In Mid-October you are buying 50,000 bushels of corn at 80 Dec basis. You could immediately sell it at a cash price of 400 cents per bushel. However, you plan to carry the corn from mid- October until mid-April. You base your cost-of-carry on aninterest rate of 10%. At the end of November you are forced to set your Dec/May spread at a 5 cents inversion.

By mid-April, your sell basis is at +30 May and you sell the corn.

In Mid-October what do you do to properly hedge the 50,000 bushels and turn this into a basis transaction? (e.g. do I buy or sell futures and how many)

		Buy 50,000 bushels of December futures
		Sell 5,000 bushels of May futures
		Buy 50,000 bushels of May futures
		Sell 50,000 bushels of December futures