normal-backwardation

In the case of a consumption commodity (e.g., corn, copper) we expected to observe contango: F(0) exceeds S(0). Contango implies (i) the cost of carry exceeds the convenience yield, and identically (ii) the risk-free rate exceeds the lease rate. We also might expect normal backwardation: F(0) is...

If the commodity has positive beta, then the theoretical futures price is less than the expected future spot price: F(0) is less than E[S(t)]. David's XLS is here: https://www.dropbox.com/s/706n2vz1mgprw26/062718-yt-normal-backwardation.xlsx