Question $4(6$ points$)$: Hedge

January $20{?}^{th}$ : Miller needs to buy wheat in late April. Currently, the May wheat futures are trading at $$6\mathrm{.}82.$ The expected basis is $-$$$0\mathrm{.}27.$

Does the miller have a long or short cash position?

Does the miller have a long or short futures position?

To hedge: The miller will $($buy$/$sell$)$ May wheat futures at $$\frac{6\mathrm{.}82}{b}u.$

What is the expected price?

April $30$ th:

The miller must $($buy$/$sell$)$ wheat locally in the cash market at $$\frac{7\mathrm{.}71}{?}$ bu$.$

To offset their future position, they must $($buy$/$sell$)$ May futures at $$\frac{8\mathrm{.}04}{b}u.$

What is the actual basis?

Was the basis stronger, weaker, or the same as expected? $$

What is the realized price for the producer?

Method $1$:

Method $2$: