A rice farmer in Kedah has invested heavily in state-of-the-art fertilizers and expects a heavy harvest of rice in 6 months from now. The farmer is a bit afraid, however, that high seasonal rain during the harvest will drive down the price of rice. He went to the spot market and found the current price of rice per metric ton reasonable. 

What financial instrument or contract can the farmer use to reduce price risk or price uncertainty of rice? Explain?

Answer rating: 100% (QA)

The farmer can use a financial instrument called a futures contract to reduce the price risk or pric... View the full answer