On March 15,2009 Farmer Joe decided how much corn he wanted to plant and what he expects to harvest on...

On March 15,2009 Farmer Joe decided how much corn he wanted to plant and what he expects to harvest on October 15, 2009.  He also decided to be a good business manager and hedge his corn crop against a price decline.  There are three different available months of corn futures contracts and below are the month and price of each:

July 2009: $3.54 per bushel

December 2009: $3.86 per bushel

March 2010: $4.05 per bushel

Farmer Joe believes that based on the historical basis at harvest time at the local grain elevator he expects to receive around $3.40 per bushel as his target cash price after harvest in October and plans his production in March accordingly.  After harvest, he unfortunately was only offered $3.15 per bushel by his local grain elevator and the futures price of corn was $3.61 per bushel at that time.