On March 15,2009 Farmer Joe decided how much corn he wanted to plant and what he expects to harvest on October 15, 2009.  He also decided to be a good business manager and hedge his corn crop against a price decline.  There are three different available months of corn futures contracts and below are the month and price of each:

July 2009: $3.54 per bushel

December 2009: $3.86 per bushel

March 2010: $4.05 per bushel

  

Farmer Joe believes that based on the historical basis at harvest time at the local grain elevator he expects to receive around $3.40 per bushel as his target cash price after harvest in October and plans his production in March accordingly.  After harvest, he unfortunately was only offered $3.15 per bushel by his local grain elevator and the futures price of corn was $3.61 per bushel at that time.

 

   

 

Date	Spot	Futures
March 15th	Question 28	Question 29
October 15th	Question 30	Question 31
Gain (Loss)	Question 32	Question 33
Effective Price	Question 34