I am just trying to understand that if commodity forwards are available, what is the use of a commodity swap. If a farmer wants to hedge his risk, he can do it via entering into a commodity forward, why is the commodity swap required at all ?
The commodity swap allows the farmer to enter into a series of forwards all at once: so one contract, instead of (say) five separate contracts. Also, the Swap strike will be (approximately) the average of the individual forwards: so from cash-flow perspective, it gives the farmer consistent prices over a prolonged period of time (and some farmers might prefer this). The individual Forwards would all have different strikes, whereas the Swap will have one strike for every month.