An Australian farmer has been contracted to sell 1000 tonnes of oranges to an American juice manufacturer at a set price - HSC - SSCE Business Studies - Question 19 - 2021 - Paper 1

The effective method of hedging for the American juice manufacturer would be option D: The American manufacturer using a derivative to protect themselves from a falling American dollar. This is because the payment for the oranges is required in Australian dollars, and if the American dollar depreciates against the Australian dollar, the manufacturer would pay more in their local currency. By hedging against this risk, they can stabilize their costs.