mar350

With a perfect hedge i.e. with no basis differential , you will earn the risk free rate.

Roughly F=S*e^t. The e^t part is the return component by investing S amount in the commodity .

So intuitively , by borrow S dollars at the risk free rate and investing in the short futures contract ( I know , I know that futures does not require up front investment , but the notional amount is supposedly invested in T-Bills , so it earns the risk free rate ), The futures price represent a future value of the S dollars at the risk free rate over time t