Quote:
Originally Posted by MRM
Yes, you are missing something. The futures market allows buyers and producers of the product or raw material to manage their risk. For instance, a farmer can get seed money for spring planting by selling futures on his crop. General Mills can assure itself a steady supply of wheat at a known price by buying grain futures. Manufacturing companies who need large amounts of oil can budget around a known cost and ensure supply buy buying futures.
If producers or consumers of comodities were held to selling only at the time of production or consumption they would be at the mercy of the days' spot prices, and would be open to supply, demand and pricing shocks.
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I appreciate your description of the process. I guess my question is, if we adjusted the system to eliminate the speculators, would we be any worse off? I see that some changes might be required. But I also see that oil speculation is about to crash our economy.