The answer I get from people working at market makers I’ve talked to is that they provide liquidity (so you can buy or sell a security immediately rather than waiting minutes or hours?) and decrease volatility.
One set of markers of a "good" industry or organization is whether they pay for all the harm they create in society and whether their profits are equal to or below the value they create for society.
For instance, the oil/car industry pays for basically none of the large negative externalities they create. In this case, I hazard that futures industry captures more value than they create. And that value is extracted from other players in the vertical chain, particularly farmers.
The relationship between futures traders and farmers is pretty much identical to that between any kind of insurance company and its customers - it's a risk arbitrage transaction where the client (farmers in this case) are sacrificing profit in expectation for a flatter outcome curve which in a properly priced market yields higher utility in expectation, since utility as a function of profit is concave for an individual farmer and much closer to linear for a well-capitalized market maker.
I understand the mathematics. The problem is that there is a practical asymmetry of information. Large future traders can invest a lot of resources into getting a much better prediction of future prices, while individual farmers cannot. In such scenarios, it is inevitable that farmers will be exploited by future traders into making bad deals.
futures contracts work somewhat well for farmers. There's a level of certainty provided and they are reducing their risk so that a low price at the end of the season doesn't ruin them (however they also don't profit from a higher price). As a farmer i would likely prefer to sell a certain percentage of my goods with a futures contract so that i can have less risk of financial ruin.
When I was an undergrad, I interviewed at a then-very small, now-very-prestigious quant firm. In the last interview or so, I asked the quant head something like, “but what value do you provide to society?”
He said, “we provide liquidity.”
I turned down the job they later offered and went to work at a software company that sells a thing people buy.
I would prefer the price of onions - seems like the price is a lot more stable other than a few points out of the year where it is very high. For those times, I could choose to have a small store of onions or go without.
For the price of corn, if the price is high, chances are it will be high for a while, so I'll have to go without for a while...
Likewise, this is the answer I generally hear from those folks. IME it's still begging the question - the increased liquidity is still overwhelmingly only meaningful to those already-ultra-rich, unless you subscribe to trickle-down Economics.
For instance, the oil/car industry pays for basically none of the large negative externalities they create. In this case, I hazard that futures industry captures more value than they create. And that value is extracted from other players in the vertical chain, particularly farmers.