Price Differential / Basis Calculator
Basis = physical price − benchmark. Differential = physical price − quality/freight-adjusted fair value. Use for grain, energy and metals term contracts priced 'index +/− x'.
| Benchmark | $780.00 |
| + Quality adj. | -$12.00 |
| + Freight adj. | $35.00 |
| + Other | $0.00 |
| = Fair value | $803.00 |
| Contract price | $810.00 |
| Differential | +$7.00 |
Need help interpreting this result?
Ask Trade Expert AI how it applies to your transaction. Free with an account.
Overview & methodology
How do you calculate commodity basis?
Formula
Basis = physical price - benchmarkFair value = benchmark + quality + freight + other adjustmentsDifferential = physical price - fair valueIllustrative methodology; use consistent currency and units. Rates and adjustments are contract-specific assumptions.
| Component | Definition | Indicative default example |
|---|---|---|
| Benchmark | Reference price in matching units | 780 USD/MT |
| Physical price | Contract price for the cargo | 810 USD/MT |
| Basis | Physical price minus benchmark | +30 USD/MT |
| Quality adjustment | Signed premium or discount | -12 USD/MT |
| Freight adjustment | Signed location adjustment | +35 USD/MT |
| Fair value | Benchmark plus all adjustments | 803 USD/MT |
| Differential | Physical price minus fair value | +7 USD/MT |
Numerical Example: Indicative Commodity Basis Analysis
Indicative calculator default inputs, not a live market quote. Basis is +$30/MT; fair value is $803/MT and differential is +$7/MT.
Method note: calculations run in your browser using the formulas and published rule books cited on this page. Results are free estimates for planning, with no login required, and should be confirmed with your bank, broker or the official source before you commit.
Frequently asked questions
What is 'basis' in commodity trading?
Basis is the difference between a local physical commodity price and a global benchmark price (Platts, Argus, CBOT, LME). A positive basis means the physical price is higher than the benchmark; negative basis means it's lower. Basis narrows near delivery as physical and futures prices converge.
How does quality adjustment affect the basis?
Quality adjustments reflect premiums or penalties compared to the benchmark specification. For example, crude oil at 35°API might trade at a discount to 34°API benchmark; high-grade coal trades at a premium. These adjustments are critical to calculating fair value.
What is 'differential' vs 'basis'?
Basis = physical price − benchmark. Differential = physical price − (benchmark + quality/freight adjustments). Differential shows whether the contract is overpriced or underpriced relative to its fair value after all costs. Both metrics help traders assess deal attractiveness.