Commodity futures contract

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Commodity futures contract

An agreement to buy a specific amount of a commodity at a specified price on a particular date in the future, allowing a producer to guarantee the price of a product or raw material used in production.
Copyright © 2012, Campbell R. Harvey. All Rights Reserved.

Commodity Futures Contract

An agreement to buy and sell a commodity at a certain date at a certain price. For example, Investor A may make a contract with Farmer B in which A agrees to buy a certain number of bushels of B's corn at $15 per bushel. This contract must be honored whether the price of corn goes to $1 or $100 per bushel. Commodity futures contracts can help reduce volatility in the normally volatile commodity markets, but contain the risks inherent to all speculative investing. These contracts may be sold on the secondary market, but the person holding the contract at its end must take delivery of the underlying. See also: Carrying charge, Options contract.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved
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Over the years, there have been regulatory structural and operational changes in commodity future market, to improve market practices in various dimensions, it said.
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