We examine two models of commodity futures prices. The theory of storage explains the difference between contemporaneous futures and spot prices (the basis) in terms of interest changes, warehousing costs, and convenience yields. We find evidence of variation in the basis in response to both interest rates and seasonals in convenience yields. The second model splits a futures price into an expected premium and a forecast of the maturity spot price. We find evidence of forecast power for 10 of 21 commodities and time-varying expected premiums for five commodities.
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