Hedging Hedging is another practice that insures against poor harvests. This practice is carried on by cooperatives mainly. They try to reduce the risk of poor harvest by actively participating in the futures market. They take futures contracts and offset the loss they may incur on account of poor harvest.
Commodity Futures trading takes place in commodity exchanges and it has some great advantages. Due to Commodity futures trading poor farmers can afford to make profit and insure themselves against low prices by entering in to a contract to sell at the time the product prices are high. Buyers also benefit from the fluctuating prices at the time of the harvest. Futures also are regulated very well by futures exchanges of the respective countries.
