Why lock in?

The single best reason to fix a price is to secure or lock in a profit, or conversely to minimize losses. Secondly, budget certainty is paramount for some customers. Finally, when prices are trading at long term historic lows, it is prudent, though still slightly speculative, to lock in such pricing. Overall, any or all of these reasons are variations on the same theme: managing risk. To lock in the price is to manage the risks associated with the price changing over time.

It is important to consider that fixing the price for any commodity, i.e. lumber, gas oil, etc., is an exercise in reducing financial risk. It is similar to buying insurance. If prices change unfavourably, the hedge protects you. If prices change favourably, it is tempting to consider this a loss, but similar to buying fire insurance and having your house not burn down, the lost opportunity is the cost of risk protection. To not fix the price is to speculate that the price will change favourably or continue to be favourable to you. Locking in is not speculation. It is, in fact, exactly the opposite.