Plot a break-even basis (B.E.) line and the actual monthly basis line and listed below and answer questions. Refer to the breakeven Excel example in the D2L homework folder for further reference.

Todays basis: $-0.60

Expected normal basis on July 1: $-0.11

Harvest October 1: Lift hedge by July 1

Storage cost: $0.04 per month

1.Would you consider hedging October 1 and why? _________________________________________________________________________

2.What net above harvest cash did you expect to receive July 1 (given you hedged on Oct 1), show work? _________________________________________________________________________

Breakeven Basis Breakeven Basis Diff. Diff, Month Oct 1 Nov 1 Dec 1 Jan 1 Feb 1 Actual Basis -0.60 -0.58 -0.52 -0.45 -0.40 Month Mar 1 Apr 1 May 1 Jun 1 Jul 1 Actual Basis -0.34 -0.22 -0.18 -0.12 -0.11 BASIS 0.00 -0.10 -0.20 -0.30 -0.40 -0.50 -0.60 -0.70 -0.80 Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Breakeven Basis Breakeven Basis Diff. Diff, Month Oct 1 Nov 1 Dec 1 Jan 1 Feb 1 Actual Basis -0.60 -0.58 -0.52 -0.45 -0.40 Month Mar 1 Apr 1 May 1 Jun 1 Jul 1 Actual Basis -0.34 -0.22 -0.18 -0.12 -0.11 BASIS 0.00 -0.10 -0.20 -0.30 -0.40 -0.50 -0.60 -0.70 -0.80 Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug