Comment by NoboruWataya
3 years ago
I don't have a percentage for you but agriculture-related futures make up a non-negligible amount of overall trading. It's not just some artificial example. Agricultural futures were also the first futures, and much of today's trading infrastructure was built around agricultural futures. So that's probably part of why it is such a common example.
They are far from the only example. Airlines use futures to hedge against fluctuations in fuel prices. Manufacturers use futures to hedge against fluctuations in the price of input materials. International businesses use FX swaps to hedge against currency fluctuations. Borrowers use interest rate swaps to hedge against interest rate rises. Investment funds (including pension funds and sovereign wealth funds) use options to hedge against drastic movements in asset prices.
I don't really understand your other questions. The use of derivatives in agriculture does not, on balance, result in fewer crops being produced. On the contrary, by allowing farmers to protect themselves against various risk, derivatives markets allow farmers to safely invest more money in production, and reduces the risk of farmers going bankrupt (bankrupt farmers don't produce many crops). Food would almost certainly be more scarce and more expensive if farmers did not have access to the financial markets.
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