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

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

No 08_13, Working Papers from 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

Keywords: Inventories; commodity prices; transport costs (search for similar items in EconPapers)
JEL-codes: L92 N71 Q13 (search for similar items in EconPapers)
Date: 2008-10
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