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Calcimator

Hedging Calculator

Futures contract count from expected production.

Inputs

%

Results

Contracts needed

6

Bushels hedged30,000
Actual hedge ratio (%)60
Total margin ($)$9,000.00
Hedge value ($)$180,000.00
Unhedged bushels20,000
How to Use This Calculator
  1. Enter Expected Production in bushels, Contract Size (CBOT corn = 5,000 bu), and Hedge Ratio percentage.
  2. Enter the Futures Price and Initial Margin Per Contract required by your broker.
  3. Review Contracts Needed and Actual Hedge Ratio achieved (may differ due to contract rounding).
  4. Check Total Margin Required and Hedge Position Value to plan working capital needs.
  5. Use Unhedged Bushels to understand remaining price risk exposure.

How the result changes with Expected production (bu)

Expected production (bu)Contracts needed
1,000,090120
3,500,065420
6,500,035780
9,000,0101,080

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

  1. Identify Input Parameters
    4 parameters
    Expected production (bu) = 50000, Contract size (bu) = 5000, Hedge ratio % = 60, Futures price ($/bu) = 6 = 5 input(s) provided
  2. Calculate Contracts needed
    Contracts needed = floor(bushelsToHedge / contractSizeBu)
    6 = 6
  3. Calculate Bushels hedged
    Bushels hedged = contractsNeeded * contractSizeBu
    30000 = 30000
  4. Calculate Actual hedge ratio
    Actual hedge ratio = round((actualBushelsHedged / expectedProductionBu) * 10000) / 100
    60 = 60

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