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

Assume the following prices.

DateSpot Price/BuMarch Futures Price

September 1$2.10$2.34

October1$2.05$2.20

November1$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 elevator's hedging position?

a. long hedges from 9/1 to 10/1

b. the elevator has no need to hedge

c. short hedges from 9/1 to 11/1

d. long hedges from 9/1 to 11/1