Food Price and Supply Stabilization: National Buffer Stocks and Trade Policies

Abstract

Trade policies are likely to have a greater impact on the stability of a country's food grain supply than any reasonable size buffer stock. At the margin, countries need to trade off the cost of additional stocks against the cost of unstable foreign exchange balances associated with free trade. A stochastic simulation model is specified to assess the impact of trade and buffer stock policies on the stability of consumption and prices and the expected values and standard deviations of costs and gains to consumers, producers, and the government, and the balance of payments.