Suppose we have a six-month commodity swap with a notional quantity of 1000, monthly payments, and a fixed price of $5.00. Suppose the future spot or reference prices turn out to be $5.23, $5.15, and $4.95 in months 1-3 respectively. You produce the commodity and sell 1000 units each month.

1. If you decide to enter the swap to hedge, which position would you take: fixed price payer or receiver? Why