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Normal Backwardation Theory

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Normal backwardation theory
Holds that the futures price will be bid down to a level below the expected spot price.
Normal Backwardation Theory
In Keynesian economics, a theory stating that the future spot price for a commodity will be higher than the forward price. This is because the producers of commodities expect to sell no matter what, and are willing to sell at a loss, if necessary. In normal backwardation, no rational investor will buy on the future spot market if he/she can buy more cheaply on the forward market. The extent to which normal backwardation occurs in the market is debated.


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