The Long-Term Structure of Commodity Futures

Na Jin, Sergio Lence, Chad Hart and Dermot Hayes

Staff General Research Papers Archive from Iowa State University, Department of Economics

Abstract: Futures markets on agricultural commodities typically trade with maximum maturity dates of less than four years. If these markets did trade with maturities eight or ten years distant, futures prices would have value as price forecasts and as a way to structure long-term swaps and insurance contracts. Agricultural commodity markets generally exhibit mean reversion in spot prices and convenience yields. Spot markets also exhibit seasonality. This study develops and implements a procedure to generate long-term futures curves from existing futures prices. Data on lean hogs and soybeans are used to show that the method provides plausible results.

Keywords: Commodity markets; futures; Bayesian statistics; mean reversion; seasonality (search for similar items in EconPapers)
Date: 2012-03-20
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Citations: View citations in EconPapers (9)

Published in American Journal of Agricultural Economics, April 2012, vol. 94 no. 3, pp. 718-735

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Journal Article: The Long-Term Structure of Commodity Futures (2012)
Working Paper: The Long-Term Structure of Commodity Futures (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:isu:genres:34992

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