This paper illustrates a simple hedging procedure for reducing the risk of investing in production. costs . by locking in a predetermined price range. The emphasis.is on planning and budgeting before committing resources to production. Success is measured as a return to management. The hedging methodology used in the paper is applicable to.any agricultural enterprise where basis is known. It is ·probably impossible to hedge successfally without a good · 'f.'nderstanding of basis.