IDEAS home Printed from https://ideas.repec.org/a/oup/apecpp/v38y2016i1p152-173..html

Commodity Storage under Backwardation: Does the Working Curve Still Work?

Author

Listed:
  • Kishore Joseph
  • Scott H. Irwin
  • Philip Garcia

Abstract

We investigate storage in the presence of backwardation and the existence of the Working curve for Chicago Board of Trade corn, soybeans, and wheat markets and the Kansas City Board of Trade wheat market using 1990–2010 data. Two spread measures—the futures-spot and futures-futures—are matched with deliverable stocks on the first Friday of delivery. To account for grade and location aggregation issues, the futures-spot spreads are measured using the lowest spot bid and highest futures price. Storage in the presence of backwardation is pervasive both in terms of the percentage of observations and the magnitude of the stockholdings. The Working curve emerges most clearly in KCBT wheat and soybeans. Convenience yield is also supported by the negligible holdings of delivery shipping certificates in backwardations. Overall, the results show that the Working curve does indeed still work today. When evaluating policy proposals to deal with heightened price volatility in agricultural markets it is important that models incorporate this well-established relationship.

Suggested Citation

  • Kishore Joseph & Scott H. Irwin & Philip Garcia, 2016. "Commodity Storage under Backwardation: Does the Working Curve Still Work?," Applied Economic Perspectives and Policy, Agricultural and Applied Economics Association, vol. 38(1), pages 152-173.
    • Handle: RePEc:oup:apecpp:v:38:y:2016:i:1:p:152-173.
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1093/aepp/ppv011
    Download Restriction: Access to full text is restricted to subscribers.
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or

    for a different version of it.

    Other versions of this item:

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Athanasios Triantafyllou & George Dotsis & Alexandros Sarris, 2020. "Assessing the Vulnerability to Price Spikes in Agricultural Commodity Markets," Journal of Agricultural Economics, Wiley Blackwell, vol. 71(3), pages 631-651, September.
    2. Mallory, Mindy L., 2025. "A Survey of 50 Years of Commodity Price Analysis, and a Look Ahead to the Next 50," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 50(4), December.
    3. Adjemian, Michael K. & Bruno, Valentina & Robe, Michel A. & Wallen, Jonathan, "undated". "What Drives Volatility Expectations in Grain and Oilseed Markets?," 2017 Annual Meeting, July 30-August 1, Chicago, Illinois 258452, Agricultural and Applied Economics Association.
    4. Covindassamy, Genevre & Robe, Michel A. & Wallen, Jonathan, 2016. "Sugar With Your Coffee?: Financials, Fundamentals, and Soft Price Uncertainty," IDB Publications (Working Papers) 8588, Inter-American Development Bank.
    5. Adjemian, Michael K. & Bruno, Valentina G. & Robe, Michel A., 2016. "What Drives Volatility Expectations in Grain Markets?," 2016 Conference, April 18-19, 2016, St. Louis, Missouri 285861, NCR-134/ NCCC-134 Applied Commodity Price Analysis, Forecasting, and Market Risk Management.
    6. Fernandes, Vitor M. & Kunda, Eugene L. & Robe, Michel A., 2022. "Corn Futures Deliveries: Why? When? So What?," 2022 Annual Meeting, July 31-August 2, Anaheim, California 322061, Agricultural and Applied Economics Association.
    7. Verteramo Chiu, Leslie J. & Tomek, William G., "undated". "Insights from Anticipatory Prices," 2017 Annual Meeting, July 30-August 1, Chicago, Illinois 258115, Agricultural and Applied Economics Association.
    8. Theodora Bermpei & Athanasios Triantafyllou, 2025. "The Determinants of Marginal Convenience Yield in Agricultural Commodity Markets," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 45(4), pages 289-307, April.
    9. Goswami, Alankrita & Karali, Berna, 2019. "Does a Nexus Exist between Implied Volatility and Storage Regimes in Agricultural Commodities?," 2019 Conference, April 15-16, 2019, Minneapolis, Minnesota 309627, NCR-134/ NCCC-134 Applied Commodity Price Analysis, Forecasting, and Market Risk Management.
    10. Christophe Gouel, 2020. "The Value of Public Information in Storable Commodity Markets: Application to the Soybean Market," American Journal of Agricultural Economics, John Wiley & Sons, vol. 102(3), pages 846-865, May.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:oup:apecpp:v:38:y:2016:i:1:p:152-173.. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Oxford University Press (email available below). General contact details of provider: https://edirc.repec.org/data/aaeaaea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.