Storage and price stabilization

Commodity storage models, developed first within agricultural economics in the tradition of Gustafson (1958), are valuable in helping us understand how prices of storable commodity markets behave, and how they respond to policy interventions. They show that the policy-relevant dynamic effects of storage-increasing policies are quite different from comparative statics, and generally less favorable to consumers. They help us understand the implications of price controls, price supports, buffer stocks, speculative attack, and "convenience yield," and have great potential for assessing various econometric methodologies used for studying market efficiency and bias, and supply response. However, more attention should be paid to appropriate commodity market interventions in times of rapid productivity change, and in extremely depressed markets such as those of the 1930s, that influenced the course of agricultural policy in the United States over the next half-century.