A World Food Reserve

MAC/WFY

Page-47

0230_553559_09_cha05

restore a balance between supply and demand only `painfully and slowly' should
restriction of output be considered (UN, 1951). Moreover, a quota scheme could
not be expected to function effectively unless all major exporters were prepared
to participate in its operation. An international buffer stock, on the other hand,
could work effectively even with a more limited membership, provided it could
commend sufficient resources for influencing the market in the desired direction.
The same argument applied to a multilateral long-term contractual arrangement
but they carried the risk of generating the so-called `cobweb effect' of a succession
of larger-than-necessary short-term changes in output and consumption, which
might be overcome by combining them with buffer stocks.

The `outstanding advantages' of a buffer stock were in its basic function of

carrying forward from times of abundance to times of scarcity the services of
available productive resources. This argument acquired additional strength insofar
as the fluctuations which prompted a buffer stock's operations that were part and
parcel of fluctuations of trade generally. The risk of `magnified failure' was one
of the main drawbacks of the more ambitious commodity stabilization plans in
multicommodity arrangements through one master agreement for a large group
of primary food and non-food products. Mention was made of the long-standing
proposal for a `Composite Commodity Reserve', which aimed at stabilizing the
average price level of a basket of primary commodities by means of international
buffer stock operations.

The report concluded that some of these proposals `may

deserve further study'.

Despite these significant potential advantages, no buffer stock arrangements

were in operation. This was because they carried with them some practical limit-
ations. A buffer stock commodity had to be storable, fairly homogeneous, and
capable of a high degree of standardization. It should be traded in an international
market of sufficient importance, and sufficient inherent instability, to justify the
operation of an international buffer pool. Market prices should be free to respond
to additions to, and withdrawals from, the supply available in the market. No one
government should have a commanding share of market supplies or dominate
purchases. And demand for the commodity concerned should not be influenced
predominantly by a substitute commodity or commodities outside the buffer pool.
The requirement of `storability' implied a reasonably high value in relation to bulk,
thus ruling out commodities with high storage costs per unit, and fair keeping
qualities, to avoid excessive costs of frequent rotation or of insurance against
deterioration.

Given the technology available by the beginning of the 1950s, a list of about

a dozen food commodities, accounting for about 1012 per cent of world trade,
`represented the maximum range of foodstuffs that might be considered eligible
for buffer stock operations'. This list could be reduced further by other difficulties.
FAO studies had shown the technical difficulties for establishing international
buffer stock arrangements in rice and sugar, for example, and the rather tight
world supply situation made it difficult to build up an initial stock reserve in
cocoa. Substitution created difficulties for coarse grains and some oils. And for
several commodities, notably wheat, major producers had their own national

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Useful links	A World Food Reserve MAC/WFY Page-47 0230_553559_09_cha05 A World Food Reserve 47 restore a balance between supply and demand only `painfully and slowly' should restriction of output be considered (UN, 1951). Moreover, a quota scheme could not be expected to function effectively unless all major exporters were prepared to participate in its operation. An international buffer stock, on the other hand, could work effectively even with a more limited membership, provided it could commend sufficient resources for influencing the market in the desired direction. The same argument applied to a multilateral long-term contractual arrangement but they carried the risk of generating the so-called `cobweb effect' of a succession of larger-than-necessary short-term changes in output and consumption, which might be overcome by combining them with buffer stocks. The `outstanding advantages' of a buffer stock were in its basic function of carrying forward from times of abundance to times of scarcity the services of available productive resources. This argument acquired additional strength insofar as the fluctuations which prompted a buffer stock's operations that were part and parcel of fluctuations of trade generally. The risk of `magnified failure' was one of the main drawbacks of the more ambitious commodity stabilization plans in multicommodity arrangements through one master agreement for a large group of primary food and non-food products. Mention was made of the long-standing proposal for a `Composite Commodity Reserve', which aimed at stabilizing the average price level of a basket of primary commodities by means of international buffer stock operations. 21 The report concluded that some of these proposals `may deserve further study'. Despite these significant potential advantages, no buffer stock arrangements were in operation. This was because they carried with them some practical limit- ations. A buffer stock commodity had to be storable, fairly homogeneous, and capable of a high degree of standardization. It should be traded in an international market of sufficient importance, and sufficient inherent instability, to justify the operation of an international buffer pool. Market prices should be free to respond to additions to, and withdrawals from, the supply available in the market. No one government should have a commanding share of market supplies or dominate purchases. And demand for the commodity concerned should not be influenced predominantly by a substitute commodity or commodities outside the buffer pool. The requirement of `storability' implied a reasonably high value in relation to bulk, thus ruling out commodities with high storage costs per unit, and fair keeping qualities, to avoid excessive costs of frequent rotation or of insurance against deterioration. Given the technology available by the beginning of the 1950s, a list of about a dozen food commodities, accounting for about 1012 per cent of world trade, `represented the maximum range of foodstuffs that might be considered eligible for buffer stock operations'. This list could be reduced further by other difficulties. FAO studies had shown the technical difficulties for establishing international buffer stock arrangements in rice and sugar, for example, and the rather tight world supply situation made it difficult to build up an initial stock reserve in cocoa. Substitution created difficulties for coarse grains and some oils. And for several commodities, notably wheat, major producers had their own national back to top Next page
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