Question

Suppose a corn farmer in Midwest is expecting to harvest 100,000 bushels of corn in the fall. What is the strategy that this farmer can use to eliminate his/her business uncertainty due to the price fluctuation of corn? (Standard corn futures size is 5,000 bushels per contract)

Group of answer choices

none of the above

short 20 corn futures

long 20 corn futures

Answer 1

The farmer in Midwest, after harvesting, will sell the Corn in the market and he is worried about the price falls and Shorting Future makes profits when the prices falls and will compensate the loss from the price fall.

No. of Short Futures will be = 100,000 / 5000 = 20 futures.

Option B is correct.

NOTE: The answer to your question has been given below/above. If there is any query regarding the answer, please ask in the comment section. If you find the answer helpful, do upvote. Help us help you.