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If you could explain i'd appreciate it Assume you are a feed manufacturer and purchase com in 100.000 bushel lots on a regular basis. It
If you could explain i'd appreciate it
Assume you are a feed manufacturer and purchase com in 100.000 bushel lots on a regular basis. It is December and you are in the process of planning corn purchases for delivery in mid-April. A local supplier is offering a long-term purchase agreement of 5 cents over May futures. CBOT May futures are currently trading at $4.15 per bushel In reviewing your records and historical prices, you discover the spot price of com in your area during mid-April averages 5 cents under May futures. If you take the long-term purchase agreement with the local supplier, what is the price you will have to pay for com? If basis patterns hold to historical norms, what is the price you will have to pay for com if you use futures contracts to hedge the purchase? If the feed manufacturer hedges 100% of the purchase, what specific actons should be taken in the futures market? By April 10. the local elevator price for com is $4.12 per bushel and May futures contract is trading at $4.05. You purchase corn for that cash price and you offset your futures position, what is the result of the hedge? What is the net purchase (or realized) price paid for your com? Assume you are a feed manufacturer and purchase com in 100.000 bushel lots on a regular basis. It is December and you are in the process of planning corn purchases for delivery in mid-April. A local supplier is offering a long-term purchase agreement of 5 cents over May futures. CBOT May futures are currently trading at $4.15 per bushel In reviewing your records and historical prices, you discover the spot price of com in your area during mid-April averages 5 cents under May futures. If you take the long-term purchase agreement with the local supplier, what is the price you will have to pay for com? If basis patterns hold to historical norms, what is the price you will have to pay for com if you use futures contracts to hedge the purchase? If the feed manufacturer hedges 100% of the purchase, what specific actons should be taken in the futures market? By April 10. the local elevator price for com is $4.12 per bushel and May futures contract is trading at $4.05. You purchase corn for that cash price and you offset your futures position, what is the result of the hedge? What is the net purchase (or realized) price paid for your comStep by Step Solution
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