Johnson Family Farm – Hedging Decision Harvard Case Solution & Analysis

Frank Johnson was contemplating his options for the coming year. The next day, January 12, U.S. Department of Agriculture (USDA) World agricultural production and demand estimates report was to be released. From the point of view of Johnson's biggest problem was predictable transfer of corn in 2010. In November, USDA predicted that for the first time in recent years, the projected transfer would be about 827 million bushels, which would be the lowest since 1996. Low transfer boded well for corn prices. At that time, USDA estimated the U.S. average cash price of corn in 2010-11 to $ 5.20. At current prices, the place is about $ 5.83 per bushel, he expects that prospects actually improve, but was concerned about the overall uncertainty in prices. Uncertainties associated with the use of corn in ethanol production and demand for corn from China loomed large in his thinking. He needs to consider whether to hedge all or a portion of the crop for the next year. "Hide
by Robert M. Conroy Source: Darden School of Business 5 pages. Publication Date: December 28, 2011. Prod. #: UV5639-PDF-ENG

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