Both farmers who provide agricultural and sideline products to the market and enterprises that provide basic raw materials such as copper, tin, lead and oil to the market, as suppliers of social goods, suffer losses in order to ensure the reasonable economic profits of the goods they have produced or are still in the process of production and to prevent the possible price drop when they are officially sold.

We can reduce the price risk by selling futures, that is, selling the same amount of futures as a seller in the futures market as a means of hedging.

2. The operator sells the hedging:

For operators, the market risk they face is that when the goods are not resold after acquisition, the price will fall, thus reducing the operating profit and even causing losses. In order to avoid this market risk, operators can use the method of selling hedging to carry out price insurance.

3. Comprehensive hedging of processors:

For processors, market risks come from two aspects: buying and selling; I'm worried about the rising prices of raw materials and finished products, and I'm even more afraid of the rising prices of raw materials and finished products.

As long as the materials and finished products needed by processors can be traded in the futures market, then the futures market can be used for comprehensive hedging, that is, the purchased raw materials can be hedged, and the products can also be hedged, so that worries can be relieved, processing profits can be locked in, and specialization of processing and production can be realized.

Extended data

The role of hedging in the production and operation of enterprises;

1, determine the procurement cost and ensure the profit of the enterprise. The supplier has signed a spot supply contract with the buyer for future delivery, but at this time, the supplier does not need to buy the materials required by the contract. In order to avoid the price increase when purchasing raw materials in the future, we can lock in profits by buying related raw materials in futures.

2, determine the sales price, to ensure corporate profits. Production enterprises have signed contracts to purchase raw materials, sell related finished products through futures and lock in production profits.

3. Ensure that the enterprise budget does not exceed the standard.

4. Upstream enterprises of raw materials in the industry guarantee production profits.

5. Ensure trade profits.

6. Adjust the inventory. When it is considered that the current price of raw materials is reasonable and it is necessary to increase the inventory, futures can be used instead of spot to enter the inventory, and the utilization rate of enterprise funds can be improved through its leverage principle to ensure the cash flow of enterprises. When the price of raw materials falls and the inventory of enterprises cannot be reduced due to production or other factors, they will be sold in the form of futures to avoid losses caused by price depreciation.

7. financing. When spot enterprises need financing, they can obtain a higher financing ratio from banks or related institutions by pledging futures warehouse receipts.

8. Avoid exchange rate losses of foreign trade enterprises. When foreign trade enterprises settle accounts in foreign currency, they can lock in the exchange rate through futures to avoid the losses caused by exchange rate fluctuations and lock in the order profits.

9. Purchase or sales channels of enterprises. In some specific cases, the futures market can become another channel for enterprises to buy or sell. When the goods enter the delivery link, the real transfer of commodity property rights is realized, which is an appropriate supplement to spot purchase or sales.

Baidu encyclopedia-hedging

Baidu encyclopedia-futures hedging