We all understand that concept with fruit where the retail buyer wants to buy literally $1-2 worth at a time, the shelf life is short, retail costs are high, etc, but bulk commodities aren't usually so extreme with the disparity. Obviously the same concepts apply but if the spot price is *that* much higher than contract price and it's possible to dump into the spot market in bulk for such multiples of contract prices, surely it becomes tempting to sell into the spot market.
It's simply not possible for the apple farmer to dump a tonne of apples into an open market and expect to sell what they have, at almost any price, but the spot market could easily absorb 2,000 tonnes of high grade dilithium carbonate per year and we could reasonably expect the spot price to remain higher than current contract prices for at least a couple of years, meaning we could earn multiples of our revenue by selling on the spot market rather than on contract. Your example works perfectly for apples and just as well for oranges but you can't really compare apples and dilithium carbonate; there isn't a comparable spot price for apples in a market of any scale.
There's obviously something I'm missing but I'm not seeing it, unless those spot prices really are for absolutely tiny amounts and our 2KTPA actually would flood it and more than halve the spot price.
AGY Price at posting:
32.5¢ Sentiment: Buy Disclosure: Held
