how huge food companies like Cargill and Mcdonald’s, etc. protect themselves from extreme price changes.
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Imagine your friend buys a pack of sweet Pokémon cards. You know you want one, but don’t want to buy the whole pack, so instead you make a deal before he opens the pack.
“I will give you my lunch money for the best Pokémon card in that pack,” you say. Now your friend needs some money, so he agrees, with neither of you really knowing what’s in the pack.
Congratulations, my friend, you’ve now begun your exciting new career in trading *futures.*
Now the best card in that pack might be a Swinub or something crappy. Conversely, it might be a shiny Charizard. (I don’t know much about Pokémon.)
Neither of you really knew before opening the pack, so you both made your best guess before opening the pack. It might be a great deal for you. It might be a disaster.
Commodities and futures trading is the same basic thing, just being done by billion-dollar companies and people with private jets instead of school friends.
Current price changes don’t affect them, because the sales prices for raw goods (chicken, unprocessed grains, barrels of oil) were set a year ago before the current prices hit (i.e. before the Pokémon cards got opened).
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