An elevator operator typically purchases huge amounts of grain from farmers.

Assume the following prices.

Date Spot Price /Bu March Futures Price

September 1 $2.10 $2.34

October 1 $2.05 $2.20

November 1 $2.20 $2.38

It costs the elevator $0.05/Bu/month to store the grain.

An elevator purchases grain from a farmer on September 1 at 3 cents under the spot and immediately sells it for 1 cent over the spot price.

What is the elevators hedging position?

		short hedges from 9/1 to 10/1
		short hedges from 9/1 to 11/1
		the elevator has no need to hedge
		long hedges from 9/1 to 10/1
		long hedges from 9/1 to 11/1