The elevator sets the spread when it sells grain for cash and buys futures markets. as per the given statement in question.
What is the futures market?
A futures market is an auction market where participants trade futures and commodity contracts for delivery on predetermined dates in the future. Futures are exchange-traded derivative contracts that guarantee the delivery of a commodity or asset at a price set today, regardless of when it is delivered.
Commodity producers and suppliers use futures contracts to try to reduce market volatility. With an investor willing to accept both the risk and the reward of a volatile market, these manufacturers and suppliers negotiate contracts.
Futures markets are not only used for agricultural contracts; they are also used to buy, sell and hedge financial products including interest rate futures.
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