Futures
markets traditionally included two kinds of players. On one side were the
farmers, the millers, and the warehousemen, market players who have a real,
physical stake in wheat. This group not only includes corn growers in Iowa or
wheat farmers in Nebraska, but major multinational corporations like Pizza Hut,
Kraft, Nestlé, Sara Lee, Tyson Foods, and McDonald's -- whose New York Stock Exchange shares rise and fall on their
ability to bring food to peoples' car windows, doorsteps, and supermarket
shelves at competitive prices. These market participants are called "bona fide"
hedgers, because they actually need to buy and sell cereals.
On the
other side is the speculator. The speculator neither produces nor consumes corn
or soy or wheat, and wouldn't have a place to put the 20 tons of cereal he
might buy at any given moment if ever it were delivered. Speculators make money
through traditional market behavior, the arbitrage of buying low and selling
high. And the physical stakeholders in grain futures have as a general rule
welcomed traditional speculators to their market, for their endless stream of
buy and sell orders gives the market its liquidity and provides bona fide
hedgers a way to manage risk by allowing them to sell and buy just as they
pleased.