Can you think of the additional costs of holding increased rice stocks as suggested above? Safety or

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Can you think of the additional costs of holding increased rice stocks as suggested above?


Safety or buffer stocks are held for many reasons. For example, road authorities might want to hold sufficient stock of grit salt in case of bad weather, or firms might build stock of key materials if a price rise is impending.
In recent times climate change has brought more extreme weather conditions more frequently globally.
This too has had an effect of the levels of stocks held by some businesses, and indeed even on supply. In the Philippines, rice has been traditionally grown, but an increasing population and less available has seen an increasing reliance on imported rice. During 2016, the government was considering the import of an additional 250 000 metric tonnes as a precaution against the impact of La Niña in early 2017. At the end of August 2016, the National Food Authority (NFA) awarded a contract for the supply of rice to the world’s top rice exporters, Thailand and Vietnam. They were offered 100 000 and 150 000 metric tonnes respectively under a government-to-government (G2G) procurement scheme. The NFA also stated it would conduct more G2G procurement in the last quarter to ensure adequate rice inventory (22 days). At the end of August 2016, the NFA’s rice inventory stood at 578 700 metric tons, sufficient for 18 days, which is more than the recommended buffer stock of 15 days at any given time.

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