Effective price they pay in october when hedge is lifted

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A biodiesel producer anticipates they would require 500,000 bushels of soybeans (their main input) in October of 2017 to operate at capacity. To protect themselves from the price risk, they set the hedge in May of 2017. The spot price in May is $9.64 and the futures price with November delivery is $9.67 per bushel of beans. When they lift the hedge in early October, November soybeans trade at $13.77 and the spot price is $13.79. Each soybeans contract is for 5,000 bushels. Please, describe the hedge (What will they buy or sell? How many contracts?). Then find the effective price they pay in October when the hedge is lifted. Express your answer in dollars and cents per bushel.

Reference no: EM131556666

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