The one goal of future contracts is for producers and consumers to be able to make deals before that production and consumption happens. Those are the primary dealers there, and I don't really remember where I got statistics, but AFAIK, they are about 10% of the volume.
On top of those primary deals, a lot of people pile up making bets on secondary deals. Those are the people going for "hey, a lot more farms are growing rice this year, I bet its price will fall". They are very welcome because they not only stabilize the prices on those markets, but they also provide short-term money to make the deals flow more homogeneously. Without them, making deals on those markets would be a profession by itself (as it was).
Now, there exist people making bets on the results of the bets of the secondary market. That is a different market. At some point it's clear that this becomes toxic, but nobody seems to agree on what point exactly.
> What about the crops they destroy because they would be less profitable?
You mean farmers getting bankrupt? You seem to be misunderstand, because the main reason farmers love the futures market is because it lowers their risks.
> How well will it work if we create unsustainable land that the farmers can no longer grow crops on?
Well, surely if you go and kill everybody, there will be nobody losing money on those markets.
> What about the crops they destroy because they would be less profitable?
To clarify this point specifically, food self sufficiency is considered a national security issue.
Consider the situation where a hostile country floods your market with cheap food products (below cost) until your country's farms go bankrupt due to an inability to compete. Once you stop producing food of your own, you give significant power to whoever controls your food supply.
This is a large part of why agricultural subsidies exist. And yes, sometimes it means paying farmers to let crops rot on the vine in order to not cause market gluts. That is an entirely different situation from futures and hedging, which in any sane market match supply and demand (with the result of minimizing waste).
Not necessarily, if they can produce the crops more cheaply. Since each country ideally wants to secure it's own food supply, it's inevitable that many countries will find themselves subsidizing local production that would otherwise disappear in a competitive international market.
Additionally, hostile countries do not need to flood markets sustainably if the goal is simply to hollow out food production in the target country before taking more overtly hostile (i.e. military) actions.
On top of those primary deals, a lot of people pile up making bets on secondary deals. Those are the people going for "hey, a lot more farms are growing rice this year, I bet its price will fall". They are very welcome because they not only stabilize the prices on those markets, but they also provide short-term money to make the deals flow more homogeneously. Without them, making deals on those markets would be a profession by itself (as it was).
Now, there exist people making bets on the results of the bets of the secondary market. That is a different market. At some point it's clear that this becomes toxic, but nobody seems to agree on what point exactly.
> What about the crops they destroy because they would be less profitable?
You mean farmers getting bankrupt? You seem to be misunderstand, because the main reason farmers love the futures market is because it lowers their risks.
> How well will it work if we create unsustainable land that the farmers can no longer grow crops on?
Well, surely if you go and kill everybody, there will be nobody losing money on those markets.