Question 4 (6 points): Hedge January 20th: Miller needs to buy wheat in late April. Currently, the May wheat futures are trading at $6.67. The expected basis is -$0.30. • Does the miller have a long or short cash position? • Does the miller have a long or short futures position? ⚫ To hedge: The miller will April 30th What is the expected price?. • The miller must. (buy/sell) May wheat futures at $6.67/bu. (buy/sell) wheat locally in the cash market at $7.89/bu. • To offset their future position, they must $8.04/bu. • What is the actual basis?. • What is the realized price for the producer? 。 Method 1: о Method 2: о The hedge resulted in a realized price of (buy/sell) May futures at

Question 5 (5.5 points): Hedge May 20th: Producer plans to sell corn in early November. Currently the December corn futures are trading at $4.33. The expected basis is -$0.36. • Does the producer have a long or short cash position? (buy/sell) Dec corn futures at $4.33/bu. Nov. 10th: To hedge: The producer will What is the expected price? • The producer must (buy/sell) corn locally in the cash market at • • $4.18/bu. To offset their future position, they must $4.67/bu. What is the actual basis? What is the realized price for the producer? ○ Method 1: Method 2: о The hedge resulted in a realized price of (buy/sell) Dec futures at

Question 3 (6.5 points): Hedge October 15th: A producer plans to sell wheat in early July; currently, July wheat futures are trading at 680'6. The expected basis is $0.60 under. July 1 • Does the producer have a long or short cash position? Does the producer have a long or short futures position? To hedge: The producer will per bushel. What is the expected cash price? (buy/sell) July wheat futures at 680'6 ⚫ The producer must (buy/sell) wheat locally in the cash market at 562'2 per bushel. To offset their future position, they must. 599'4 per bushel. • What is the actual basis? • (buy/sell) July futures at 。 Was the basis stronger, weaker, or the same as expected? What is the realized price for the producer? Method 1: 。 Method 2: 。 The hedge resulted in a realized price of

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