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A beef producer needs to buy 200,000 pounds of live cattle in May. The company wants to use the June futures contracts to hedge its

A beef producer needs to buy 200,000 pounds of live cattle in May. The company wants to use the June futures contracts to hedge its risk. The contract size is 40,000 pounds. The standard deviation of changes of cattle spot price is 1.2, the standard deviation of changes of cattle futures price is 1.4, and the correlation coefficient between the two is 0.7. Which strategy should the company follow?

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