For the following scenarios, describe a hedging strategy using futures contracts. Discuss the reasons for your choice of contract.
a. A public utility is concerned about rising costs.
b. A corn farmer fears that this year’s harvest will be at record high levels across the country.
c. A natural gas producer believes there will be excess supply in the market this year.
Finally, comment on whether using option contracts in the above cases could be better. What are the pros and cons of using options?