Commodity Futures Prices as Forecasts

Futures markets provide contemporaneous price quotations for a constellation of contracts, with maturities 30 or more months in the future, and a large literature exists about interpreting these prices as forecasts.It is often preferable to think of futures markets as determining a price level and price differences appropriate to the temporal definitions of the contracts.Futures prices can be efficient in reflecting a complex set of factors, but still be "poor" forecasters.Forecasts from quantitative models cannot improve upon efficient futures prices as forecasting agents; the models provide equally poor forecasts.Analogous ideas are discussed for basis forecasts.-