More recently, stocks of raw materials have been used to stabilize agricultural prices in both the United States and other industrialized countries and many developing countries, and even across borders, through international agreements. Governments or marketing boards, for example, store or promote the storage of goods following the bumper years, then release those stores during poor harvests. This will stabilize agricultural commodity prices and allow farmers to plan their activities more confidently. First, we will consider the operation of buffer storage systems that have existed since the 1920s for a number of raw materials such as wheat, tin, rubber, coffee, sugar and cocoa. All of this ultimately failed for one reason or the other, so there are no important examples to consider. Benjamin Graham`s books of 1937 and 1944 received much attention and support from leading economists such as John Maynard Keynes, Friedrich A. von Hayek, Milton Friedman and Frank D. Graham. However, policymakers were hesitant to abandon the mystical idea of a golden currency with a commodity-based currency, especially if an international agreement was needed to make the plan effective. The idea of storage has been widely used, as we have seen, particularly for raw materials such as coffee, tin and tobacco. But not for the macro economy as a whole. Demand management and the politically controlled money supply have been the norm since the beginning of the Keynesian era – although Keynes himself has been very supportive of Graham`s ideas on storage (but not on money). See G.
Grand: World Commodity Markets under the sign of the slump, in: WIRTSCHAFTSDIENST, 10, 1967, p. 524. Such systems have suffered from some of the same problems that have plagued buffer storage systems, namely problems of maintaining the agreement and converting to substitutes when prices are kept too high. The primary measure of buffer stocks, which creates price stability, is often combined with other mechanisms to achieve other objectives, such as the promotion of domestic industry. This result is achieved by setting a minimum price for a given product above the equilibrium price, to the point where supply and demand curves intersect, which guarantees a minimum price to producers, encourages them to produce more, thus creating a surplus ready to be used as a buffer camp. Price stability itself can also attract companies to the market and continue to stimulate supply. There are a number of possible problems with buffer storage systems, and these may include: If there is a very good coffee crop, the supply curve will move to the right and the price would fall below the limit. The operators of buffer stock would then intervene to increase demand, to keep the price within the limit. This is shown in Figure 2 below.
The completion of the Negotiations on the Common Fund has not yet made a hoped-for breakthrough for one of the Integrated Commodity Programme (IPC) commodity agreements. Opposition, particularly from industrialized countries, but also from individual producing countries, has left little hope of successful implementation of price stabilization under a broad programme.