1. Sally is a rancher, who markets her cattle to packers herself. She has a marketing contract with Cargill, a meatpacker, which covers the delivery of up to 50 cattle per month to Cargill plants over a 3-year period. The contract specifies a base price to be paid for her cattle, in dollars per 100 pounds (cwt) of liveweight cattle delivered, with adjustments up or down for cattle with grade, weight, and yield values that depart from base values. The base price will change each month in accordance with changes in the CME live cattle futures price in the nearby futures contract.
   1. Why would Sally want to use a futures contract price to adjust the base price in her marketing contract? Cargill offered her an alternative: they would adjust her base price each month in accordance with changes in Cargills top of the market price (TOMP)the highest price that Cargill paid in the cash market in the month of her cattle delivery. Why might she prefer a futures-based adjustor?