Optimal Storage and Marketing Over Space and Time

Martin Benirschka and James K. Binkley

American Journal of Agricultural Economics, 1995, vol. 77, issue 3, 512-524

Abstract: Borrowing from the theory of optimal resource extraction, we develop the mechanism guiding efficient commodity storage and marketing over producing regions through the crop year. Optimal storage occurs at producing areas, and time in storage varies directly with distance to market. Prices grow with interest rates in locations where storage is efficient but more slowly elsewhere, which explains why market prices (i.e., prices at the market) grow more slowly than interest rates. The model is empirically supported by examining storage in the Corn Belt, rates of price growth at various points, and quarterly grain marketings.

Date: 1995
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Persistent link: https://EconPapers.repec.org/RePEc:oup:ajagec:v:77:y:1995:i:3:p:512-524.

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