Interview , | 09/04/2025 : The Power of Buffer Stocks

Soaring food prices, climate shocks, and geopolitical conflicts have shown once again how fragile the global food system is. Private profiteering and speculation drive price volatility, while those who grow food are often among the most food insecure themselves. From seasonal hunger in the Global South to the weaponization of food in wars, hunger is not a natural disaster — it is a political consequence of unequal and exploitative systems. Food sovereignty — understood as the right of people to healthy, culturally appropriate food produced sustainably and to define their own food systems — puts forward a fundamentally different vision.

One tool that can help move us closer to this vision is buffer stocks, or public reserves of essential food staples. These can do much more than smooth out short-term supply shocks. They can guarantee farmers a minimum price, stabilize local markets, and strengthen the production of resilient, ecologically sustainable varieties. In times of climate crisis and global instability, they are also a tool of resistance: building resilience against extreme weather, geopolitical disruptions, and the destructive logic of international agribusiness.

Years of civil society advocacy have now borne fruit: under South Africa’s G20 presidency, food security has been placed at the centre of the agenda, and buffer stocks are explicitly being considered as a policy tool. This opens up new space to push for food systems that prioritize people over profit.

To delve deeper into the issue, the Rosa Luxemburg Foundation’s Tanja Tabbara spoke with experts Merle Schulken and Sophie van Huellen about how buffer stocks can work in practice, where they hold the greatest potential, and what role they might play in shaping a more secure, sustainable, and just food system.

Buffer stocks are usually proposed to reduce price volatility, curb price spikes, and reduce inflation. Can you explain how that works?

MS: Buffer stocks are public reserves of storable commodities that are designed to smooth out extreme fluctuations in market prices. The buffer stock agency intervenes on the open market, buying up commodities when prices fall below a certain level and releasing stocks onto the market when prices spike above a certain level.

The price range within which prices are stabilized is updated regularly in order to reflect long-term trends in supply and demand rather than freezing the economy in time. To prevent spoilage in the stocks, the agency regularly rotates them at market prices: for example, public canteens might use grain from the buffer, which is then replenished from the open market.

Private farmers and traders also store commodities, but their decisions are based on profit incentives and do not take into account certain wider economic and social costs of price spikes, such as food insecurity or macroeconomic instability. As a result, they often store less than would be socially desirable. Buffer stocks can increase the level of storage above what the private sector is willing to offer.

SvH: Buffer stocks also calm markets in moments of crisis or high uncertainty. In such moments, markets tend to panic, which can result in large price spikes. These spikes materialize because speculators bet on rising prices, which they tend to do in times of high uncertainty.

Private markets don’t deal well with uncertainty and don’t consider social consequences that are not priced in. For this reason, states would do well to proactively increase their resilience to shocks in essential commodities markets.

These spikes or booms have secondary effects, as they incentivize hoarding by those who rely on the supply of the commodity, say grain. Price booms signal possible shortages, and these can then become self-fulfilling through secondary effects. 

Booms can also spill to other related commodities that are close substitutes. For instance, a boom in wheat prices often result in a boom in rice prices, as they are both staple foods and substitutes in many diets. 

MS: Commodity price stability matters not just for humanitarian and development reasons, but also for overall macroeconomic stability. As 2022 and 2023 have shown, commodity price spikes can set-off a general inflation dynamic as the higher commodity prices ripple through supply chains causing firms to increase their nominal profit mark-ups and workers to defend their real wages.

Stable prices also benefit producers. Although high prices are good for farmers in the short-run, their long-run income can fall after a price spike. If an excessive price explosion leads to overproduction, this can cause a price collapse in the following period. Compared to flexible commodity market prices, the prices of most other goods and services, which rose due to the inflation caused by the price spike, are fairly sticky. As a result, farmers often see their real incomes fall when the prices they get drop back down while everything else stays more expensive. 

Where do you see the greatest potential for buffer stocks?

SvH: Buffer stocks can be most effective for commodities that are storable, such as grains, and for commodities with highly volatile prices. Prices for food and agricultural commodities tend to be highly volatile due to continuous cycles of over- and underproduction.

These so-called cobweb dynamics emerge due to the lagged supply response of food and agricultural commodities, due to growing cycles. Storage reduces these dynamics, and this is where buffer stocks come in. 

MS: Buffer stocks are particularly effective for essential commodities — goods with steady demand and limited short-run supply flexibility that are important to people’s livelihoods. People cannot easily substitute away from these items, and producers often need months or even years to adjust production. Many agricultural products, for example, have long planting and harvest cycles. As a result, when supply or demand is disrupted, prices can swing sharply because neither side of the market can respond quickly.

For example, in 2022, when grain shipments from Ukraine to parts of Northern Africa appeared at risk, these countries turned to the global market, willing to pay exceptionally high prices to secure supplies — because domestic grain shortages were simply not an option. 

It’s likely that disruptions like what we saw in 2022 will become more frequent. Climate change is increasing the risk of extreme weather events that can hit multiple regions simultaneously and, in some cases, damage transport infrastructure. Geopolitical tensions also add to the risk of trade disruptions.

