[s k]

Ok thanks for the insight

[s k]

i need help on this question
Question 1
(i) The following specifications for the available Soya beans based futures contracts

Commodity Price Symbol Month/Expiry Contract Size Months Point Value Forecast Price Jun 21
US Soybeans (Links to an external site.)
1005 ZS (S) Nov 20 5,000 Bushels FHKNQUX 1 = $50 892
US Soybean Oil (Links to an external site.)
35 ZL (BO) Dec 20 60,000 Lbs. FHKNQUVZ 1 = $600 28
US Soybean Meal (Links to an external site.)
324 ZM (SM) Dec 20 100 Tonnes FHKNQUVZ 1 = $100 293

NB: 1 bushel of soybeans = 60 pounds = 10.7 pounds of crude soy oil = 47.5 pounds of soybean meal = 39 pounds of soy flour = 20 pounds of soy protein concentrate = 11.8 pounds of isolated soy protein

Also: Assume that the tenure of the futures contract = 3 months

Using the data above assess the exposure to volatile commodity prices and design hedging strategies for the following entities.

(a) A Zambia Soybeans Farmer with an output of 2,000,000 tonnes whose harvest is expected in June 2020. [5 marks]

(b) An international stock feed processing company with 180,000,000 Tonnes of Soybean Meal based output per year. [5 marks]

(c) Outline the challenges faced in trying to achieve a perfect hedge in the above two cases.
[4 marks]
(d) Describe how a cross hedge could be achieved for each of the above. [4 marks]

(e) Given the above forecast prices, evaluate the most profitable of the three possible hedges for the farmer. [7 marks]

[s k]

the most important thing is to have the prime understanding of the financial instrument involved.
2. you need to grasp the basic manouvers on the futures and options. eg when the price of the futures goes down, the interest goes up. Again you need to know whether you are selling or buying.
It is difficult to trace the area on which you would like freinds to gravitate on as this topic is wide. the infor is scant. specify a question

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