7 Commodities in Contango and Backwardation

One of the more unique aspects of futures contracts compared to other investment styles, is that there are fixed term contracts which expire at specific dates, and many different ‘contract months’ for each commodity futures market. So, you can trade July 2014 Corn, or the December 2014 contract, or the July December 2016 contract, and so on – depending on how you are looking to approach the market and what term you are looking to hedge. A quick look at the CME’s website shows how there are different prices and trading volume in several various ‘months’:

Corn Futures Market(Disclaimer: Past performance is not necessarily indicative of future results)
Table Courtesy: CME Group

Charting these different prices for the different contract months gives you what they call the price “curve”, with a downward sloping curve defined as a market in ‘backwardation’, with the further out prices lower than the nearer month prices. And an upward sloping curve defined as that uniquely futures term: Contango.  We’ve pointed out how Commodity ETF’s typically underperform the commodities they track due to the markets they track being in Contango, forcing the ETF to have to pay the roll yield (get out of the cheaper one, into the more expensive one) several times per year, and thought it would be worthwhile to check in on several markets to see whether they are currently in backwardation or contango.

Here are the Contango/Backwardation curves of 7 Commodity Markets extending into 2015.

Markets showing Contango:

Coffee Contango(Disclaimer: Past performance is not necessarily indicative of future results)

Wheat Contango

Markets showing Backwardation:

Crude Backwardation(Disclaimer: Past performance is not necessarily indicative of future results)

10 Yr Note Backwardation(Disclaimer: Past performance is not necessarily indicative of future results)

Mixed Markets: 

Corn Mix(Disclaimer: Past performance is not necessarily indicative of future results)

Lean Hogs Mix(Disclaimer: Past performance is not necessarily indicative of future results)

Cocoa Mix_1
(Disclaimer: past performance is not necessarily indicative of future results)

Related:

1. Lean Hogs continues to push all time highs, due to a deadly diarrhea virus, killing millions of young hogs.

2. Will a negative roll yield shut down managed futures bond tailwind?

3. It Takes Two to Contango

4. M6 Capital believes South American countries will push the grain commodities lower.

5. Coffee is off its screaming trend

 










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Forex trading, commodity trading, managed futures, and other alternative investments are complex and carry a risk of substantial losses. As such, they are not suitable for all investors.

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It should be noted that past market performance is not indicative of future market movement.No market data or other information is warranted by Attain Capital Management as to completeness or accuracy, express or implied, and is subject to change without notice.

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Past Performance is Not Necessarily Indicative of Future Results. The regulations of the CFTC require that prospective clients of a managed futures program (CTA) receive a disclosure document when they are solicited to enter into an agreement whereby the CTA will direct or guide the client’s commodity interest trading and that certain risk factors be highlighted. The disclosure document contains a complete description of the principal risk factors and each fee to be charged to your account by the CTA.