The Theory Of Storage :: essays research papers

The Theory of StorageTHE THEORY OF STORAGE. THE bring out OF STORAGE REFERS NOT TO THE SUPPLY OfSTORAGE SPACE BUT TO THE SUPPLY OF COMMODITIES AS INVENTORIES. IN GENERAL 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 PRODUCTION ISNOT STABLE FOR ALL COMMODITIES ESPECIALLY ARGICULTURAL CONSUMERS DEMAND THAT THESTORAGE FUNCTION BE SO PERFORMED THAT THE FLOW OF COMMODITIES FOR SALE result 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 addition to the marginal expenditure onphysical storage and the marginal convenience yield anformer(a) variable, a riskinesspremium, is take to explain the holding of stocks as functions of pricespreads. in the empirical part of the study the theory will be applied tostocks of several agricultural commodities. the risk premium for each commoditywill be measured residually under specified conditions by deducting form theprice spread between two periods the other two components of the marginal costof storage." (brennan p.50)IN GENERAL WE CAN OBTAIN A MEASURE OF THE RELATIVE RISK PREMIUMS INVOLVED IN THESTORAGE OF diametric 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 mid-fifties and 1960s. Pauls work differs from other works in that heinvestigates the pricing of all grain storage not just that available to aparticular commodity. mend brennans marginal storage cost is from the point ofview of the owner of the grain, Paul is looking at the first component only.