The relationship between the spot price and the expected future spot price whereby the futures price (in a commodity futures or an index futures) is lower than the expected future spot price. In other words, normal backwardation exists when expected spot price at delivery (time T) is larger than the current futures price (time t). This concept predicts that futures prices are biased.

Normal backwardation implies that holders of commodity or index futures should receive a positive excess return (positive risk premium).