What is backwardation? | Fox Business


Backwardation occurs when the spot price is higher than the future price, or in other words, investors are willing to pay a premium to hold the commodity now.

This causes a downward sloping futures price curve.

WHAT IS CONTANGO?

For example, a famine could have caused corn to be in short supply for the current season, but extended forecasts are calling for above-average rainfall to cause a surplus during the upcoming growing season.

That would make corn more expensive in the near term and cheaper further out along the price curve.


View more information: https://www.foxbusiness.com/markets/what-is-backwardation

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