An agricultural company needs to sell 50,000 bushels of corn by to end of April. The future price for the month of May for a bushel of corn is 731 cents
dollar per bushel.
a) Specify your hedging strategy
b) Identify basis risk
c) What is the final position of the company in USD?
Corn Futures Contract
Contract size 5,000 bushels, cents per bushel
Delivery months: Dec, Mar, May, Jul.
Maturity profile:
S2 = 725 cents per bushel
F2 = 728 cents per bush

Answer rating: 100% (QA)

Answer Explanation a Since the company needs to sell 50000 bushels of corn at the end of April it wi... View the full answer