A price floor is a minimum price level established through market mechanisms, government intervention, or contractual arrangements below which prices are not expected to fall. Price floors can result from production costs, support programs, or options strategies that provide downside protection. Understanding price floors helps assess downside risk and support levels.

Price floors may be temporary or permanent depending on underlying support mechanisms. Government price supports, production shut-in costs, and options-based floors create different floor characteristics and durability. Price floors influence market dynamics by affecting supply decisions and providing psychological support levels for traders.

Real-world example: U.S. corn has an effective price floor around $3.50 per bushel due to government loan programs and ethanol production economics, providing minimum price support even during surplus production years.