Definition for : Backwardation

When commodity makets show futures prices below the Spot price this is known as backwardation. The reverse scenario is known as Contango.Backwardation is unfrequent for a persishable commodity that has a Cost of carry, so grains such as corn and wheat, and sugar, are often in Contango.

(For more see Chapter 49 Managing working capital of the Vernimmen)

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