UK Accounting Glossary
A commercial hedger is a corporation that attempts to stabilize the price of a commodity by taking a position or stake in the commodities market. Since a commercial hedger uses the commodity to produce its own goods, locking in prices is a favourable strategy. A commercial hedger in the commodities market can be both a manufacturer/producer and an investor in the basic financial market. A commercial hedger might be an airline buying energy futures when crude oil prices per barrel are considered low. When a commercial hedger buys futures to hedge market risk, the commercial hedger is confident that future production costs can be hedged at an advantage. A commercial hedger uses the commodities market to transfer market risk to speculators. A large commercial hedger is referred to as a “large speculative account.”
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This glossary post was last updated: 4th February 2020.