You farm in Alberta and expect to have 1,000 tonnes of canolafor sale in the fall. You would like to hedge your risk of price fluctuations through the Winnipeg Commodity Exchange. Today is early March, and the cash price for canola is C$590 per tonne. The settle price on a futures contract to sell your canola in November is C$576 per tonne. Assume you enter into a futures contract to deliver 1,000 tonnes of canola.
a. Assume the price of canola in the cash market, in Alberta, in November is C$615 per tonne. Without delivering your canola to Winnipeg, close out the futures contract and calculate your gains, losses, and net receipts on the 1,000 tonnes of canola.
b. Assume the price of canola in the cash market, in Alberta, in November is C$540 per tonne. Without delivering your canola to Winnipeg, close out the futures contract and calculate your gains, losses, and net receipts on the 1,000 tonnes of canola.