Paper
Assess the likely success of a buffer stock scheme for natural rubber (25 marks)
A buffer stock scheme is when the government seek to stabilise the market price of agricultural products e.g. purchasing supplies when the harvests are plentiful and selling stock when supplies are low. As stated in the study, the price of natural rubber has increased as a result of “responding to a combination of demand and supply factors”. The introduction of this scheme can help smoothen the fluctuation in prices, but the use of the scheme has benefits and drawbacks can affect whether the scheme is to be a success.
This diagram shows the buffer stock scheme. It illustrates how the government have decide to give a minimum price to those working in agriculture.
One part of the buffer stock scheme being successful is that the stable prices can help maintain the incomes of the workers in agriculture and that it increases the incentive to grow crops. Following this, the prices being balanced will be able to prevent excess prices for the consumers. This diagram shows the effect of excess demand. As stated in the extract, “poor weather in Thailand, Malaysia and Indonesia” which shares an amount of “60% of the world’s natural rubber” which explains how the demand will increase as there is a shortage of the good.
However, a reason that the buffer stock scheme can be a failure is if the average price of the produce is not estimated correctly, as this is used to determine the price boundaries. If the government placed incorrect boundaries, then either the target price will be higher or much lower than the average price. As a result, there can be excess stocks or eventually running out of stocks. It states “deficit of 820,000 tonnes by 2010” which proves that the scheme has some risks due to natural rubber supplies decreasing.
To summarise, the success of a buffer stock scheme depends on how the government is able to stabilise the price
A buffer stock scheme is when the government seek to stabilise the market price of agricultural products e.g. purchasing supplies when the harvests are plentiful and selling stock when supplies are low. As stated in the study, the price of natural rubber has increased as a result of “responding to a combination of demand and supply factors”. The introduction of this scheme can help smoothen the fluctuation in prices, but the use of the scheme has benefits and drawbacks can affect whether the scheme is to be a success.
This diagram shows the buffer stock scheme. It illustrates how the government have decide to give a minimum price to those working in agriculture.
One part of the buffer stock scheme being successful is that the stable prices can help maintain the incomes of the workers in agriculture and that it increases the incentive to grow crops. Following this, the prices being balanced will be able to prevent excess prices for the consumers. This diagram shows the effect of excess demand. As stated in the extract, “poor weather in Thailand, Malaysia and Indonesia” which shares an amount of “60% of the world’s natural rubber” which explains how the demand will increase as there is a shortage of the good.
However, a reason that the buffer stock scheme can be a failure is if the average price of the produce is not estimated correctly, as this is used to determine the price boundaries. If the government placed incorrect boundaries, then either the target price will be higher or much lower than the average price. As a result, there can be excess stocks or eventually running out of stocks. It states “deficit of 820,000 tonnes by 2010” which proves that the scheme has some risks due to natural rubber supplies decreasing.
To summarise, the success of a buffer stock scheme depends on how the government is able to stabilise the price