Contango

http://thefountainhead.typepad.com/contango/2007/01/contango.html

In Hilary's own words:

When a commodity futures contract is in backwardation, an investor has two potential sources of returns. Since backwardation typically indicates scarcity, one is on the correct side of a potential price spike in the commodity by being long at that time. The other source of return involves a bit more explanation. In a backwardated futures market, a futures contract converges (or rolls up) to the spot price. This is the “roll yield” that a futures investor captures. The spot price can stay constant, but an investor will still earn returns from buying discounted futures contracts, which continuously roll up to the constant spot price. A bond investor might liken this situation to one of earning “positive carry.” In a contango market, the reverse occurs: an investor continuously locks in losses from futures contracts converging to a lower spot price. Correspondingly, a bond investor might liken this scenario to one of earning “negative carry.”

In other words, for a backwardation (contango) commodity we buy (sell) a future contract further into the delivery curve and wait for its appreciation (depreciation) as it approaches the higher (lower) spot price.