Beer companies need to get a lot of raw materials from wheat suppliers to brew beer. Suppose Lao Wang beer is a beer producer and farmer Xiaobai is a wheat supplier. Originally, the price of wheat was 10 yuan, but due to oversupply, the price dropped to 5 yuan, which made the profit of Lao Wang Beer grow strongly, but the profit of farmer Xiaobai was relatively damaged, because the original profit was reduced by half. On the contrary, if the supply of wheat decreases and the price rises due to the weather, farmer Xiaobai will benefit and Lao Wang beer will be damaged. The income and profit of many enterprises will change greatly because of the price fluctuation in the market.
So in order to control the cost more easily, futures are derived from the market. The two parties will invite investors to negotiate a contract to hedge against market price fluctuations, and the content will ensure that the prices listed in the contract can be used as the pricing for future purchases or sales in future transactions. Take farmer Xiaobai as an example. He will find an investor and make an agreement with him to 10 yuan to buy wheat. When the price of wheat drops from 10 to $5, investors still need to buy the wheat specified in the contract at 10, and Xiaobai can lock in the profit. On the contrary, when the future wheat price is higher than 10, investors can benefit from the contract. In addition, Lao Wang Beer also found an investor, who also bought wheat for 5 yuan, so frog beer can lock in the cost of buying wheat and reduce the impact of market price fluctuations.
Therefore, the risks and rewards of market price fluctuations have shifted from Lao Wang Beer and farmer Xiaobai to investors. Today, we don't have to deliver wheat or oil, and the exchange plays the role of intermediary. There are all kinds of futures, except in agricultural products market, financial index, metal, energy and even temperature futures. In addition, at present, investors focus on speculation, not hedging.