There is a concept in commodity trading called futures. I won’t get into the technical details but it basically a contract that says “I will buy x product from you at y date for z amount of money”
Large companies buy alot of theses contracts. Imagine if maccas one day ran out of potatoes for chips? Imagine the reputation damage and lost money. So they buy contracts to guarantee supply.
But let’s say potatoe when up 500%. It won’t effect maccas because they have a signed contract saying the farmer will sell at z amount of money. They have to sell to them at that cost. Anything they make above that then they can sell at market rates but not untill they filled there contract first.
What’s in it for the farmer? The certainity there product will be sold at a specific cost. Imagine the cost of potatoes went down 90% and u were a potatoe farmer. U could lose your farm with such a drop. But u entered into a contract with maccas so u are guaranteed the sale at the agreed upon rate. So u don’t have to worry about a lost
As an example. Do u remember during covid when the price of oil went into negatives. This was in part due to these contracts. The interesting thing is people buy and sell these contracts but when the contract ends, whoever hold the contract has to buy the product at that cost. At the time, there was not enough space to hold the oil so people were desperately trying to sell the contract so they didn’t have to pay for it and find a place to store it. It got so bad people were willing to pay you to take it off them. But it didn’t reflect at the pumps because there are fixes cost to transportation of petrol.
However this is only from a pure market perspective. There are many aspect like bulk purchasing and other factors that allow them to be less price sensitive.
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