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Unformatted text preview: Long hedge is buying in futures Short is selling in the futures Basis weak 1. Good weather at harvest 2. Big crops in competing countries 3. Big surplus stocks 4. Inadequate storage capacity of farm 5. Light participation in government price support programs 6. Shortage of rail cars/ trailers/ barges 7. Producers need cash immediately Basis strong 1. Bad weather at harvest 2. Small crops in competing countries 3. Small surplus stocks 4. Adequate storage capacity of far4m 5. Heavy participation in government price support programs 6. Abundance of rail cars/trailers/barges 7. Producers do not need cash immediately The purchase or sale of a futures contract as a temporary substitute for a merchandising transaction that will be made at a later date. Usually this involves opposite transactions in the futures market from those made in the cash market. It is anticipated that since the price the futures market from those made in the cash market....
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This note was uploaded on 03/19/2010 for the course BUS bus 215 taught by Professor Dr.john during the Spring '10 term at Brown Mackie College.
- Spring '10