Hedging Calculator
Futures contract count from expected production.
About this calculator
Hedging with futures means selling contracts against grain you expect to produce, locking in a price before you've harvested a bushel. This calculator starts from your expected production and hedge ratio (the percentage of that production you want to protect) to get bushels to hedge, then divides by contract size — 5,000 bushels for a standard CBOT corn or soybean contract — to find how many contracts you need. That division is deliberately rounded down (floored), not to the nearest whole contract, because selling more contracts than your actual production would leave you over-hedged and exposed to price risk in the wrong direction if yields disappoint; rounding down keeps you at or under your target ratio. Because contracts only come in whole numbers, your actual hedge ratio achieved will typically land a bit below your requested percentage — the calculator reports this gap explicitly.
Total margin required multiplies contracts by the initial margin your broker requires per contract, which is working capital you need on hand and which can be added to via margin calls if futures prices move against your position before you offset it. Hedge position value is simply the hedged bushels valued at the current futures price, and unhedged bushels is the production left fully exposed to price swings. Remember this only covers price risk — it does nothing for basis risk, the gap between your local cash price and the futures price, which is handled separately.
Inputs
Results
Contracts needed
6
How to Use This Calculator
- Enter Expected Production in bushels, Contract Size (CBOT corn = 5,000 bu), and Hedge Ratio percentage.
- Enter the Futures Price and Initial Margin Per Contract required by your broker.
- Review Contracts Needed and Actual Hedge Ratio achieved (may differ due to contract rounding).
- Check Total Margin Required and Hedge Position Value to plan working capital needs.
- Use Unhedged Bushels to understand remaining price risk exposure.
How the result changes with Expected production (bu)
| Expected production (bu) | Contracts needed |
|---|---|
| 25,000 | 3 |
| 37,500 | 4 |
| 75,000 | 9 |
| 125,000 | 15 |
What each input means
- Expected production (bu)
- Total expected production in bushels.
- Contract size (bu)
- Bushels per futures contract (CBOT corn = 5,000).
- Hedge ratio %
- Percentage of production to hedge.
- Futures price ($/bu)
- Current futures price per bushel.
- Initial margin ($)
- Initial margin requirement per contract.
What each result means
- Contracts needed
- Number of futures contracts to sell.
- Bushels hedged
- Actual bushels covered by hedge.
- Actual hedge ratio (%)
- Percentage of production actually hedged.
- Total margin ($)
- Total initial margin deposit required.
- Hedge value ($)
- Total value of the hedged position.
- Unhedged bushels
- Production left exposed to price risk.
How this is calculated
Worked example, using the default values
- Identify Input Parameters4 parametersExpected production (bu) = 50000, Contract size (bu) = 5000, Hedge ratio % = 60, Futures price ($/bu) = 6 = 5 input(s) provided
- Calculate Contracts neededContracts needed = floor(bushelsToHedge / contractSizeBu)6 = 6
- Calculate Bushels hedgedBushels hedged = contractsNeeded * contractSizeBu30000 = 30000
- Calculate Actual hedge ratioActual hedge ratio = round((actualBushelsHedged / expectedProductionBu) * 10000) / 10060 = 60
Engine last updated . Checked against 2 independently-derived tests — how we verify calculators. Built by Paul Gunder, a software engineer, not a licensed financial, medical, or legal professional.
Frequently Asked Questions
Why does my actual hedge ratio come out lower than the percentage I asked for?
Contracts only come in whole numbers, and the calculator floors bushels-to-hedge divided by contract size rather than rounding to the nearest contract. If your target doesn't divide evenly into 5,000-bushel increments, the leftover fraction of a contract gets dropped, so the actual hedge ratio it reports will typically land a little below your requested percentage.
Why round the contract count down instead of to the nearest whole contract?
Rounding up or to the nearest contract could push your hedged bushels above your actual expected production, which would leave you over-hedged — short more futures contracts than grain you'll actually have to deliver against. Flooring the division guarantees you never sell more contracts than your production can cover, keeping the position at or under your target ratio.
What is the initial margin, and can the amount I need actually change?
Initial margin is the good-faith deposit your broker requires per contract to open the position, and total margin required here is just that figure times your contract count. It isn't fixed for the life of the position — if futures prices move against your short hedge, you can face margin calls requiring additional cash before you offset the trade, so this number is a starting requirement, not the total you might ultimately need.
If I hedge 100% of my production, am I fully protected from price risk?
You're protected from outright futures price moves, but this calculator only addresses that price risk — it says nothing about basis risk, the gap between your local elevator's cash price and the futures price you hedged against. A move in basis can still change your net price even with production fully hedged in the futures market.
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