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Suppose you are a wheat farmer. You expect a new harvest of wheat three months from...

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Finance

Suppose you are a wheat farmer. You expect a new harvest ofwheat three months from today. The price of wheat at the time ofharvest in three months is uncertain. How can the farmer avoid theprice risk?

Suppose you are a miller. You need to purchase wheat in threemonths from today. You are faced with the price risk, too. How canyou have insurance for the price risk?

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4.1 Ratings (488 Votes)
As a Wheat Farmer I am worried that the prices of wheat may fall from current level in three months when the new harvest of wheat will come in the supply I can sell the 3 month forward contract for wheat and lock my    See Answer
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Suppose you are a wheat farmer. You expect a new harvest ofwheat three months from today. The price of wheat at the time ofharvest in three months is uncertain. How can the farmer avoid theprice risk?Suppose you are a miller. You need to purchase wheat in threemonths from today. You are faced with the price risk, too. How canyou have insurance for the price risk?

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