Farmer Production I: Assume you are a farmer who just planted wheat in your fields. You anticipate that you will be able to harvest and sell 30,000 bushels of wheat next July given normal yields. You really need to protect your returns this year given the poor returns you had last year because you only sold your wheat in the cash market. This year you decide to use futures to reduce your exposure to price risk. You look at the CBOT futures board and decide to purchase enough futures contracts to cover 50% of your crop. Your purchase price for the JLY24 contract is the open for the day. Based on this information, answer the following questions below. Wheat Market: November 9, 2023 Price Unit: Cents and quarter-cents/bu. Contract Size =5,000 bushels 3. If you want to cover 50% of your crop, how many contracts do you buy or sell? Show your work for full credit. (2 pts.) 4. Your initial transaction in the market for the JLY24 contract was at the open, what was the futures price? Put down both the quote in cents and dollars. (2 pts.) 5. When July 1st rolls around, you offset your futures position. The July futures contract price is now $6.95/bu. Also, on July 1st, you sell your wheat in the cash market. The local cash price is 10 cents under the futures board price, this is the price you receive for your wheat. Assume there is no broker fee. Page 2 of 7 a. What is your per bushel profit or loss in the futures market? (4 pts.) b. What is your total profit/loss in the futures market? (4 pts.) c. Accounting for profit/loss in the futures market, what is the effective price per bushel, also called the net price per bushel, you receive for your wheat? Hint: you will have to adjust the futures price by the local basis to determine the local cash price you received for your wheat. Show the math. ( 8pts)