FUTURES PRICES AS FORECASTS OF COMMODITY SPOT PRICES: LIVE CATTLE AND WOOL

In this paper the foundations on which the predictive interpretation of futures prices rests are discussed, and possible reasons for the differential predictive performance of futures prices as between different commodity markets examined. The predictive performances of futures, and spot prices themselves, are tested empirically, using Australian data for wool (a continuous inventory commodity) and finished live beef cattle (virtually a non-storable commodity), by means of instrumental variables estimation.