I was reading Trading Commodities and Financial Futures by Kleinman, I saw this excerpt:
When you buy or sell a futures contract, you don’t actually sign a contract drawn up by a lawyer. Instead, you enter into a contractual obligation that can be met in only one of two ways. The first method is by making or taking delivery of the actual commodity. This is by far the exception, not the rule. Fewer than 1% of all futures contracts are concluded with an actual delivery. The other way to meet this obligation, which is the method you will be using, is termed offset. Very simply, offset is making the opposite (or offsetting) sale or purchase of the same number of contracts bought or sold sometime prior to the expiration date of the contract. Because futures contracts are standardized, this is accomplished easily.
My question is if 1% of contracts are fullfilled, how does this market work? Why would producers create contracts that they would not fullfill?