Commodity Hedge & Lock In Your Price
Locks the price
Enter your crop quantity, the futures price and your expected basis to get the lots to sell, the effective locked price, the value locked in, and your gain versus spot.
Set up your hedge
Next: sell 10 futures lots to lock ₹2,050/qtl; on delivery the basis settles your true realisation — watch margin calls if prices rally.
Hedging fixes your price, not your profit: a favourable spot move becomes an opportunity cost, and basis can drift from your estimate. Use exchange lot sizes and keep margin buffer.
Commodity hedge — key facts
- Hedge type
- short (sell futures)
- Locked price
- futures price + basis
- Basis
- local cash − futures
- Lots
- quantity ÷ lot size
- Locked value
- locked price × quantity
- Trade-off
- no downside, no upside
- Needs
- margin (initial + daily)
- Privacy
- Runs in your browser; nothing uploaded
Sell the price before you sell the crop
Between sowing and harvest, the price of your crop can swing far enough to wipe out the margin. A hedge takes that uncertainty off the table: a farmer or FPO sells futures contracts now, so if the cash price falls by harvest, the gain on the futures makes up for it — and if it rises, the futures give some back. What you realise is the futures price you sold at, adjusted by the basis between your local market and the exchange.
This tool shows the number of lots to sell, the effective locked price, the total value locked in, and your gain versus the current spot, in 8 currencies. Use it to size a hedge and see the trade-off before you call a broker. Pair it with the Store or Sell, MSP Profitability and Warehouse Receipt Loan tools to plan how and when to market the harvest.
Remove price risk
Lock a selling price before the market moves.
Account for basis
Locked price uses your local cash-to-futures gap.
Size the position
See exactly how many lots to sell to hedge.
Know the trade-off
Protect the floor; give up the rally — by design.
Frequently Asked Questions
What is a commodity hedge?+
A hedge is a futures position that offsets the price risk of a physical crop. A farmer or FPO holding (or growing) a commodity to sell later sells futures contracts now; if the price falls, the gain on the short futures offsets the lower cash price, and vice versa. The result is that the effective selling price is locked in regardless of where the market goes.
How is the locked-in price calculated?+
Effective locked price = futures price + the expected basis, where basis = local cash price − futures price. You sell futures at today's quote, then later sell your crop in the local market and buy back the futures; the two markets move together, so what you actually realise is the futures price you sold at adjusted by the basis. This tool computes it from your inputs.
What is the basis?+
Basis is the difference between your local cash price and the futures price for the same commodity — driven by transport, quality, storage and local supply and demand. A hedge converts price risk into the usually smaller and more predictable basis risk. Entering your expected basis gives a realistic locked price rather than just the raw futures quote.
How many lots should I sell?+
Lots = your crop quantity ÷ the contract (lot) size, rounded to whole contracts since futures trade in fixed lot sizes. The tool computes the number of lots to sell to hedge your quantity and shows the value that covers, so you can see how much of your production is protected and how much is left unhedged.
What is the hedge ratio?+
The hedge ratio is the share of your expected production you choose to hedge. Hedging 100% locks the whole price but removes any upside; many growers hedge a portion — say 50–70% — to protect a floor while keeping some exposure to a rally. Adjust the quantity you hedge in the tool to see the trade-off.
What happens if the price rises after I hedge?+
Your physical crop sells for more, but the short futures position loses roughly the same amount, so your net realisation stays near the locked price. A hedge isn't a bet on direction — it removes uncertainty in both directions. That certainty is the point: you give up the upside to guarantee you won't be hurt by a fall.
Who uses commodity hedging?+
Farmers, Farmer Producer Organisations (FPOs), traders, processors and exporters all hedge to manage price risk. For a farmer or FPO with a known harvest to sell, a short hedge locks the selling price; processors who must buy later use long hedges to lock their input cost. The same basis logic applies to both.
Do I need margin to hedge?+
Yes — selling futures requires posting initial margin and meeting daily mark-to-market (variation) margin if the price moves against the position. Plan for this cash flow: a rising market means the physical crop is worth more but the futures call for margin top-ups in the meantime. Factor margin availability into how much you hedge.
Is this financial advice?+
No — it's a planning estimate of the locked price and lots from your inputs. Real outcomes depend on actual basis at sale, contract specifications, brokerage, margin and taxes, and futures trading carries risk. Use the tool to size a hedge and understand the mechanics, then act through a registered broker and your own judgement.