How can selling a futures contract mitigate agricultural risk for farmers?
A) Farmers can grow crops that are not subject to weather inclemency.
B) Farmers can pin down a price for their produce even if there is volatility in market prices.
C) Futures contracts allow farmers to store their grains in silos until the market prices rise.
D) Futures contracts allow farmers to trade in crops whose prices will fall in the future.

Question

Quizplus · Accepted Answer

Selling a futures contract allows farmers to lock in a price for their produce, which can mitigate the risk of market price volatility. This means that even if the price of their crops falls in the future, the farmer will receive the price agreed to in the futures contract.

How Can Selling a Futures Contract Mitigate Agricultural Risk for Farmers