Question

In: Economics

You plan on selling 67 steer calves in January that you expect to weigh 750 pounds each. You have ovserved the following prices ($/cwt) over the last 3 years:


You plan on selling 67 steer calves in January that you expect to weigh 750 pounds each. You have ovserved the following prices ($/cwt) over the last 3 years:


CashCME FCBasis
2007$89.00$99.00a. ___________
2008$94.00$103.00b. ___________
2009$83.00$94.00c. ___________

What is your expected basis for January 2010 (3 year average)?   d. ___________

Market Information 9/9/09

Current Cash 750 lb steer$87/cwt
Jan FC Futures$101/cwt

If you placed a hedge on 9/9/09 using Jan futures, what is your expected net sale price?

Assume that on Jan 25 you sell your feeder cattle for $85 per cwt at the local auction and that Jan. FC Futures are at $94 cwt. Show the results of a Futures hedge you placed on September 9 and offset on January 25.

----------|

Date    |

________|

------------------------------|

Cash                                  |

_______________________|

--------------------------------||

Futures                                 ||

_________________________||

-------------------------------------|

Basis                                           |

_____________________________|

9-Sept |

|

________|

e.                                   |

|

_______________________|

g.                                       ||

||

_________________________||

i.                                               |

|

_____________________________|

25-Jan   |

|

________|

f.                                   |

|

_______________________|

h.                                       ||

||

_________________________||

j.                                               |

|

_____________________________|

k. NSP = ____________

Solutions

Expert Solution

Rahul Sunny answered 1 year ago
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