Understanding fuel hedging contracts
Most farmers would be surprised to know that the term ‘hedge’, now synonymous with investment banks and financial markets, has its origins in the 14th century when it was used to describe a fence made from a row of bushes. Therefore, to hedge a piece of land was to limit it in terms of size and create a protective barrier.
Today, financial hedges are used in a similar way by protecting and limiting against the potential risks that accompany unexpected changes in prices of shares and a range of commodities, including gold, oil, maize and fuel. A
