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A deferred futures is a futures contract that expires during the most distant months. It is also called “back months.” According to Kastens and Schroeder (1996), deferred commodity futures prices contain considerable information regarding market expectations of futures prices. For instance, they show that wheat deferred futures prices are considered as the best estimate of harvest time price from 6 months prior to harvest

up to harvest. Th eir reasoning is founded on the well-known equation for the basis of a futures contract: basis = cash price – futures prices. We thus have: cash price = basis + futures price. Taking expectation on both sides, we get: expected cash price = expected basis + futures price. Hence, the technique of forecasting is simple. It consists of adding a forecast of the basis to today’s future price of the futures contract that will be nearby during the forecast period. Note that commodity futures prices may be used to forecast future spot prices because there is a convenience premium in the cost-of-carry of a commodity. Th e net cost-of-carry, designated by cc, is equal to: cc = fi nancing cost + storage cost − convenience premium. Th e convenience premium is not an observed variable and thus allows the futures price to be used as forecast of the corresponding future spot price. Th e price Fc of a commodity contract is thus: Fc = Scecc, where Sc is the spot price of the commodity. But a strict arbitrage argument rules the computation of the price of a fi nancial contract. If the underlying does not pay dividends or any other cash-fl ow, the price FF of a fi nancial contract is: FF = erSF, with r being the risk-free rate and SFthe spot rate of the underlying. Th is relation is determinist and we, thus, cannot use the futures price as a forecasting tool in this case (Kastens and Dhuyvetter, 1998; Racicot and Th éoret, 2004, 2006).