Grain price stabilization experiences in Asia: What have we learned?

Agricultural policy and nutrition outcomes – getting beyond the preoccupation with staple grains

“…Today, India holds 61 million tons of food stocks publically, amounting to 38 % of annual food consumption requirements (Bhardwaj et al 2014;FAO 2012). The costs of holding these stocks are enormous, and their disbursement has not been very effective, as has been documented by several observers (Cummings et al 2006;McKee 2012). The huge reserves held by India are subject to significant losses, estimated to exceed 20 % (McKee 2012).…”

“…Use of a regional reserve system has been shown to reduce costs by 41 % (Koester 1986). Other solutions include shifting reserves to private institutions which tend to operate more efficiently, reducing the number of commodities held in reserve, and allowing wider margins between price floors and ceilings in order to decrease the number of times that the government must intervene to stabilize prices (Cummings et al 2006). Gradually weaning farmers (and consumers) way from price subsidies for staple grains and enhancing the incentives for production system diversification into non-staple food crops and livestock products would also contribute to improved efficiencies in food stock management.…”

Food Price Volatility and Its Implications for Food Security and Policy

“…Food price stability is in fact associated with the rapid economic growth during the early development phase in Southeast Asia (Dawe and Timmer 2012;Cummings et al 2006). However, the downside of stabilization policies are that the fiscal costs of public reserves are often high, while the benefits may not be as high as expected.…”

The Role of Markets for Managing Agricultural Risks in Developing Countries

“…But these theoretical results do not consider the important dynamic gains to be had if price stabilization contributes to the widespread adoption of more productive technologies. Cummings, Rashid and Gulati (2006) argue that because price stabilization schemes corrected some important market failures and helped create an enabling economic environment for the Asian Green revolution, then it contributed to the generation of enormous economic and social benefits.…”

“…In Africa, many marketing boards used price stabilization schemes to tax farmers (Newbery, 1989). In Asia, price stabilization schemes were often used to improve the terms of trade for farmers or to offset macroeconomic biases against agriculture, at least during the Green Revolution 14 era (Cummings et al, 2006). When stabilization programs distort average or trend prices for consumers, producers or both, they soon lead to high subsidy costs and to economic inefficiencies by sending farmers and consumers the wrong market signals.…”