Hedging Wheat Follow

A lot of times when people think about futures markets, they imagine the fast paced locals shouting bids and offers across an open outcry pit while waving hand signals and throwing paper around, all the while trying to make a living off of the markets.  This is the legendary, yet controversial image of the commodities trader.  Although this depiction may be a little dramatic, the portrayal is fairly accurate.  Not everybody trading wheat fits this mold, but many do.  These locals are called speculators.  Speculators are made up of the independent floor traders and everyone else who uses financial market for reasons other than commercial or industrial purposes.

Speculators are often blamed for market turmoil, but this should be ignored.  Yes, the big speculators do have the power through leverage to sometimes push a market away from equilibrium.  Most of the individuals trading wheat markets for speculative purposes are either trying to make an honest living or want to grow their capital through other means than a 401k and mutual funds.  These people play a vital role in the market place by providing liquidity.  Liquid futures markets are necessary for commercial interests to conduct their business.