For example, assume that Heidi, a swine producer, knows she will be buying a pen of feeder pigs two months from now.
Corn is an input into the production of swine.
Placing a hedge can be a simple process. First, knowing your cost of production helps you know when to place a hedge. To place a hedge, you need to contact a broker. A broker can help you understand how to place and exit your hedging position. After you have placed the order, the broker will contact a brokerage house at the commodity exchange and relay the order.