The classic user is a producer: a farmer with a crop in the ground, a miner with ore in the pit, an oil company with wells flowing. Selling futures fixes the revenue side while the physical asset remains in hand.
The hedge is not perfect. What it locks in is the futures price, and the producer actually receives the local cash price, which differs by the basis. A short hedge therefore converts flat price risk into basis-risk — a much smaller and more predictable exposure, but not zero.
Margin is the practical burden. A rising market means losses on the futures leg that must be paid daily in cash, while the offsetting gain on the physical asset is not realised until it is sold. Producers need credit lines for exactly this.
Example: a farmer expecting 50,000 bushels sells 10 December corn at $4.70. Corn falls to $4.10; the futures gain 60 cents x 50,000 = $30,000 while the crop sells for $30,000 less. Net revenue is fixed near $4.70 minus basis.
Related: long-hedge, hedger, basis, basis-risk, hedge-ratio