Buying time: The effect of Market Facilitation Program payments on the supply of grain storage

We estimate the impact of an unprecedented surge in ad hoc farm payments on grain inventories held by farmers. Payments thought to be decoupled from production may still distort markets if they affect other outcomes such as inventories. Through the Market Facilitation Program, US farmers received approximately 23 billion dollars over two marketing years. The economic theory of commodity storage suggests such a cash injection can increase inventories by lowering the opportunity cost of storage. Using a panel event study framework, we find Market Facilitation Program payments significantly increased grain storage by US farmers without similar impacts on off-farm inventories.