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What Causes Commodity Price Backwardation?
Author(s) -
Frechette Darren L.,
Fackler Paul L.
Publication year - 1999
Publication title -
american journal of agricultural economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.949
H-Index - 111
eISSN - 1467-8276
pISSN - 0002-9092
DOI - 10.2307/1244322
Subject(s) - normal backwardation , futures contract , contango , economics , convenience yield , commodity , econometrics , commodity market , aggregate (composite) , spot contract , microeconomics , financial economics , market economy , materials science , finance , composite material
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.