Suppose the cotton (a storable commodity) futures prices are currently Expiry Month Price c/lb December 2021 83 December 2022 96 (a) Suppose an unexpected typhoon destroys cotton crops in India. This causes a downward revision in the expected global cotton production in 2022. Assuming all else equal, will demand for storage of cotton in 2021 (St) increase, decrease or stay the same? Draw a graph of the demand for storage to support your answer. (b) Using the same scenario from (a), do you expect the cotton market to still in contango, inverted, or could it be either contango or inverted? Draw a graph of supply and demand for storage to support your answer
Suppose the cotton (a storable commodity) futures prices are currently Expiry Month Price c/lb December 2021 83 December 2022 96 (a) Suppose an unexpected typhoon destroys cotton crops in India. This causes a downward revision in the expected global cotton production in 2022. Assuming all else equal, will demand for storage of cotton in 2021 (St) increase, decrease or stay the same? Draw a graph of the demand for storage to support your answer. (b) Using the same scenario from (a), do you expect the cotton market to still in contango, inverted, or could it be either contango or inverted? Draw a graph of supply and demand for storage to support your answer
Chapter12: The Partial Equilibrium Competitive Model
Section: Chapter Questions
Problem 12.12P
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Suppose the cotton (a storable commodity) futures prices are currently
Expiry Month |
Price c/lb |
December 2021 |
83 |
December 2022 |
96 |
(a) Suppose an unexpected typhoon destroys cotton crops in India. This causes a downward revision in the expected global cotton production in 2022. Assuming all else equal, will
(b) Using the same scenario from (a), do you expect the cotton market to still in contango, inverted, or could it be either contango or inverted? Draw a graph of
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