Plot a break-even basis (B.E.) line and the actual monthly basis line and listed below and answer questions. Refer to the breakeven Excel example in the D2L homework folder for further reference. Todays basis: $-0.60 Expected normal basis on July 1: $-0.11 Harvest October 1: Lift hedge by July 1 Storage cost: $0.04 per month

Questions:

1.Would you consider hedging October 1 and why? _________________________________________________________________________

2.What net above harvest cash did you expect to receive July 1 (given you hedged on Oct 1), show work? _________________________________________________________________________

3.List all the months you would consider lifting your hedge early? _________________________________________________________________________

4.What could you receive when you did lift your hedge for each month or months, show work?

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5.What would you receive if held to July 1, show work? _________________________________________________________________________

Breakeven Basis Breakeven Basis Diff. Diff, Month Oct 1 Nov 1 Dec 1 Jan 1 Feb 1 Actual Basis -0.60 -0.58 -0.52 -0.45 -0.40 Month Mar 1 Apr 1 May 1 Jun 1 Jul 1 Actual Basis -0.34 -0.22 -0.18 -0.12 -0.11 BASIS 0.00 -0.10 -0.20 -0.30 -0.40 -0.50 -0.60 -0.70 -0.80 Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Breakeven Basis Breakeven Basis Diff. Diff, Month Oct 1 Nov 1 Dec 1 Jan 1 Feb 1 Actual Basis -0.60 -0.58 -0.52 -0.45 -0.40 Month Mar 1 Apr 1 May 1 Jun 1 Jul 1 Actual Basis -0.34 -0.22 -0.18 -0.12 -0.11 BASIS 0.00 -0.10 -0.20 -0.30 -0.40 -0.50 -0.60 -0.70 -0.80 Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug