Have you traded agricultural commodities before? They are agreed prices based on volume, quality and delivery dates. They lock in prices for instance if the market was to go up they would still be able to meet their processing costs without having to effectively renegotiate all other supply chain agreements.
They will generally lock in a contract for "X" amount fixed price, and then if the market goes either way they still have security of the supply. Goes both ways, no one can have their cake and eat it too.
In saying that some larger processes, have then turned around and tried to renegotiate, although that usually happens when there is an over supply of "premium" product in the market
CLI Price at posting:
5.7¢ Sentiment: None Disclosure: Held
