Which factor can influence the shape of the futures curve for commodities?

The shape of the futures curve for commodities is significantly influenced by storage and transportation costs. These costs directly impact the pricing structure of futures contracts for several reasons. When commodities are physically stored, the costs associated with storing them—such as warehousing fees, insurance, and spoilage—must be factored into the pricing. Higher storage costs can lead to a rising futures curve, reflecting the increased expenses involved in holding the commodity until the delivery date.

Similarly, transportation costs can influence how futures prices are structured. If the logistics of moving a commodity from one location to another are expensive or challenging, this can also affect the futures pricing. For instance, if transport costs rise, it may be more economically favorable to lock in futures prices earlier rather than later, causing adjustments in the futures curve.

Understanding this relationship helps explain the various shapes a futures curve can take (contango or backwardation), depending on the market dynamics of supply, demand, and these associated costs.

Market sentiment, dividends from underlying equities, and management fees, while they may affect trading decisions and pricing, do not have the same direct impact on the shape of a futures curve for commodities as storage and transportation costs do.