To observe the full impact of the changes in production on the price, note (in the right
panel) that total supply declines from ST to 'ST and that the corresponding total demand shifts to
the left from DT to 'DT. The price is now 'P, the intersection of 'ST and 'DT. Given price
instability in the range of 'ST and ST', the price fluctuates between P" and "P, if demand would
stay constant, as it would in a country in which maize is not so dominant a source of income and
effective demand for maize.

 Note that a substitution of imports or releases from an SGR to the full extent of the loss
in production would have resulted in ST intersecting with 'DT at a price P* which is far less than
the price in a normal production year. In this case, intervention would have resulted in an
increase rather than a decrease in price instability, with particularly undesirable consequences for
maize producers. If this were to happen, maize producers may receive a lower price when
production declines and a higher price when production is higher. The consequence of such price
intervention would cause farm income to become more unstable.


D3