Chapter 5


 Funds are required to cover the additional costs accruing from:

 the necessary stand-by arrangements, in order to be able to intervene when necessary,

 financing of the purchasing/sales operations, when interventions become necessary,

 interest rates for credits /opportunity costs of capital invested in the stocks,

 management and technical storage costs,

 storage losses.

 Although, in principle, the marketing margin should cover storage costs, experience shows
 that this is difficult to achieve, particularly in the case of buffer-stocks and food reserves
 established for market regulatory and food security purposes (see also Box 5.1).

In order to be effective, price stabilisation policies need to comply with all the conditions set
out above. If this is not guaranteed, the outcome of government interventions on price
stability and food security could be worse than without intervention, as producers and
consumers would end up bearing additional marketing and price risks.

In an open economy and in the presence of marked fluctuations of food prices on the world
market, the use of variable levies on imports could serve as an instrument to achieve partial
price stability on the internal food market.

2.2.2 Stocking policies

Since biblical times in ancient Egypt, public holding of food stocks has been considered an
essential element of the food security strategy of a country. Different types of public food
stocks can be distinguished, according to the main purposes and features of stockpiling:

Tab. 5.2: Types and purpose of public food stocks


Type of stock Purposes Important features

Working stock Smoothing regular intra-seasonal / intra- Short-term intra-seasonal and/or intra-annual
 annual supply variations, in order to stocks established by public food marketing
 ensure continuous market supplies and/or enterprises
 to stabilise prices

 Buffer stock Offsetting irregular/unexpected variations Inter-seasonal / inter-annual stocks built-up or
 in market supplies, price stabilisation drawn down, depending on the market
 situation

 Emergency food .Ensuring that food requirements are met Inter-annual stocks, provisions for
 reserve/ in cases of natural or man-made disasters, unpredictable emergencies, stocks released for
 food security to bridge the period until food (aid) emergency relief purposes
 stocks supplies arrive from external sources


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