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Maybe what I was suggesting wasn't clear enough. If you need food in 100 days, you can pay for the futures for that day, or in 100 days the actual spot price,
by ArchD 15y ago
Maybe what I was suggesting wasn't clear enough.
If you need food in 100 days, you can pay for the futures for that day, or in 100 days the actual spot price, whatever it turns out to be in 100 days. You generate demand for the futures or the actual commodity, not both. By acting early, well in advance, you could get a better price if the price is going to go up. Even if you have zero idea where the price is heading, by buying futures continually well in advance, you could smoothen out the volatility for yourself.
So, why would it make the problem worse?
- justincormack 15y agoThat is clearer. But right now that would increase demand for futures even more, over the current situation, and if the futures prices are higher purely for speculative reasons, you would reduce volatility but pay a lot for that. Whereas if you sell future production into the market now, you realise gains from historically high prices, and hopefully make a profit.
- ArchD 15y agoWell, I'm not necessarily suggesting it for right now, but as a general strategy. But, if the governments were to short the futures right now, who's to say the price will not increase? It's a risk. If they can be sure, other entities can also be sure and make money doing the same.