A farmer hedging next season's soybeans
A soybean farmer will harvest and sell a large crop in the fall. To lock in a price today, the farmer sells soybean futures now and plans to buy them back (and sell the physical crop locally) at harvest.
Has the farmer fully fixed the price they will receive? If not, what is uncertain, and how should they size the hedge?
Show a hint
The farmer sells physical grain at the local elevator but settles the hedge at the futures price. Those two prices are not the same number.
Your answer
This one is open-ended. Work it through, then check your reasoning against the full solution.