It really doesn’t, you don’t buy fuel on the futures market, you buy it locally from the coop or whatever local purveyor you use for future delivery, hundreds of gallons at a time.

The same for your other inputs, you have contacts to buy them well into the future, you don’t just pay the market rate when you need it.

Commodities futures are just like gold based money. The gold itself wasn't traded, it sat locked in a vault somewhere. People traded receipts for the gold. I.e. that's what banknotes literally used to be.

Eh, while there is quite a lot of speculation-only trading, unless you're dealing with cash-settled futures, if you forget to close out your position you'll be expected to, say, deliver or take delivery on 5000 bushels of corn.

Commodities futures are heavily used to arrange actual exchange of goods and aren't abstractions but real contracts.

That is true right up until the day the contract comes due. Then you need to pick up your oil, pork, OJ, etc. at the time and place specified in the contract. If you holds the contract at that point in time, you are responsible for picking it up at the place in space.

Why? Wouldn't a farmer just buy the futures contract (or an option on it), then liquidate and use the profit to offset the loss on the spot purchase? I was under the impression that hedgers never take delivery.

Hedges who sit in an office at Wall street never take delivery.

If you're a person who actually needs the future, you need to take delivery. This makes sense on an industrial mega-farm scale, but doesn't make sense at the private-farm scale.

Why can't you buy cash settled futures and/or liquidate before due for delivery?