Amaze Yield, Inc. is a commodity trading firm. Denis is the head trader and mainly trades the agricultural markets.

Since Denis expects an increase in the spot prices of corn and wheat, on 1 September 2022, he considers purchasing corn and wheat futures contracts for delivery on 15 December 2022. Price data for corn and wheat are presented in Table 1.

Table 1 Corn and Wheat Spot and Futures Prices
	Price per Bushel as of 1 September 2022
Spot corn	$2.65
Spot wheat	$4.20
December 2022 corn	$2.85
December 2022 wheat	$3.70

Denis opened a long position of 100 wheat futures contracts for delivery December 2022. One month later, on 1 October, a hail storm destroyed significantly wheat crops. As a result, there is a temporary shortage in the supply of wheat.

On 14 December, one day before the wheat futures contracts mature, Denis decides to maintain his exposure to wheat, so he sells his December wheat futures contracts and purchases March wheat futures contracts for delivery on 15 March 2023. Price data for wheat is shown in Table 2:

Table 2 Wheat Spot and Futures Prices
	Price per Bushel as of 14 December 2022
Spot wheat	$4.50
March 2023 wheat	$4.20

(b) (4 marks) Describe what is contango and backwardation with respect to the term structure of forward curve of commodity futures. Based on Table 1, decide whether the forward curve of wheat can best be described as being in contango or in backwardation.

(c) (3 marks) What is convenience yield? Explain how the events on 1 October affected December wheats convenience yield.

(d) (3 marks) What is roll yield? Based on Table 2, explain whether the roll return on the wheat futures contracts investment on 14 December is positive or negative.