Question
It is March and you grow sugarcane on your property north of the Sunshine Coast. At present (in March), you expect the size of your
It is March and you grow sugarcane on your property north of the Sunshine Coast. At present (in March), you expect the size of your crop for the coming November to be 50,000 kilograms. You note that in March, November dated futures contracts written on sugarcane are quoted at $2.50 per kilogram. Your attitude is very risk averse given the huge responsibility placed on you by your family in managing the family farm. You wish to take steps to guard against any unfavourable movements in the price of sugarcane. Assume that contracts are for 1,000 kilograms.
A wheat farmer has an expected production of 1000 tonnes in January. Using the information provided, conduct an analysis of the futures trading the farmer would do in order to hedge against risk (gives explicit figures, don't need to find the information in those stupid stocks tables)
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