A corn farmer has committed to sell 20,000 bushels of corn in November.

We calculate the minimum variance hedge ratio as 0.9*20/24 = 0.75; and multiply this by the ratio of the [units required to be hedged] to the [units per futures contract], ie 0.75*20000/5000 = 3. Therefore the right quantity of contracts to sell is 3 contracts. Since the corn farmer has an obligation to sell in November, he or she can sell the futures now and lock a price in. The price locked in will be equal to the futures price, plus the basis (ie the difference between the spot and the futures price) in November.

Therefore the correct answer is to sell 3 December corn futures contracts and close these out prior to delivery in November when the November spot price will be realized. If prices have fallen, the loss on the spot trade will be made up by the profit on the hedge in the form of the futures, and also the other way round.