How Does a Long Hedge Work?
Hedgers who are planning to purchase livestock in the future will be at a disadvantage if prices increase. They can use long hedges to control that risk. First,
they buy futures contracts to cover the cash livestock they plan to buy. When they are ready to purchase the feeder or stocker cattle, they will sell back the futures contracts and buy in the cash market simultaneously. The long hedges allow them to lock in a purchase price for the cattle.
Details: The Long Hedge