Calculate the hedge ratio and residual basis

Convert 12,000mt of soymeal into an 80% futures hedge. Contract size is 100 short tons. One metric ton equals 1.10231 short tons. Exposure -> contract units -> coverage -> intentional rounding -> residual risk. The common shortcut is to round the full tonnage to a nearby lot count and forget that coverage percentage and basis exposure are separate decisions. Convert units 12,000mt x 1.10231 = 13,227.72 short tons. The contract is not in metric tons, so the hedge starts with unit discipline. Apply coverage 13,227.72 x 80% = 10,582.18 short tons to hedge. Coverage is a risk decision. It should…

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