6.1.1. Supply Factors
For most commodities, the supply curve is comprised of current inventories, the amount of expected domestic production, and expected imports.
supply = domestic production + inventories + imports
For non-storable commodities, such as hogs and eggs, whose production cycle begins in advance of the product actually coming to market, the supply curve is relatively fixed. Once production begins, the producer has no choice but to offer the product, whatever the prevailing price. The supply curve for these products is basically vertical. Federal funds are another example of a non-storable commodity, since banks cannot hold funds to satisfy a future reserve requirement.
For storable commodities, such as corn or copper, supply curves are flatter because the producer may choose to market or store the commodity based on market price. If prices are low, a producer will store a greater part of the product until prices improve, and it will release less of its product into the current market. Below is a description of some of the important factors that determine the size and shape of the supply curve.
Current inventories. Inventory is product that is available for sale but either on the market and unsold, or withheld from the market and stored. Large inventories may indicate low demand, low prices, or both.
Cost