Explanation:
Backwardation vs. Contango:
Analysis of Option B:
Why other options are incorrect:
The correct understanding is that backwardation benefits consumers through lower forward prices, while contango benefits suppliers through higher forward prices.
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In commodity markets, the complex relationships between spot and forward prices are embodied in the commodity price curve. Which of the following statements is true?
A
In a backwardation market, the discount in forward prices relative to the spot price represents a positive yield for the commodity supplier.
B
In a backwardation market, the discount in forward prices relative to the spot price represents a positive yield for the commodity consumer.
C
In a contango market, the discount in forward prices relative to the spot price represents a positive yield for the commodity supplier.
D
In a contango market, the discount in forward prices relative to the spot price represents a positive yield for the commodity consumer.