{"id":149,"date":"2012-11-11T16:00:05","date_gmt":"2012-11-11T23:00:05","guid":{"rendered":"https:\/\/blogs.ubc.ca\/benlee\/?p=149"},"modified":"2013-10-11T11:38:26","modified_gmt":"2013-10-11T18:38:26","slug":"blog-post-7-china-launches-temporary-cotton-reserve","status":"publish","type":"post","link":"https:\/\/blogs.ubc.ca\/benlee\/2012\/11\/11\/blog-post-7-china-launches-temporary-cotton-reserve\/","title":{"rendered":"Blog Post #7 (China launches temporary cotton reserve)"},"content":{"rendered":"<p><a href=\"http:\/\/www.chinadaily.com.cn\/bizchina\/2011-09\/09\/content_13656716.htm\">China launches temporary cotton reserve<\/a><\/p>\n<p style=\"text-align: center;\"><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter\" src=\"http:\/\/info.fabrics.net\/wp-content\/uploads\/2011\/03\/Bales-of-Cotton.jpg\" alt=\"http:\/\/info.fabrics.net\/wp-content\/uploads\/2011\/03\/Bales-of-Cotton.jpg\" width=\"186\" height=\"170\" \/><\/p>\n<p style=\"text-align: center;\">The Chinese Government is intervening in the agricultural market in order to protect the producers of cotton. As the article mentions, the government aims to stabilize the expectations of cotton production while preventing major price fluctuation. Cotton being a demand and supply price inelastic agricultural product has a higher tendency to face price volatility. The government has therefore launched a temporary cotton reserve or in other words through the use of buffer stocks.<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"alignleft\" src=\"http:\/\/tutor2u.net\/economics\/revision-notes\/buffer-stock-systems1.jpg\" alt=\"buffer stock systems\" width=\"325\" height=\"202\" \/><\/p>\n<p>Also a subset of commodity agreements, buffer stocks are used by countries to stabilize export earnings from producing primary products. Primary products or commodities are used as inputs in manufacturing industries. Buffer stocks aim to stabilize the market price of the product through buying the supplies of the product when there is an excess supply and selling the stock, as the supply is low.<\/p>\n<p>The diagram above shows how the buffer stock scheme works. P min is the guaranteed minimum price to the cotton farmers offered by the government. The price floor is set above the normal free market equilibrium price. The supply curve of the cotton is vertical which represents a fixed supply. The government then buys the excess supply of Q2 to Q1 and stores it in order to maintain the guaranteed price at P min. If there is an excess demand, the government would sell the stocks to reach the guaranteed price at P min.<\/p>\n<p>However there are several disadvantages of implementing buffer stock schemes. Farmers may overproduce as the government promises to buy whatever amount if produced and not bought by customers. According to history, commodity agreements have collapsed due to financing problems.<\/p>\n<p>Although the price may stabilize, inc<\/p>\n<p>omes would not because they vary with the level of output. Storage and financing costs are high. Perishable items cannot be stored for long.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>China launches temporary cotton reserve The Chinese Government is intervening in the agricultural market in order to protect the producers of cotton. As the article mentions, the government aims to stabilize the expectations of cotton production while preventing major price fluctuation. Cotton being a demand and supply price inelastic agricultural product has a higher tendency [&hellip;]<\/p>\n","protected":false},"author":14683,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[44],"tags":[819828],"class_list":["post-149","post","type-post","status-publish","format-standard","hentry","category-articles","tag-comm-101-104"],"_links":{"self":[{"href":"https:\/\/blogs.ubc.ca\/benlee\/wp-json\/wp\/v2\/posts\/149","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/blogs.ubc.ca\/benlee\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/blogs.ubc.ca\/benlee\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/blogs.ubc.ca\/benlee\/wp-json\/wp\/v2\/users\/14683"}],"replies":[{"embeddable":true,"href":"https:\/\/blogs.ubc.ca\/benlee\/wp-json\/wp\/v2\/comments?post=149"}],"version-history":[{"count":7,"href":"https:\/\/blogs.ubc.ca\/benlee\/wp-json\/wp\/v2\/posts\/149\/revisions"}],"predecessor-version":[{"id":204,"href":"https:\/\/blogs.ubc.ca\/benlee\/wp-json\/wp\/v2\/posts\/149\/revisions\/204"}],"wp:attachment":[{"href":"https:\/\/blogs.ubc.ca\/benlee\/wp-json\/wp\/v2\/media?parent=149"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/blogs.ubc.ca\/benlee\/wp-json\/wp\/v2\/categories?post=149"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/blogs.ubc.ca\/benlee\/wp-json\/wp\/v2\/tags?post=149"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}