Anyone with even a passing exposure to the literature on commodity markets and agricultural policy knows the dominant place of issues of price supports and market stabilization. Important ways of supporting prices include marketing quotas, as in many national agricultural policies and international commodity agreements, and purchases by a public authority. The traditional analysis of such programs, such as by Wallace (1962), is a simple supply-demand snapshot of current effects on participants. The differences among the implications of surplus disposal, buffer stocks, or supply controls for the market outcomes in subsequent periods are typically ignored or estimated with an educated guess (e.g., Gardner 1987). Their differential effects on previous storage now part of the current supply-demand picture go unrecognized.

Similarly, in the huge theoretical literature on market stabilization, the means of stabilization is generally neglected. Even though lip service is often given to storage as the source of the stabilization, typically the mechanism is represented as a deus ex machina, who suddenly removes some or all of the uncertainty in a commodity market. Even when the subject is a public buffer-stock scheme, and when the actual behavior of storage would seem to be an unavoidable topic, the public buffer stock is commonly assumed to operate in a world without private storage. In this literature, the effects of stabilization and storage are deduced in the style of long-run comparative statics.

In this book storage takes center stage. The models developed here consider explicitly how and to what extent industrywide storage stabilizes a commodity's price over time.