Each player in the commodity market fulfills an economic activity. Justify.

Broadly, the participants in commodity market can be classified as Hedgers, Arbitrageurs and Speculators. Each of the players has an economic function to fulfill as given under: Hedger is the person who basically wants to avoid risk and enters into a contract with speculator. Hedger is a user of the market, who enters into futures contract to manage the risk of adverse price fluctuation in respect of his existing or future asset. Hedgers are those who have an underlying interest in the commodity and are using futures market to insure themselves against adverse price fluctuations. Examples could be stockists, exporters, producers, etc. A speculator is one who enters the market to profit from the future price movements. He does not have any physical exposure. Speculators accept the risk that hedgers seek to avoid, giving the required liquidity to the market. Arbitrageurs are traders who buy and sell to make money on price differentials across different markets. They simultaneously buy or sell the same commodities in different markets. Arbitrage keeps the prices in different markets in line with each other.