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lectur8-page36 - interest. Fertilizer sales persons often...

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Why buy fertilizer 6 months in advance? If you expect fertilizer prices to increase by more than the prevailing interest rate, is it cheaper to buy now? What if you expected a price decrease in the future? Why would a fertilizer sales person try to sell you early? If you expect fertilizer prices to increase 10% over the next six months and you have money sitting in the bank earning 6%, you may want to think about buying that fertilizer in advance. The cost increase will be greater than the interest that you sacrifice. If you expected the price of fertilizer to decrease over the next six months, then I hope that you would conclude to keep your money in the bank earning
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Unformatted text preview: interest. Fertilizer sales persons often have more fertilizer market information available to them than perhaps you do. They are in the business, they have company analysts trying to predict the affects of market changes. If I were a fertilizer company and my analysts were telling me that they expected fertilizer prices to fall 20% in the next few months, I would probably tell may sales persons to take 10% off the top and push those sales and lower inventories to beat the anticipated price fall. Think you ought to keep your ear to the market as well?...
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This note was uploaded on 12/29/2011 for the course ECO 210 taught by Professor Malls during the Fall '10 term at SUNY Stony Brook.

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