Business, 27.08.2021 16:40 mariah10455

Suppose the cotton (a storable commodity) futures prices are currently: Expiry month Price c/lb
December 2021 83
December 2022 96

a. Is the cotton market in contango or in backwardation?
b. What is the slope of the futures curve for cotton? Draw a future curve graph to support your answer.
c. Are there positive returns to storage between Dec 21 and Dec 22? Draw a graph of supply and demand for storage to support your answer (where t=Dec 21 and t+1=Dec22).
d. Suppose an unexpected typhoon destroys cotton crops in India. This causes a downward revision in the expected global cotton production in 2022. Assuming all else equal, will demand storage of cotton in 2021 (St) increase, decrease or stay the same?

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Suppose the cotton (a storable commodity) futures prices are currently: Expiry month Price c/lb

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