Futures markets serve as a hedging devise for commodity producers and processors. In a perfect world of balanced supply and demand, commodity processors would contract directly with producers for future inventory needs at negotiated prices. In the real world, there are nearly always more producers wanting to sell than processors willing to buy, or visa-versa. This gap is bridged by speculators who step in to assume market risk—as temporary buyers or sellers—in exchange for a profit opportunity. If they did not exist, speculators would need to be invented in order for futures markets to function. Continue reading