Private markets may adapt to some of this volatility by increasing and decentralizing storage. However, as we discussed in the previous question, private markets don’t deal well with uncertainty and don’t consider social consequences that are not priced in. For this reason, states would do well to proactively increase their resilience to shocks in essential commodities markets. 

SvH: Buffer stocks can also be combined with other policy initiatives to achieve desirable outcomes beyond securing the immediate supply of food and reducing price volatility (e.g., reducing market concentration, incentivizing diversification of produce, etc.). Buffer stocks can therefore be a powerful tool to work towards a more resilient food system in the medium and long term.

Can you give some practical examples for buffer stocks? What has proven successful? 

MS: Buffer stocks have existed for thousands of years. For example, there are records of buffer stocks in China dating as far back as 202 BC. Over the years, buffer stocks have been used in a variety of contexts.

Many countries have used buffer stocks to achieve food sovereignty and stabilize prices during periods of agricultural structural transformation. One historical example is the European Common Agricultural Policy between the 1950s and 1980s. In the immediate post-war period, buffer stocks were used to stabilize prices and guarantee farmers a minimum support price high enough to boost production. Later, when production levels were sufficient, they shifted to supporting farm incomes, often combined with production quotas to prevent oversupply. Minimum support prices were protected by tariffs to shield farmers from global competition.

Even when they merely stabilize prices along a market-neutral trend, buffer stocks can support domestic production by preventing price collapses when there is overproduction.

Today, countries such as China, India, and several African countries use buffer stocks for similar purposes. India’s system is one of the largest, purchasing grain at minimum support prices and supplying it through a public distribution system that provides subsidized food to vulnerable populations. It is important to domestically consume surplus stocks that arise when the minimum price can’t be defended through trade restrictions alone. The policies that Europe used during its agrarian transition involved dumping surplus products on other world regions, which inhibited agricultural development there.

In contexts where production support is not the goal, buffer stocks are used primarily to stabilize prices. Many import-dependent countries hold strategic reserves to stabilize domestic prices around the average international market price during temporary supply shocks. For example, Uzbekistan maintains grain reserves to prevent its domestic prices from deviating from the domestic price level of trading partners when trade is disrupted. 

Public stocks can also be used to protect farmers from periodic price collapses due to overproduction. The EU and US use so-called intervention stocks for this purpose. It is important to note that even when buffer stocks simply stabilize prices around average global levels, they can provide predictable returns to farmers and support agricultural development, as Indonesia’s experience in the 1980s and 1990s illustrates.

Successful buffer stock programs share several key features: clear and limited mandates, dedicated budgets for each objective, transparent and predictable intervention rules, and a price band wide enough to avoid crowding out private traders and storage. Strong state capacity to forecast production and monitor prices is critical. 

When stocks are used to raise producer prices, potential surplus stocks must be distributed in ways that avoid depressing domestic markets — such as through school feeding programs. Finally, transparency and political independence are essential to limit corruption and maintain trust.

What role can buffer stocks play in the food sovereignty of countries?

MS: They can help stabilize prices when countries raise the national price level above the price level on the international market to protect domestic farmers through trade restrictions and/or production quotas. By doubling as procurement agents for public distribution systems, buffer stocks can also guarantee a minimum support price to farmers that incentivizes production. In today’s day and age, these strategies could be adapted to support the production of regional, ecologically sustainable, and resilient crop varieties.

Even when they merely stabilize prices along a market-neutral trend, buffer stocks can support domestic production by preventing price collapses when there is overproduction. If their procurement processes are carefully organized, they can also allow the state to regulate agricultural markets by participating in them — for example reducing undesirable market concentration or improving the market integration of smallholder farmers. If it manages to crowd-in desirable private economic activity, guaranteed demand from public procurement of food consumed in public programs can act as a market maker — and not just for storable commodities but also for fresh produce.

How could the concept of buffer stocks be implemented globally, and particularly in the Global South? 

SvH: The design of an effective buffer stock depends on the type of food commodity targeted for price stabilization along with the global, regional, and national contexts. These contexts define what desirable policy objectives could be achieved with buffer stocks beyond price stabilization as well as how they can achieve price stabilization.

For instance, the trade of grains (such as wheat and maize) is highly concentrated — a few multinational trading houses control a large share of global trade and storage. Prices for these food commodities are determined in commodity derivative markets, which are financial markets prone to speculative price spikes in times of crisis and high uncertainty. 

In these contexts, virtual buffer stocks as proposed by Joachim von Braun and Maximo Torero in the aftermath of the 2008 food price crisis could be an ideal solution. These are targeted at financial markets, which reduces the need for physical stock holdings. They were termed “‘virtual” as they are a financial commitment by the buffer stock to intervene in derivative markets if prices move outside a certain range justified by actual demand and supply conditions.

Buffer stocks at the national level are a good start, but there is potential for synergy effects when they are implemented at the regional or international level.

