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2(c) It is March 2023, the spot price of cottonseed is $271.03 per tonne. A manager of a cotton production company anticipates the need

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2(c) It is March 2023, the spot price of cottonseed is $271.03 per tonne. A manager of a cotton production company anticipates the need to sell cottonseed in the first week of July 2023, which is four months away. Because the price of cottonseed might be lower at that time due to increasing supplies at harvest, the manager protects against downside risk by currently selling the appropriate number of contracts using soybean futures. (i) Discuss how a cross hedging would help in case of an increase or decrease in the futures price of soybean.

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