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It is the end of October and you are harvesting corn. Your cash price is $3.00 per bushel.

It is the end of October and you are harvesting corn. Your cash price is $3.00 per bushel.

It is the end of October and you are harvesting corn. Your cash price is $3.00 per bushel. You are considering storing the grain until the end of March. Your storage cost are estimated at $.03 per bushel per month. December Corn is trading at $3.60 per bushel and March Corn is trading at $3.72 per bushel. Your typical harvest basis is -$.50 per bushel and your typical basis in March is -$.40 per bushel.

a. What is your current harvest basis?

b. What is your opening basis for a storage hedge?

c.  How much basis improvement do you expect during storage?

d.  What is your expected return per bushel from storing until the end of March using a storage hedge?

 

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Abhinav 04-Dec-2019

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