The public management of price risk after a supply shock: storage versus target price

Julien Jacob (), Antoine Leblois () and Marielle Brunette ()
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Julien Jacob: BETA - Bureau d'Économie Théorique et Appliquée - AgroParisTech - UNISTRA - Université de Strasbourg - Université de Haute-Alsace (UHA) - Université de Haute-Alsace (UHA) Mulhouse - Colmar - UL - Université de Lorraine - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement
Antoine Leblois: CEE-M - Centre d'Economie de l'Environnement - Montpellier - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement - Institut Agro Montpellier - Institut Agro - Institut national d'enseignement supérieur pour l'agriculture, l'alimentation et l'environnement - UM - Université de Montpellier
Marielle Brunette: BETA - Bureau d'Économie Théorique et Appliquée - AgroParisTech - UNISTRA - Université de Strasbourg - Université de Haute-Alsace (UHA) - Université de Haute-Alsace (UHA) Mulhouse - Colmar - UL - Université de Lorraine - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement

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Abstract: Exogenous shocks frequently have adverse effects on commodity markets. This article examines the fall in commodity prices resulting from such shocks and explores strategies to manage these declines. Specifically, we compare two public management tools: a storage policy and the implementation of a subsidy to the producer, ensuring a minimum selling price (target price). To analyse these policies, we develop a tractable theoretical welfare model that we simulate. Using a case study of timber price drops following a storm, we demonstrate that a target price is generally socially beneficial from a broader perspective but can be disadvantageous for consumer-taxpayers in the event of a storm of intermediate intensity. Additionally, our findings suggest that a storage policy is socially preferable in cases of low-intensity storms, whereas a target price becomes more effective for high-intensity events. Sensitivity analyses are conducted to assess the robustness of these results.

Keywords: Storm; Policy; Forest; Price; Risk (search for similar items in EconPapers)
Date: 2025-12-03
Note: View the original document on HAL open archive server: https://hal.inrae.fr/hal-05397391v1
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Published in Applied Economics, In press, pp.1-14. ⟨10.1080/00036846.2025.2585210⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-05397391

DOI: 10.1080/00036846.2025.2585210

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