Journal Article

What Causes Commodity Price Backwardation?

Darren L. Frechette and Paul L. Fackler

in American Journal of Agricultural Economics

Published on behalf of Agricultural and Applied Economics Association

Volume 81, issue 4, pages 761-771
Published in print November 1999 | ISSN: 0002-9092
Published online November 1999 | e-ISSN: 1467-8276 | DOI: http://dx.doi.org/10.2307/1244322
What Causes Commodity Price Backwardation?

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A recently proposed explanation for futures price backwardation is examined. An equilibrium model with spatial heterogeneity leads to the interpretation of backwardations as mismeasurement by the analyst. However, the model predicts that backwardations are more affected by the location of stocks than by their aggregate level. Empirical examination of the United States corn market fails to support this result.

Keywords: backwardation; futures prices; location; storage; transportation; Q110

Journal Article.  0 words. 

Subjects: Agricultural Economics

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