In a stored commodity for a future time period

In agriculture,
there is an inconsistent time period of when the producer harvests the
commodity and the consumer makes the purchase at the store. Storing commodities
is important in agriculture to meet the demands of the consumer. In grocery
stores all over the world, consumers purchase products year round even when
some of those products are harvested on select months. For example, a consumer
will make a weekly purchase of a loaf bread, but wheat farmers harvest it only
a few times during the year. With producers storing wheat, there will be a
supply readily available to sell to the consumer, even when wheat is not being
harvested. The government and producers have two different objectives when
storing commodities. For producers the main objective is to earn a profit while
the government’s objective is to regulate producers on how they store the
commodity, stabilize prices, and implement tariffs or subsidies for the
producer.

            For a producer, the main objective
is to earn a profit. While storing commodities, anticipating a higher price in
the future can help the producer earn a profit Another way is pricing a stored commodity
for a future time period when prices have already been established. When
storing commodities, it also increases a producer’s efficiency during the
operation. During the harvest, it takes longer to deliver goods, but having
stored goods makes them readily available for purchase. Figure 1 shows how
producer surplus takes effect.

We Will Write a Custom Essay Specifically
For You For Only $13.90/page!


order now