Carrying Charge Market

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DEFINITION of 'Carrying Charge Market'

A futures market where contracts with maturities further into the future have higher future prices relative to current spot prices. These higher future prices are associated with higher carrying charges, such as interest, insurance and storage for holding the commodities for a longer period of time. Because a carrying charge market incorporates the full cost to carry a commodity, it is also called a "full carry market."

INVESTOPEDIA EXPLAINS 'Carrying Charge Market'

If it costs $1 a month to insure and store a half bushel of corn, and the spot price is $6 per half bushel, a contract for a half bushel of corn that matures in three months should cost $9 in a carrying charge market. However, when a commodity is in low supply, spot prices might be higher than future prices. This higher price helps to ration the limited supply.

RELATED TERMS
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