Files

Abstract

We investigate storage in the presence of backwardation and the existence of the Working curve for CBOT corn, soybeans, and wheat markets and the KCBOT wheat market using recent data, 1990-2010. Incorporating Telser’s concept of the cost of carry, we employ two measures of the spread—the percent of full carry for futures-futures and futures-spot (maximum) spreads which are adjusted for interest and storage rates. Both spreads are calculated relative to the next nearby futures contract and are matched with closest weekly deliverable stock information available at the delivery locations for the contracts. Our findings indicate that storage at a loss is pervasive both in terms of the percent of observations that exhibited storage at a loss, and the magnitude of the stockholdings for those observations. The evidence for the importance of convenience yield in the Working curve is a little less systematic, with strongest support emerging in the KCBOT wheat market, CBOT wheat and corn in Toledo/Maumee, corn in Chicago, and soybeans at almost all locations.

Details

PDF

Statistics

from
to
Export
Download Full History