With food and energy commodities having increased their prices so much over the past year, more businesses are being forced to participate in the futures markets that never have before. Why? Because they must hedge the higher prices. These market participants are not speculators. They are commercial hedgers who are buying to take delivery of these commodities to use them in their products. Ironically, with so many more commercial participants taking long-only positions in the futures markets, this may be pushing prices still higher. These commercials, by the way, represent 80% of the trading volume in the futures markets! They outnumber the speculators by several times!
Here is the definition of commercials from the Bloomberg website:
Commercial Hedgers
Commercials that take futures positions in commodities so that they can guarantee prices at which they will buy raw materials or sell their products.
