Question $3(6\mathrm{.}5$ points$)$: Hedge

October ${15}^{th\text{:}}$ : A producer plans to sell wheat in early July; currently, July wheat futures are trading at ${680}^{\text{'}}6.$ The expected basis is $$0\mathrm{.}60$ under.

$-$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 $($buy$/$sell$)$ July wheat futures at $6806$ per bushel.

What is the expected cash price?

July $1^{st\text{:}}$

The producer must $($buy$/$sell$)$ wheat locally in the cash market at ${562}^{\text{'}2}$ per bushel.

To offset their future position, they must $($buy$/$sell$)$ July futures at ${599}^{\text{'}}4$ per bushel.

What is the actual basis? $q,$

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