What is the primary goal of a hedger in commodities trading?

The primary goal of a hedger in commodities trading is to mitigate risks of price fluctuations. Hedging is a risk management strategy used by producers, consumers, and traders to protect themselves from adverse price movements. For example, a farmer may hedge against the risk of falling crop prices by entering into a futures contract that locks in a selling price for their produce. Similarly, a company that relies on commodities as inputs may hedge to secure purchase prices and avoid the uncertainty associated with the market.

Using futures contracts or options, hedgers aim to reduce the financial impact of volatility in commodity prices, ensuring more predictable financial outcomes and stabilizing their cash flow. This focus on risk mitigation distinguishes hedgers from speculators, who actively trade to take advantage of price movements for profit rather than to protect against them.