Futures Contracts Suppose Golden Grain Farms (GGF) expects to harvest 50,000 bushels of wheat in September. GGF

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Futures Contracts Suppose Golden Grain Farms (GGF)

expects to harvest 50,000 bushels of wheat in September. GGF is concerned about the possibility of price fluctuations between now and September. The futures price for September wheat is £2 per bushel, and the relevant contract calls for 5,000 bushels.

What action should GGF take to lock in the £2 price?

Suppose the price of wheat actually turns out to be

£3. Evaluate GGF’s gains and losses. Do the same for a price of £1. Ignore marking to market.

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