Futures contract

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A standardized agreement calling for deferred delivery of a commodity, or its equivalent, entered through organized futures exchanges. Most agricultural futures contracts call for physical delivery, but feeder cattle futures contracts call for cash settlement at contract maturity. In fact, contracts are usually liquidated before delivery. Traders are classified as hedgers or speculators. The FAIR Act of 1996 requires USDA to conduct research through pilot programs to determine if futures and options contracts can provide producers with reasonable protection from the financial risks of fluctuations in price, yield, and income inherent in the production and marketing of agricultural commodities.

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