The following are two types of futures traders:
An example of a hedger would be an airline buying oil futures to guard against potential rising prices. An example of a speculator would be someone who is just guessing the price direction and has no intention of actually buying the product. According to the Chicago Mercantile Exchange (CME), the majority of futures trading is done by speculators as less than 3% of transactions actually result in the purchaser of a futures contract taking possession of the commodity being traded.
Since most of the future contracts are never settled physically (therefore, no actual trades occour), why would the rest (actual buyers and sellers) even agree to participate in this speculative price action game?
Why futures contract price of commodity is considered to be some kind of approximant of commodity price if all it is is ~97% speculation of traders who never bought/sold, never does and never will be involved in the commodity trade?