World Bank2012-12-042012-12-042012-09https://hdl.handle.net/10986/11878The recurrent global food price spikes in 2008 and 2010 rekindled interest in the use of national food grain stockpiles ('stocks') to enhance food security. They were a commonly used instrument in government responses to these food prices spikes. They were also widely considered as a useful tool after the 1974 food crisis and its associated food price volatility and supply disruptions. Large stocks became a reality at the global level in the 1980s and 1990s as a side-product of farm income support policies in the developed countries. However, large 'buffer' or 'intervention' stocks, as the grain accumulations in developed countries came to be called, eventually proved to be very costly forms of producer income support and were drawn down for fiscal and other reasons starting in the late 1990s. This report, prepared for government and development partner practitioners, revisits the issues and evidence concerning grain stocks. It starts with an open mind concerning stocks as policy tools and specifically seeks to avoid the polarization of views that grew up around the topic in the 1980s and 1990s. It takes the form of an evidence-based review of developing country experience. Historically, grain stocks have been used for two main purposes. First, to stabilize domestic prices and second, to provide readily available emergency food and safety net reserves targeted at the most vulnerable. The assessment of actual experience of using grain stocks for these two purposes is summarized as follows. Using grain stocks to stabilize domestic prices has generally not been an effective instrument to improve food security outcomes. Developed countries no longer use stocks to stabilize domestic prices due to the unpredictability and often unsustainably high budget costs. In Africa and Asia, where price stabilization programs are still frequently pursued, high fiscal costs are crowding out needed public investment in agricultural productivity and rural infrastructure. The often unpredictable grain purchases and releases of stabilization programs are discouraging private investment in both grain production and storage, which are the key to lowering both the level and volatility of food prices.CC BY 3.0 IGOACCOUNTINGAGRICULTURAL COMMODITIESAGRICULTURAL COMMODITYAGRICULTURAL GROWTHAGRICULTURAL POLICIESAGRICULTURAL POLICYAGRICULTURAL PRODUCTIONAGRICULTUREARBITRAGEBAGGINGBANKING SYSTEMSBASIC NEEDSBENEFICIARIESBUTTERCACASH PAYMENTSCASH TRANSACTIONSCASH TRANSFERCASH TRANSFERSCENTRAL BANKSCEREALSCHEESECOCOACOLLECTIVE ACTIONCOLLECTIVE ACTION PROBLEMCOLLECTIVE ACTION PROBLEMSCOMMODITIESCOMMODITYCOMMODITY PRICECOMMODITY PRICESCOMPETITIVE ADVANTAGECOMPETITIVE MARKETCOMPETITIVENESSCONSUMER EXPENDITURESCONSUMER PRICECONSUMER PRICE INDEXCONSUMER PRICESCOST OF CAPITALCOUNTRY TO COUNTRYCRITICAL NEEDSCURRENCYDEFAULTSDEFICITSDEVELOPING COUNTRIESDEVELOPING COUNTRYDEVELOPING ECONOMIESDIVIDENDSDOMESTIC MARKETDOMESTIC MARKETSDOMESTIC PRICESECONOMIC CRISESECONOMIC DOWNTURNSELECTRONIC CASHENERGY PRICESEXCHANGE RATEEXPENDITUREEXPENDITURESEXPORTEREXPORTERSFINANCIAL SERVICESFINANCIAL SUPPORTFOOD AIDFOOD AID PROGRAMSFOOD CROPSFOOD DEMANDFOOD DISTRIBUTIONFOOD FORTIFICATIONFOOD IMPORTSFOOD INSECURITYFOOD MARKETSFOOD NEEDSFOOD POLICYFOOD POLICY RESEARCHFOOD PREFERENCESFOOD PRICEFOOD PRICE INFLATIONFOOD PRICESFOOD RESERVESFOOD SAFETYFOOD SECURITYFOOD SHORTAGESFOOD STAPLESFOOD SUBSIDYFOOD SUBSIDY PROGRAMSFOOD SUPPLYFOOD TRANSFERSFOODGRAINSFORWARD MARKETSGOVERNMENT INTERVENTIONGOVERNMENT SUBSIDYGRAIN PRODUCTIONGRAIN RESERVESGRAINSGROSS DOMESTIC PRODUCTHOLDINGHOUSEHOLD INCOMEHOUSEHOLD INCOMESIFPRIINCENTIVE STRUCTUREINCOMEINCOME GROWTHINCOME SHOCKSINCOMESINFORMATION SYSTEMINPUT PRICESINSTRUMENTINSURANCEINTEREST RATESINTERNATIONAL BANKINTERNATIONAL FOOD POLICY RESEARCH INSTITUTEINTERNATIONAL MARKETINTERNATIONAL MARKETSINTERNATIONAL TRADEINVENTORIESINVENTORYINVESTINGJOB CREATIONLOANLOCAL ECONOMIESLOGISTICAL SUPPORTLONG-TERM INVESTMENTSMAIZEMARKET CONDITIONSMARKET DEVELOPMENTSMARKET DISTORTIONSMARKET FAILURESMARKET INFORMATIONMARKET LEVELMARKET LEVELSMARKET PLAYERSMARKET PRICEMARKET PRICESMARKET TRENDMARKET TRENDSMARKETINGMEALMILLSMONOPOLYNATURAL RESOURCESOPPORTUNITY COSTSOUTPUTOUTPUTSPADDYPOLITICAL STABILITYPOVERTY ALLEVIATIONPRICE BANDPRICE BANDSPRICE CEILINGPRICE FLOORPRICE FLUCTUATIONSPRICE INCENTIVESPRICE INFLATIONPRICE INSTABILITYPRICE LEVELSPRICE MOVEMENTSPRICE POLICYPRICE STABILITYPRICE STABILIZATIONPRICE VARIATIONSPRICE VOLATILITYPRIVATE INVESTMENTPRODUCER PRICESPROFIT MARGINSPROTEINSPUBLIC BUDGETSPUBLIC INVESTMENTPUBLIC INVESTMENTSPUBLIC POLICYPUBLIC SPENDINGPUBLIC STOCKPUBLIC STOCKSPURCHASINGPURCHASING POWERRATES OF RETURNRECURRENT EXPENDITUREREGIONAL INTEGRATIONREGIONAL TRADEREMOTE AREASRESERVERETURNRICE MARKETINGRISK AVERSIONRUBBERRURAL INFRASTRUCTURESAFETY NETSAFETY NETSSALESALESSAVINGSSECURITY RISKSSELLING PRICESSOCIAL COSTSSTABILIZATION POLICIESSTOCK MANAGEMENTSTOCKSSTRUCTURAL PROBLEMSUPPLY CHAINSUPPLY CHAINSSUPPLY SHOCKSSURPLUSSURPLUSESTRANSPARENCYTREASURYVITAMINSWAREHOUSESWFPWHEATWHOLESALE PRICEWORLD FOOD PROGRAMMEWORLD MARKETWORLD MARKETSWORLD TRADEWorld Bank10.1596/11878