QUESTION $23$ QUESTION $25$

You make a sale of soybeans to a processor at $-10$ JAN for immediate delivery. It is currently December and you have no

ownership of beans at this time but you do have beans in inventory that you have title to under the terms of a price later

agreement.

You ship these beans from inventory to fill the sale you have made to the processor. The producers who you have the

price later contracts with may set the price at anytime between now and next harvest at your elevator's current posted

spot price.

Having made and delivered this sale without having the bushels priced by the farmer, which of these circumstances would

give you the most profitable outcome?

You pre$-$spread your sell basis from JAN$/$MAR at a $20$ inversion. Farmers price in January at a time when your buy basis is

$+10$ MAR. You gain $4$ total in benefit from having the money.

You spread your sell basis from JAN$/$MAR on roll day at a $10$ carry. Farmers price in February at a time when your buy basis

is $-15$ MAR. You gain $8$c total in benefit from having the money.

You pre$-$spread your sell basis from JAN$/$MAY at a $5$ C inversion. Farmers price in March at a time when your buy basis is $-10$

MAY. You gain $12c$ total in benefit from having the money.

You spread your sell basis on roll day from JAN$/$JUL at a $20$ carry. Farmers price in May at a time when your basis is $-20$ JUL.

You gain $16$ total in benefit from having the money.

During harvest you accumulated a position of $500,000$ bushels of long$-$the$-$basis corn at an average buy basis of $-45$ DEC.

Considering you will carry the corn for a sale to be made later in the season, which of these circumstances would give you the most

profitable outcome? $($Freight excluded.$)$

Spread DEC futures to MAR at a $10$ carry. Sell basis at $-10$ MAR with a total cost$-$of$-$carry of $15.$

Spread DEC futures to MAY at a $20$ carry. Sell basis at $-10$ MAY with a total cost$-$of$-$carry of $20.$

Spread DEC futures to JUL at a $15$ carry. Sell basis at $+5$JUL with a total cost$-$of$-$carry of $25.$

Spread DEC futures to SEP at a $40$ inversion. Sell basis at $+60$ SEP with a total cost$-$of$-$carry of $35.$

QUESTION $24$

You negotiate a sale with a mill in which you sell them wheat picked up at your elevator in January at a basis of $+30$ MAR.

It is currently June $($pre$-$harvest$)$ and you have no ownership of wheat at this time.

Having made this sale without owning wheat, which of these circumstances would be your best alternative to complete this short$-$the$-$

basis transaction?

Forward contract wheat pre$-$harvest from producers for January delivery at $-20$ MAR and incur no cost$-$of$-$carry.

Purchase wheat during harvest at $-20$ SEP. Spread short SEP futures to MAR at $30$ carry. Carry wheat until January and incur

$25$ cost$-$of$-$carry.

Pre$-$spread your purchase of wheat from SEP$/$MAR at $40$ carry. Forward contract wheat from producers for harvest delivery at $-30$

SEP. Carry the wheat until January and incur $25$ cost$-$of$-$carry.

Wait and purchase wheat in Jan$/$Feb at $+20$ MAR and incur no cost$-$of$-$carry.