On the Comovement of Contango and Backwardation Across Futures Commodity Markets

We examine the time‐varying nature of the comovement of the slope of the futures curve in major agricultural, metals and energy commodity futures markets in a Global Vector Autoregressive model. We find significant comovement between the slopes, indicating the co‐existence of backwardation and contango in many seemingly unrelated commodity futures markets. The degree of comovement in commodity futures curves intensifies during periods of financial and macroeconomic turmoil and increased geopolitical risk. In contrast, our analysis shows that the gold futures market becomes more backwardated (contangoed) when the rest of the commodity futures markets become more contangoed (backwardated).