I thought I understood this theory where basically producers think the futures market is in backwardation whereas the consumers think the futures market will be in contango. So both parties lock in their respective prices and whoever puts more pressure in the futures market will determine whether we are in backwardation or contango.
However, I am totally lost when I read the following statement:
hedging pressure hypothesis, in which investors will receive a risk premium that is a positive
excess return for going short in a ‘normal contangoed’ commodity futures market;
What premium are we talking about? and what does the whole statement mean?