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What Causes Commodity Price Backwardation?

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  • Darren L. Frechette
  • Paul L. Fackler
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    Abstract

    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. Copyright 1999, Oxford University Press.

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    Bibliographic Info

    Article provided by Agricultural and Applied Economics Association in its journal American Journal of Agricultural Economics.

    Volume (Year): 81 (1999)
    Issue (Month): 4 ()
    Pages: 761-771

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    Handle: RePEc:oup:ajagec:v:81:y:1999:i:4:p:761-771

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    Cited by:
    1. Peterson, Hikaru Hanawa & Tomek, William G., 2001. "Income Enhancing and Risk Management Properties of Marketing Practices," 2001 Conference, April 23-24, 2001, St. Louis, Missouri 18963, NCR-134 Conference on Applied Commodity Price Analysis, Forecasting, and Market Risk Management.
    2. Peterson, Hikaru Hanawa & Tomek, William G., 2001. "Income-Enhancing And Risk-Reducing Properties Of Marketing Practices," 2001 Annual meeting, August 5-8, Chicago, IL 20613, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    3. Andrew Coleman, 2007. "A model of spatial arbitrage with transport capacity constraints and endogenous transport prices," Reserve Bank of New Zealand Discussion Paper Series DP2007/05, Reserve Bank of New Zealand.
    4. Andrew Coleman, 2007. "The pitfalls of estimating transactions costs from price data: evidence from trans-Atlantic gold-point arbitrage, 1886-1905," Reserve Bank of New Zealand Discussion Paper Series DP2007/07, Reserve Bank of New Zealand.
    5. Yoon, Byung-Sam & Brorsen, B. Wade, 2001. "Market Inversion In Commodity Futures Prices," 2001 Conference, April 23-24, 2001, St. Louis, Missouri 18962, NCR-134 Conference on Applied Commodity Price Analysis, Forecasting, and Market Risk Management.
    6. Peterson, Hikaru Hanawa & Tomek, William G., 2000. "Commodity Price Behavior: A Rational Expectations Storage Model of Corn," Working Papers 127682, Cornell University, Department of Applied Economics and Management.
    7. Franken, Jason R.V. & Garcia, Philip & Irwin, Scott H., 2006. "Do Interest Rates Explain Disaggregate Commodity Price Growth?," 2006 Annual meeting, July 23-26, Long Beach, CA 21319, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    8. Andrew Coleman, 2008. "Storage Under Backwardation: A Direct Test of the Wright-Williams Conjecture," Working Papers 08_13, Motu Economic and Public Policy Research.
    9. Seamon, V. Frederick & Kahl, Kandice H. & Curtis, Charles E., Jr., 2001. "Regional And Seasonal Differences In The Cotton Basis," Journal of Agribusiness, Agricultural Economics Association of Georgia, vol. 19(2).

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