Storage Under Backwardation: A Direct Test of the Wright-Williams Conjecture

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Storage Under Backwardation: A Direct Test of the Wright-Williams Conjecture

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Andrew Coleman () (Motu Economic and Public Policy Research)

Abstract

Commodities are often stored when the spot price exceeds the future price in a central market. Wright and Williams conjectured that inventories are held in locations far from the central market on these occasions. In these locations the spot price is lower than the price for forward delivery because transport costs are temporarily high. This hypothesis has not been directly tested, because prices for forward delivery are not normally available at non-central locations. This paper uses an example where these prices exist to test the hypothesis. The evidence, from the late nineteenth century corn markets in Chicago and New York, strongly supports the conjecture. Length: 30 pages

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Paper provided by Motu Economic and Public Policy Research in its series Working Papers with number 08_13.

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Date of creation: Oct 2008
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Handle: RePEc:mtu:wpaper:08_13

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Find related papers by JEL classification:
L92 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Railroads and Other Surface Transportation
N71 - Economic History - - Economic History: Transport, International and Domestic Trade, Energy, and Other Services - - - U.S.; Canada: Pre-1913
Q13 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Markets and Marketing; Cooperatives; Agribusiness

This paper has been announced in the following NEP Reports:

NEP-ALL-2009-01-17 (All new papers)

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Brennan, Donna & Williams, Jeffrey & Wright, Brian D, 1997. "Convenience Yield without the Convenience: A Spatial-Temporal Interpretation of Storage under Backwardation," Economic Journal, Royal Economic Society, vol. 107(443), pages 1009-22, July. [Downloadable!] (restricted)
George G. Tunell, 1897. "The Diversion of the Flour and Grain Traffic from the Great Lakes to the Railroads," Journal of Political Economy, University of Chicago Press, vol. 5, pages 340. [Downloadable!] (restricted)
Fackler, Paul L. & Goodwin, Barry K., 2001. "Spatial price analysis," Handbook of Agricultural Economics, in: B. L. Gardner & G. C. Rausser (ed.), Handbook of Agricultural Economics, edition 1, volume 1, chapter 17, pages 971-1024 Elsevier. [Downloadable!] (restricted)

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