On November 1, the producer observed that the opening basis is too narrow to make the...

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On November 1, the producer observed that the opening basis is too narrow to make the hedge and store decision. There are several other choices for him to choose. Please compare the following strategy and help him make the decision. Date 1-Nov Cash Futures Cash Price $2.00 May Futures $2.20 Cost of storage from Oct 1 to April 30 = $0.28 Sell Cash @ $2.28 30-Apr May Futures @ $2.40 Basis Contract: Suppose: (a) 75% of the harvest-period value has been paid; (b) interest rate=8%; (c) The contract called for $.10 under May futures. What is the break-even price? On November 1, the producer observed that the opening basis is too narrow to make the hedge and store decision. There are several other choices for him to choose. Please compare the following strategy and help him make the decision. Date 1-Nov Cash Futures Cash Price $2.00 May Futures $2.20 Cost of storage from Oct 1 to April 30 = $0.28 Sell Cash @ $2.28 30-Apr May Futures @ $2.40 Basis Contract: Suppose: (a) 75% of the harvest-period value has been paid; (b) interest rate=8%; (c) The contract called for $.10 under May futures. What is the break-even price?