Kane Inc., a gasoline producer, will require 145,000 gallons (gal) of ethanol in April 2021....
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Kane Inc., a gasoline producer, will require 145,000 gallons (gal) of ethanol in April 2021. The price for April 2021 delivery is 1.54 $/gal. While the spot price today (January 2021) is 1.52 $/gal, Kane prefers to trade futures instead of incurring costs of storing ethanol to hedge its price. For logistic reasons, Kane will not have the ethanol delivered through the futures contract, but will close its futures position on the April 2021 spot market and buy ethanol at the spot price.
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