Chapter 5


* Vulnerable groups, their characteristics, size, and location, their food needs and the
 emergency-relief requirements complementary to other sources of food supply,
* The effectiveness of early warning systems: if effective, early provisions can be made
 for internal transfers and food imports which will reduce overall stocking requirements.

Given the wide range of factors, it is clear that no simple mechanistic formula can be applied
in determining stocking requirements, and that the level of stocks needed is influenced by
other policies, such as infrastructure, trade, marketing, and pricing policies.

In determining optimum stocking levels, the costs and efficacy of public stockholdings in
achieving stability and food security objectives have to be compared with alternative
approaches, e.g. commercial and/or food aid imports. A combined strategy with minimum
stocking targets, sufficient to cover the period until imports arrive, may often be the most
appropriate approach. Box 5.2 illustrates how to calculate the size of a food security reserve,
using the case of Ethiopia.

2.3 Food imports

Food imports help to bridge structural production deficits or to mitigate supply deficits
resulting from acute production shortfalls. See Annex 1, section 2 for definition of food
deficits, and section 3 for the impact of food imports on the food situation. In our graphic
model, (additional) food imports induce a right-downward shift of the supply curve. The
broad effects, compared to a situation without food imports, are, in summary:

* The volume of food supplies increases and an existing supply deficit is reduced
 accordingly;

 The food prices go down, with further implications in regard of:

 A positive real income effect, inducing an increase in the volume of food demand and a
 corresponding reduction of an existing demand deficit, and

 A likely disincentive effect on local production, inducing decreased production and a
 widening of an existing production deficit.

 The extent to which the effects take place as described above depends on two main factors:

 1) The price elasticities of supply and demand (see Annex 1, section 3 and 4): the lower the
 elasticities (expressed in a steeper slope of the supply and demand curve), the smaller is
 the quantity effect and the larger is the price effect. This can be easily demonstrated in a
 graph using differently shaped production and/or demand curves.

 2) The level of world market prices (border or import parity prices, for definition see
 Annex 2B) in relation to domestic market prices without imports. In Fig. A-6 of Annex
 1, the price p stands for the internal price without food imports while p' represents the
 border or import parity price. The larger the difference (the lower the import prices), the


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