A Buffer Stock Model to Ensure Price Stabilization and Availability of Seasonal Staple Foods under Free Trade Considerations
AbstractPrice volatility and scarcity have become a great problem in the distribution system of seasonal staple foods produced by the agricultural industry. There is a salient supply disparity during the harvest and planting seasons. This condition could cause disadvantages to stakeholders such as producers, wholesalers, consumers, and government. This paper proposes a buffer stock model under free-trade considerations to substitute quantitative restrictions and tariffs with an indirect market intervention instrument. This instrument was developed using a buffer stock scheme in accordance with a warehouse receipt system (WRS) and a collateral management system. A public service institution for staple food buffer stock (BLUPP) is proposed as the wholesaler's competitor, with as main responsibility to ensure price stabilization and availability of staple food. Multi-criteria decision-making is formulated as a single objective mixed integer non-linear programming (MINLP) model. The results shows that the proposed model can be applied to solve the distribution problem and can give more promising outcomes than its counterpart, direct market intervention.
Burhan & Cakravastia, A., A Model to Control Availability and Price of White Sugar, Proc. of the 2nd APCOMS Conf., pp. IV.37-IV.43, 2009.
Sutopo, W., Nur Bahagia, S., Cakravastia, A. & Arisamadhi, TMA., A Dynamic Buffer Stocks Model for Stabilizing Price of Staple Food with Volatility Target, IJLT, 3(2), pp. 149-160, 2009.
Isma'il, N.M., Improvement of Industry Competitiveness National Sugar, Institute for Science and Technology Studies Journal, 2(1), pp. 3-14, 2001.
Sutopo, W., Nur Bahagia, S., Cakravastia, A. & Arisamadhi, TMA., A Buffer Stocks Model to Stabilizing Price of Commodity Under Limited Time of Supply and Continuous Consumption, Proc. of the 9th APIEMS Conf., pp. 321-329, 2008.
Sutopo, W., Nur Bahagia, S., Cakravastia, A. & Arisamadhi, TMA., Price Stabilization using Buffer Stock in Duopoly-Like Market with Consider Exp. of Stakeholders, ASOR Bulletin, 29(4), pp. 60-72, 2010.
Sutopo, W., Nur Bahagia, S., Cakravastia, A. & Arisamadhi, TMA., A Buffer Stocks Model for Stabilizing Price of Staple Food, Proc. of ICMEEM, pp. 2129-2134, 2010.
Van der Mensbrugghe, D., Beghin, J.C. & Mitchell, D., Modeling Tariff Rate Quotas in a Global Context: The Case of Sugar Markets in OECD Countries, www.card.iastate.edu, (Accessed on 1 Sept. 2010).
Chand, R., Government Intervention in Food Grain Markets in the New Context, First Edition, Chandu Press, pp. 77-98, 2003.
Jamhari, Rice Market Liberalization and Price Stability in Indonesia, Tohoku Journal of Agricultural Research, 54(3-4), pp. 23-36, 2004.
Labys, W.C., Survey of Latest Development-Commodity Price Stabilization Models: A Review & Appraisal, Journal of Policy Modeling, 2(1), pp. 121-126, 1980.
Nguyen, D.T., Partial Price Stabilization and Export Earning Instability, Oxford Economic Papers, 32(2), pp. 340-352, 1980.
Edwards, R. & Hallwood, C.P., The Determination of Optimum Buffer Stock Intervention Rules, the Quarterly J. of Economics, pp. 151-166, 1980.
Newbery M.G.D. & Stiglitz, E.J., Optimal Commodity Stock-Piling Rules, Oxford Economic Papers, 34(3), pp. 403-427, 1982.
Athanasioua, G., Karafyllis, I. & Kotsiosa, S., Price Stabilization Using Buffer Stocks, Journal of Economic Dynamics & Control, 32(1), pp. 1212-1235, 2008.
David, C.C., Food Policy-Its Role in Price Stability and Food Security, Journal of Philippine Dev., 43(1), pp. 171-189, 1997.
Khan, N.P., Government Intervention in Pakistan's Wheat and Cotton Sectors: Concepts, Policies and Implications, Asian Journal of Plant Sciences, 1(4), pp. 492-494, 2002.
Dorosh, P.A., Dradri, S. & Haggblade, S., Regional Trade, Government Policy and Food Security: Recent Evidence from Zambia, Food Policy, 34(1), pp. 350-366, 2009.
Jha, S. & Srinivasan, P.V., Food Inventory Policies under Liberalized Trade, International Journal Production Economics, 71(1), pp. 21-2, 2001.
Adao, B., Correia, I. & Teles, P., Ensuring Price Stability with An Interest Rate Rule, Economic Bulletin, pp. 57-64, 2007.
Ayenagbo, K., Kimatu, J.N., Jing, Z., Nountenin, S. & Rongcheng, W.,Analysis of The Importance of GATT and Its Contribution to International Trade, J. of Economics and Int. Finance, 3(1), pp. 13-28, 2011.
Nur Bahagia, S., Sistem Persediaan, ITB Press, pp. 15-20, 2006.
Hllinger, F., Rutten, L. & Kiriakov, K., The Use of Warehouse Receipt Finance in Agriculture in Transition Countries, FAO, 2009, http://www.fao.org/tc/tci, (Accessed on 01 Jan. 2011).
Law Number 9 of 2006 the Republic of Indonesia Concerning on System on Warehouse Receipt, http://www.resigudang.com, (Accessed on 03 Aug. 2010).
Regulation of the Finance Minister Number 171/Pmk.05/2009 on Scheme for Subsidy on Warehouse Receipt, http:// www.resigudang.com, (Accessed on 05 Aug. 2010).
Rao, S.S., Engineering Optimization: Theory and Practice, 4th Edition, John Wiley & Sons, Inc, 2009, pp. 287-393.
Sutopo, W., Buffer Stocks Models to Ensure Price Stabilization and Availability of Seasonal Staple Food, PhD Dissertation, Dept. of Industrial Engineering and Management Bandung Institute of Technology, Bandung, 2011.