Futures A wheat former expects to harvest 60,000 bushels of wheat in September. He pays $250,000 for the seed, equipment and land back in January. The farmer is worried about fluctuations in the wheat price and wishes to hedge the position. Wheat futures are currently quoted as 85.88 per bushel. Wheat futures contracts are 5,000 bushels per contract (i.e., if you buy one wheat futures contract at a price of F per bushel, you are contracting to purchase 5,000 bushels of wheat on the futures expiration date at a cost of F dollars per bushel.) 1. Should the farmer buy or sell futures to hedge himself against changes in the price of wheat? How many contracts should be buy/sell? 2. What is the net profit the farmer will make on his harvest, assuming he carries out the futures transaction from part 1, and his harvest yields exactly 60,000 bushels in September? 3. At what futures price would the farmer exactly break even on the transaction? 4. Suppose that December wheat futures (which settle on December 31st) are trading at $5.96 per bushel, and the farmer could store his harvested wheat between the end of September and the end of December for a cost of $1,800 per month (paid at the end of each month for that month's storage). Should the farmer store the wheat and use the December futures contract, or should he stick with the September contract and sell his wheat immediately upon harvesting it