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Politics : The Trump Presidency -- Ignore unavailable to you. Want to Upgrade?

To: Wharf Rat who wrote (352332)	10/18/2025 9:50:59 PM
From: techtrader73	Read Replies (1) \| Respond to of 358096

"Commercials"—companies involved in the physical production, processing, or merchandising of grain—primarily use futures trading to reduce the risk of price volatility, rather than to make a direct profit. This strategy is known as hedging. There are two main types of commercial hedgers in grain futures: Producers (farmers): They hedge against falling prices for the crops they will harvest. Processors (e.g., grain elevators, feed manufacturers, food companies): They hedge against rising prices for the grain they will need to buy. Hedging for producers Producers like farmers use futures contracts to lock in a selling price for their grain before they harvest or sell it in the physical (or "cash") market. How it works: Farmer's position: A farmer has a "long" position in the cash market because they own the physical grain. Hedging action: To hedge, the farmer takes an opposite position in the futures market by selling grain futures contracts. Outcome: If the price falls: The farmer loses value on their physical grain but gains on their futures position when they buy back the contracts at a lower price. The two actions balance each other out. If the price rises: The farmer gains more value on their physical grain but loses on their futures position when they buy back the contracts at a higher price. Again, the two actions offset. The net result is that the farmer secures a target price and is protected from large, adverse price movements. Hedging for processors Processors or other end-users of grain hedge to protect against rising prices. They need to lock in a purchase price for a time when they will need the physical commodity.