Spreadsheet-Based Models Usefull in Evaluating the Use of Futures and Options
Basic and Advanced Risk-Management Strategy Spreadsheets: Version 1 contains a series of 8 worksheets that provide you additional background material for the strategies introduced in the Hedging and Options Strategies Section. These worksheets have been designed for use by milk producers and processors wishing to manage their price risk. You may change these models to more accurately reflect your situation. To examine the impact of changes in alternative settle prices, you should only have to change the data contained in the DATA INPUT section of the spreadsheets.
Basic and Advanced Risk-Management Strategy Spreadsheets: Version 2 provides a set of spreadsheet models that extends those given in Version 1 and contains information on costs of production and on basis determination.
Mailbox/ClassIII Basis Calculations shows how one can calculate one's Mailbox/Class III basis. After users have entered actual or hypothetical mailbox prices for various months, this worksheet subtracts corresponding ClassIII/BFP prices and generates basis prices.
Determination of Reasonable Class III Values can be undertaken by assuming that Class III prices are normally distributed. The above spreadsheet file shows how one can calculate the critical values where a certain percentage of Class III values are below or above these values. These critical values change across month, time span used to calculated the average and standard deviation and the desired percentage.