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Storage Subsidies and Supply Response

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  • E. Kwan Choi
  • William H. Meyers

Abstract

This paper investigates the supply response to a storage subsidy. From the ex post sales decision problem we derive the reservation price below which all risk averse farmers hold some inventory. While sales and storage decisions are made ex post, production decisions are made ex ante before the current market price is known. Storage subsidies are shown to encourage risk averse as well as risk neutral farmers to expand output. The analysis implies that storage subsidies should be incorporated in estimating supply response.

Suggested Citation

  • E. Kwan Choi & William H. Meyers, 1989. "Storage Subsidies and Supply Response," Center for Agricultural and Rural Development (CARD) Publications 89-wp47, Center for Agricultural and Rural Development (CARD) at Iowa State University.
    • Handle: RePEc:ias:cpaper:89-wp47
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    Cited by:

    1. Femenia, Fabienne, 2012. "Should private storage be subsidized to stabilize agricultural markets once price support schemes are removed? A General Equilibrium analysis applied to European reforms," Conference papers 330253, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    2. Femenia, Fabienne, 2011. "To Subsidize or Not to Subsidize Private Storage? Evaluation of the Effects of Private Storage Subsidies as an Instrument to Stabilize Agricultural Markets After CAP Reforms," 2011 International Congress, August 30-September 2, 2011, Zurich, Switzerland 114360, European Association of Agricultural Economists.
    3. Femenia, Fabienne, 2012. "Should private storage be subsidized to stabilize agricultural markets after price support schemes are removed?:," IFPRI discussion papers 1205, International Food Policy Research Institute (IFPRI).

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