Buffer Stock Scheme

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Buffer Stock Scheme

A practice in which a large investor, especially a government, buys large quantities of commodities during periods of high supply and stores them so they do not trade or circulate. The investor then sells them when supply is low. This is done to stabilize the price by roughly equalizing supply regardless of other factors. This practice was first used in China more than 2,600 years ago. It is most common with agricultural products. The usefulness of the scheme is controversial.
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NAFED, SFAC and FCI will procure of pulses (Tur and Urad) in the Kharif 2015 season at prevailing market rates from farm gate/Mandis for creation of buffer stocks.
Speaking to Khaleej Times, Al Ghurair felt that it is vital for the GCC to encourage public-private partnership in building up strategic food reserves and buffer stocks as per capita food consumption in the region is forecast to reach 971.
The Ministry of Trade had indicated that buffer stocks have been built up to ensure market supply in Ramadan, particularly for milk (58 million litres), eggs (19.
The intervention is likely to regulate price volatility through procurement by central and state governments and agencies to maintain buffer stocks and regulate market release.
This is despite the fact that per capita income has more than doubled since the mid-1990s and agricultural production is at an all-time high, with large buffer stocks of cereals in government granaries.
Cotton prices in the international markets also came down as India and China released substantial stocks from their buffer stocks for their domestic textile industry.
Essa Abdulla Al Ghurair, Chairman of Al Ghurair Resources, said, his company sees strong growth in food grain business, moving forward, as the Gulf countries are developing buffer stocks as part of their food security programme.
The main components of the food security system in India are promoting domestic production to meet the demands of the growing population as also to reduce under-nutrition among quite a large section of the population; providing minimum support prices for procurement and storage of food items operating public distribution system; and maintaining buffer stocks so as to take care of natural calamities resulting in temporary shortage of food, and to act as a countervailing mechanism against traders and businessmen who try to push up prices, especially during periods of shortages of food.
Similarly, he suggested devising remedial measures, such as creation of buffer stocks of foodgrains, setting up distribution outlets, the introduction of food for work programs during periods of crop-failure, etc.
Yet, reverting to grain self sufficiency combined with larger national buffer stocks to stabilize domestic markets presents a costly alternative to many net importers that have no comparative advantage in grain production.
The underlying problem with buffer capacity decisions arises from two scenarios: In one, an operator temporarily works faster than their predecessor, so buffer stocks dwindle.
But, it also has buffer stocks, scrap areas, breakdowns, rejects and workers persuading ill-fitting components on to vehicles with what appear to be old-fashioned "lump-hammers", not to mention rows of faulty finished cars awaiting rectification.