The Theory Of Storage :: essays research papers

The Theory of StorageTHE THEORY OF STORAGE. THE SUPPLY OF STORAGE REFERS NOT TO THE SUPPLY OfSTORAGE SPACE BUT TO THE SUPPLY OF COMMODITIES AS INVENTORIES. IN commonplace ASUPPLIER OF STORAGE IS ANYONE WHO HOLDS TITLE TO STOCKS WITH A VIEW TO THEIRFUTURE SALE, EITHER IN THEIR PRESENT OR IN A MODIFIED FORM. SINCE takings ISNOT STABLE FOR ALL COMMODITIES ESPECIALLY ARGICULTURAL CONSUMERS DEMAND THAT THESTORAGE FUNCTION BE SO PERFORMED THAT THE FLOW OF COMMODITIES FOR SALE WILL BEMADE relatively STABLE." (BRENNAN P. 51)"the theory purports to provide an explanation of the holding of all stocks,including those for which there is not an active future market. it will beshown that, on the supply side, in sum total to the marginal expenditure onphysical storage and the marginal convenience yield another variable, a riskpremium, is required to explain the holding of stocks as functions of pricespreads. in the empirical part of the study the theory will be applied tostocks of seve ral agricultural commodities. the risk premium for each goodwill be measured residually under specified conditions by deducting form theprice spread between two periods the other two components of the marginal addressof storage." (brennan p.50)IN GENERAL WE CAN OBTAIN A MEASURE OF THE RELATIVE RISK PREMIUMS INVOLVED IN THESTORAGE OF DIFFERENT COMMODITITES."allen Paul, in a 1970 American journal of agricultural economics article,studied the pricing of grain storage space in the u.s. during the surplus periodof the 1950s and 1960s. Pauls work differs from other whole kit and boodle in that heinvestigates the pricing of all grain storage not just that available to aparticular commodity. While brennans marginal storage personify is from the point ofview of the owner of the grain, Paul is looking at the first component only.