Buffer stock scheme

Taking the market for wheat as an example, here, in years with normal harvests (S1) the price is within the allowed range and the operator does not need to act.

[citation needed] Price stability then leads to greater joint welfare (the sum of consumer and producer surplus.

For such stores to be effective, the figure for "average supply" must be adjusted periodically to keep up with any broad trends toward increased yield.

The primary action of buffer stocks, creating price stability, is often combined with other mechanisms to meet other goals such as the promotion of domestic industry.

[citation needed] Their main advantage, when compared to other forms of government intervention in markets, is that they are a mechanism that achieves its objectives "quickly and directly".

[7] Storage of agricultural products for price stabilization has been used in modern times in many countries, including the United States.

The term "ever-normal granary" was adopted from a Columbia University dissertation on Confucian economic practice that was read by future US Secretary of Agriculture Henry A. Wallace circa 1926, before he came into office.

A particularly good run of summers during the period 1985–86 saw a large surfeit of produce coming onto the market and the first intervention stores.

One such store run by "High Post Grain Silos" leased 18 unused aircraft hangars at the former Bitteswell airfield and filled them with over 250,000 tonnes of feed wheat.

The storage solution was simple, the grain was shipped into the hangars directly from the farm, having first passed a testing criterion.

Some economists, particularly of the Modern Monetary Theory school, favor creating a buffer stock of unskilled labor in the form of a government-funded job guarantee.