Up until the mid 1980s it was consistently assumed that an increase in a policy price would lead to an equivalent and sustained increase in the corresponding market price. This has clearly not been the case for the UK cereals market. The principal concern of this research is therefore to identify the exact forces that determine market prices given imperfect policy price transmission. The UK cereals market exhibits unique characteristics which suggests particular directions for the analysis. The discontinuity of cereal production in combination with their non perishable nature implies that the supply of storage theory along with its intertemporal allocation aspects are of considerable importance in determining market prices. As a direct consequence of the supply of storage theory, one is compelled to consider the role that price expectations play in the decision of farmers to supply cereals onto the market. To fully incorporate these factors a structural model of monthly periodicity has been developed. A further advantage of this approach is that the impact of the Common Agricultural Policy's intervention system may be explicitly modelled. The marketing year is treated as finite implying that supply is given, initially by production and subsequently by carry in stocks. Farmers, food processors, international traders and the intervention agencies all have a demand for current consumption. Intervention demand is included in the modelling work as a function of the relationship between the spot price and the intervention price. Intervention demand is also subject to two conditions; firstly intervention must be active and secondly the market price must be below the intervention price. For the feed wheat and feed barley markets a separate set of ninety six simultaneous equations have been established to explain the seasonal interaction of prices and quantities within these dynamic markets. Since farmers are assumed to act rationally, price expectations are solved within a rational expectations hypothesis.