We examine the determination of spot and futures prices in rational expectations equilibrium in a model with three groups of agents, agricultural producers, processing firms and speculators. We find necessary and sufficient conditions for producers to be short, processors to be long, and for the futures price to lie below the expected future spot price (normal backwardation). The conditions impose plausible restrictions on demand elasticities, and on the elasticity of substitution in the processing technology. We use a new technique of analysis which, in contrast to much of the literature does not require restrictive assumptions to be imposed upon the structure of preferences. This paper is circulated for discussion purposes only and its contents should be considered preliminary.