The Theory Of Storage :: essays research papers

The Theory of terminusTHE THEORY OF STORAGE. THE SUPPLY OF STORAGE REFERS non TO THE SUPPLY OfSTORAGE lieu BUT TO THE SUPPLY OF COMMODITIES AS INVENTORIES. IN GENERAL Aprovider 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 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 addition to the bare(a) expenditure onphysical storage and the marginal convenience yield another variable, a risk of infectionpremium, is required to condone the holding of stocks as functions of pricespreads. in the empirical part of the plain the theory will be applied to stocks of several clownish commodities. the risk premium for each commoditywill be measured residually under specified conditions by deducting form theprice spread between cardinal periods the other two components of the marginal compriseof storage." (brennan p.50)IN GENERAL WE bum 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 works in that heinvestigates the pricing of all grain storage not proficient that available to aparticular commodity. While brennans marginal storage cost is from the point ofview of the owner of the grain, Paul is looking at the archetypal component only.