Getting a fix on privately held food stocks

Shyam Khadka | Updated on January 15, 2018

Trundling truckloads: Still don’t tell the whole story

Inventory management is hit by lack of complete information. If this is addressed, price spurts can be effectively handled

As Asia’s rapidly growing economies demand modern and progressive agricultural policies and actions, there is a growing need to ensure stock-taking of domestic food availability which is both accurate and up-to-date. Information on foodgrain stocks is vital for food security, and can influence the world prices of certain crops.

Why private stocks matter

In India, stocks of grain (wheat, rice, maize) and oilseed (soyabean) are held by various stakeholders, including farmers, individual non-farmer households, the Government (Central and State), processing units, traders and exporters. Often, these entities are fragmented across the width and breadth of the country. Given the vastness of the country, the seasonal and regional nature of production and consumption, the operation of a large number of small to medium entities in the private sector, measuring privately held stocks has been a challenge.

For proactive policymaking and business planning, it is imperative to scientifically assess privately held stocks. An unexpected supply constraint of grainand oilseed may lead to a sharp rise in food prices, thereby jeopardising the national and global food security agenda.

Adequate foodgrain stocks can help contain price rise. Empirics show that low stock-to-use ratio (stocks/utilisation), an indicator of relative scarcity (or abundanceif this ratio is high), is followed by the price spikes. Low stock-to-use ratio in 2007-08 signalled spikes that saw around a 200 per cent rise in the price of rice, and over a 100 per cent rise in wheat, corn, and soyabean. While stocks held by public agencies are fairly well known, those held by private entities are not. This underscores the need to evolve scientific methodologies to measure stock held by private players.

The growing involvement of multiple stakeholders, private stockists in particular, often leads to price volatilities. Therefore, implementing a food security agenda cannot ignore private stocks that could lead to an increase in world food prices especially with respect to rice, wheat and corn which together account for 60 per cent of the world’s food energy intake.

Between 2006 and 2008, international food prices as measured by FAO Food Price Index rose by 57 per cent. One of the focus areas in efforts to address the issue aimed at enhancing private foodgrain stocks measurement.

Concerns about availability and quality of information on private stocks resulted in setting up the Strengthening Agricultural Market Information System ( project, a G20 initiative, in 2011 with the task of improving agriculture market information and forecasting national and international level stocks.

Measuring private stocks

Measuring reliable information on private foodgrain stocks is a challenge in most countries due to the non-existence of a scientific approach and methodology. This impinges on the food security agenda. While public stocks maintained as buffer are used to absorb supply shocks to dampen price spikes, the paucity of information on the volume of private stocks is used by private traders to ‘rig’ prices.

A multiplicity of private foodgrain stock-holders such as farmers, traders, processors, consumers, transporters and exporters further add complexities to the task of measuring these private stocks.

Farmers hold back stocks to meet their consumption requirements. Traders, on the other hand, may offer storage services to farmers or speculate a rise in seasonal prices. Exporters too hold stocks to meet their international commitments. Processors hold stocks as inventory to ensure operational and financial viability. The commercial storage and warehouses maintained by commodity exchanges and warehousing receipts by agencies such as the Warehouse Development and Regulatory Authority play a crucial role in stocking for private entities.

Evolving a scientific approach and methodology for measuring stocks held privately and by commercial storage entities can help predict the direction of prices and the designing of appropriate public policy and business planning.

The Philippines conducts sample surveys on a monthly basis to estimate private stocks of rice and maize. However, the suitability of this methodology for a large country like India has not been tested.

An upcoming seminar in New Delhi organised by the FAO and the agriculture ministry will hopefully throw light on approaches and methodologies for India. This will help design robust policies and focus on new technologies and their integration into the foodgrain stock data management system.

The writer is the representative in India of the FAO. The views are personal

Published on November 08, 2016

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