The effect is real, and more comparable to insurance than the free market thing you mention. If you are a water supplier and you sell your water through futures

The effect is real, and more comparable to insurance than the free market thing you mention. If you are a water supplier and you sell your water through futures with e.g. a 6 month duration, then you know for certain that you will be able to sell your water for that price for the next six months, and if the price of water drops substantially, you have six months to figure out how to pay your employees, because it wont hit you until six months later. Of course, if the price increases, then you don't get the profit that this would have otherwise produced. That's the price of the insurance against low prices.