2) Assume that you are a corn producer in Colorado. On May 19,2022 you planted your crop. You will harvest your crop on October 15, 2022. You are unsure of what prices will be at harvest so you want to hedge your crop on the futures market. Your break-even (total cost of production) is $4.60 per bushel. a) Below you are given information on past cash and CME futures prices for corn. Use this information to calculate your expected basis. (5 pts ) Round evervthing to two decimal vlaces. The predicted hedge price is $5.31$0.14$5.17. b) Assume today is May 19, 2022. If the December CBOT corn futures contract (C) is trading at $6.84/ bu., what is the expected Oct 15 cash price (per bushel) for your corn? (2 pts) Cash price =$6.84$0.03 The expected cash price will be $6.81 c) You will plant 1,200 acres and have averaged a yield of 220 bushels per acre for the past few years. If the CBOT corn contract size is 5,000 bushels per contract, how many contracts should you trade? (2 pts) d) Given the expected price you calculated in part (b), what is your expected profit per bushel? Should you proceed with planting? Why? ( 2 pts) e) It is now Oct 15, and you harvest your corn. The December contract is now trading at $6.70. The local grain elevator is currently paying $7.40/bu. Has the basis weakened or strengthened? (2 pts) f) Please fill in the box diagram below given the information above (circle the appropriate action in the futures market). (5 pts) g) Compute the realized price per bushel received for your corn. Calculate your actual profit per bushel for your corn. ( 2pts) 2) Assume that you are a corn producer in Colorado. On May 19,2022 you planted your crop. You will harvest your crop on October 15, 2022. You are unsure of what prices will be at harvest so you want to hedge your crop on the futures market. Your break-even (total cost of production) is $4.60 per bushel. a) Below you are given information on past cash and CME futures prices for corn. Use this information to calculate your expected basis. (5 pts ) Round evervthing to two decimal vlaces. The predicted hedge price is $5.31$0.14$5.17. b) Assume today is May 19, 2022. If the December CBOT corn futures contract (C) is trading at $6.84/ bu., what is the expected Oct 15 cash price (per bushel) for your corn? (2 pts) Cash price =$6.84$0.03 The expected cash price will be $6.81 c) You will plant 1,200 acres and have averaged a yield of 220 bushels per acre for the past few years. If the CBOT corn contract size is 5,000 bushels per contract, how many contracts should you trade? (2 pts) d) Given the expected price you calculated in part (b), what is your expected profit per bushel? Should you proceed with planting? Why? ( 2 pts) e) It is now Oct 15, and you harvest your corn. The December contract is now trading at $6.70. The local grain elevator is currently paying $7.40/bu. Has the basis weakened or strengthened? (2 pts) f) Please fill in the box diagram below given the information above (circle the appropriate action in the futures market). (5 pts) g) Compute the realized price per bushel received for your corn. Calculate your actual profit per bushel for your corn. ( 2pts)
