what if the predicted wheat price is very low, or the wheat rate is intentionally made low (corruption) ? neither the farmer sells it nor the buyer buys it rite…

I am not sure how there is corruption in a free market transaction? Corruption takes place when you entrust someone with someone else’s property. For example if your hire manager to take care of your restaurant, now there can be corruption or if there is a public official involved.
Coming to the second point. If the predicted wheat price is too low, the farmer will not sell the futures contract. Remember this is not just a prediction but the farmer has to agree upon the sale and buyer has to pay farmer that money. I mean I could predict the wheat prices to be Rs 10 per kg but its not really a prediction because I am not exchanging a contract.
So there is no such thing as “intentionally made low”, the whole intention of a futures contract buyer is to get the least price for his contract. If wheat’s usual price in Summer is Rs 20 per kg, and I am offering in Jan, the farmer a price of Rs 5 per kg, the farmer has no reason to accept that contract. But remember farmer would be taking the risk onto himself by not accepting that offer.
Of course once no farmer is willing to sell their wheat at Rs 5, the speculator has to offer a higher price.

What if there no harvest itself (due to floods or drought) ?

If there is no harvest then Farmer will have to pay the speculator either the price of the wheat in the market or that much wheat bought from somewhere else. This may sound horrible, but remember farmer is literally farming from the money he got from the sale of futures contract. So if the futures contract holder paid him Rs 10 per kg, and the contract was for 1000 kgs, then farmer got Rs 10,000 to grow wheat. Farmer will use Rs 7,000-8,000 from it to grow the wheat(rest is suppose to be his profit), if all the wheat goes away at the wheat prices on the day of delivery is Rs 40 per kg then farmer must pay Rs 40,000 or Rs 40,000 worth of wheat to the futures contract holder.
It may sound like a bad condition but then remember that uncertainty about the prices was taken away. If farmer cannot produce that much wheat then farmer is screwed. This screwup happens in rare conditions. Although price fluctuations happen way too much. So overall farmer is in a benefit than loss.
Now if farmer wants to reduce his loss in case of market thinking rain is going to greatly reduce the prices then Farmer can buy a futures contract any time he wants. For example if you are a Farmer and you sold Apr Futures in Jan to deliver 1000 kg of wheat at Rs 10 per kg, and now in Feb the prices have gone to Rs 30 per kg, then you can buy the contracts back to cover your position now, you re took the risks involved with price fluctuations(with a small loss). But then now you are actually involved in prediction business.

The farmer doesnt get any profit if the actual price is high. So hes getting loss in this case. (Though your idea avoid suicides, I’m thinking of the next step !).

That’s correct, the farmer will not any profit if the actual price is high. But then farmer will not have any loss if the actual price is low either. If farmer wants to take the risk in his own hand he is free to do so but then he might commit suicide if he fails.
Just consider it as buying price insurance. You give up the risk of price going down too low so you give up the profit of price going high too.

Wonderful to see

http://www.youtube.com/watch?v=_CEX1P8MZnI

so how they are suppose to reap benefits of commodities futures (here I mean probable benefits as in future options you got to be prepare for losses as well) OR its just for those rich highly educated MBA grads farmers/commodities traders who are very well aware of financial instruments [:-)] ?

See that’s why I am trying to say here. You the highly educated MBA Graduate(although I fail to see which part of an MBA degree teaches you trading), is going to do the trading, take the risks of the the price fluctuations in YOUR HAND, from the Farmer.
The farmer gets the benefit of not having the risk of price uncertainty in his hand.
Lemme elaborate.  Take for instance doing any business. When you start doing the business there are two possibilities,  you make it big, and become the next billion dollar company, or you lose it all and become bankrupt. Usually when you do good market research, you reduce your chances of becoming bankrupt. But there is still some uncertainty whether you will be able to make profit or make loss.
Wouldn’t it be great if someone took that risk from your hand. That is they promise you a certain amount of price even before you start producing anything?? That will surely reduce the risk on your capital. If you are getting a good price for your product you will go ahead and start producing.

Similarly when you buy a commodity future from a farmer he is promised a specific price(determined by the demand supply for that future commodity) for a specific quantity of commodity on a future date.

Benefits to the farmer: He does not have to worry whether his produce will lose value on that future date of production. If you are a farmer and you start planting the seeds for wheat, you know what price you will get for this wheat by looking at the current price of that future wheat. IF you like that price you can sell that future contract right now and get that money today. Then you are contractually obliged to deliver that amount of wheat on that future date.

The farmer does not have to trade in futures, only sell them to take the benefit from a farmer’s perspective.

Benefits to the guy who can predict the wheat price: This guy if he is correct will pocket the price difference, in whichever direction he thinks the price will move.

One more thing – I guess you should also read/recommend – “Fooled by Randomess ” to the readers – By Taleb. ..good one!