Re: to lose money
I'm not sure about sheep brains, but to take the example of metal trading and a futures contract traded on the London Metals Exchange most (all?) futures contracts are settled without the physical delivery of the metal that is the subject of the contract. However, the metal must be available in an LME warehouse for physical delivery should the parties agree.
It is not a question of the buyer selling the metal on, as contracts are usually settled financially and futures, and other trades on the LME, are used to hedge exposure to comodities markets rather than to buy supplies.
To use an example of Company X, which requires aluminium to manufacture its product. Company X has suppliers of aluminium and will need 100 lots in 6 months time but wants to protect against price increases during the period. Company X enters a trade on the LME for 100 lots of aluminium at a price of £110. In 6 months time Company X buys the 100 lots required from their supplier.
If the market price has increased to £120 they pay £120, but in settlement of the futures contract they receive £10 - the cost to company X was £110 (plus the cost of the futures contract).
If the market price has fallen to £100 they pay £100, but in settlement of the futures contract they pay £10 - again the cost was £110 (plus the cost of the future).
The option of physical delivery remains, but it is rarely, if ever, exercised.