The virtual buffer stock thereby leans against speculators, avoiding speculative price spikes. Smoothing prices of globally traded staple foods such as grains can go a long way in reducing price volatility of regionally or locally traded and produced crops, as secondary effects such as hoarding and spill overs to close substitutes are avoided. It also helps reduce macroeconomic instabilities. Many economies that are dependent on food imports end up importing food price inflation. 

Regional and local diets are highly diverse, and staple foods in one region might be unknown in another region. For these food commodities, regional buffer stocks work well and can serve a dual purpose of price stabilization and emergency reserve, as stocks are held locally. Regional buffer stocks can also be designed to serve other desirable policy objectives, which can enhance food security and resilience. 

For instance, regional buffer stocks can serve to integrate markets across a region, thereby smoothing volatility caused by seasonal crop cycles. Regional buffer stocks can increase competition by providing an additional buyer to farmers in highly concentrated markets. Regional buffer stocks can also encourage sustainable production by stocking diversified food crops and encouraging certain growing practices. This requires carefully designed procurement policies.

This is particularly important in the Global South, where we have high food price volatility, more frequent incidences of localised food shortages, and high market concentration with limited capacity for regulatory intervention against concentration or unfair trading practices. In these contexts, somewhat perversely, those producing food are often among the most food insecure and malnutrition and hunger tends to be seasonal due to communities’ inability to store produce. Buffer stocks in combination with minimum support prices can support both food producers and consumers. 

How can regional buffer stocks work in Africa, for example?

SvH: Together with Isabella Weber and Prof Jayati Ghosh, we propose a regional buffer stock initiative specifically for the African continent. We envision an African Grain Management Facility (AGMF) run as an autonomous public agency under the leadership of the African Union.

The facility would purchase grain from within the continent, focusing first on the crops that are dominantly produced and consumed in Africa but not so significant in global trade. Such crops include sorghum, cassava, and millets. These purchases would be complemented with purchases of food items such as rice, wheat, and maize on the world market

The facility would ensure that national governments are able to access food commodities at stabilized, predetermined prices. The purpose of the facility is therefore to stabilize prices, increase greater regional food self-sufficiency, and provide predictability, markets, and incentives to both producers and consumers. Individual countries can choose to complement the regional approach with further national strategies to enhance food and nutrition security, such as school feeding programmes. 

Different from existing regional emergency reserves, the AGMF engages in continuous procurement and offtake, with stockholdings based on reasonable estimates of demand from member countries. It is through this continuous procurement that prices are stabilized, and markets are integrated and created for regionally produced foodstuffs. 

On which policy levels are buffer stocks currently being discussed and where is the implementation of buffer stocks most meaningful? Moreover, how do you propose to monitor and regulate them?

MS: At present, buffer stocks are mainly discussed at national and regional levels, although there is also some talk of global coordination.

The 2022–2023 commodity price shock created macroeconomic instability and food insecurity across many regions, prompting governments to once again explore how to prevent future price spikes from disrupting their economies. The World Bank recently published a new report providing guidance for import-dependent countries looking to build strategic reserves to bridge temporary supply disruptions.

Our highly concentrated and industrialized food system promotes the rapid expansion of capital- and resource-intensive monoculture farming. These monocultures degrade soil, pollute water, and generate high levels of carbon emissions.

In Europe, the European Commission launched its first EU-wide initiative to coordinate emergency reserves of essential goods, including food, and medicine under the Preparedness Union Strategy. Globally, the G20 under South Africa’s leadership designated food security as one of three task force topics for this year’s discussions, with regional and global buffer stocks among the policy tools being considered.

Buffer stocks at the national level are a good start, but there is potential for synergy effects when they are implemented at the regional or international level. A buffer stock for price stabilization at the regional level involves creating one common regional agricultural price, which is then stabilized within a certain range, and thus can over time increase regional trade integration and maybe even the pursuit of a common agricultural policy — as it is being discussed in the African Union right now. 

It will be interesting to see whether buffer stocks at the regional level can move beyond emergency preparedness and be used to achieve food security in the broader sense, i.e., to give countries access to imports at stabilized prices, support regional agricultural development, reduce import dependency, and support the creation of a fairer and more sustainable food system.

How can buffer stocks address climate change?

SvH: Our highly concentrated and industrialized food system promotes the rapid expansion of capital- and resource-intensive monoculture farming. These monocultures degrade soil, pollute water, and generate high levels of carbon emissions from land clearing, habitat destruction, and fertilizer dependence, as well as through global transport.

Monoculture farming has also resulted in a large-scale reduction of crop diversity, with a few patented and high-performing seeds dominating our diets. This makes the system inherently vulnerable to crisis, be it environmental or geopolitical, and a significant contributor to climate change. Buffer stocks can address climate change by both increasing the resilience of a local, regional, or global food system and by decreasing the contribution of the industrialized food system to climate change. 

Climate change will cause more frequent and severe disruptions and trigger incidences of crisis. The increasing unpredictability of extreme weather events and other impacts of climate change mean that private storage will be insufficient to address these vulnerabilities. Private stocks are also unlikely to be located in areas most affected by climate change, as these communities are often poorer and hence less profitable clients. Through public storage, shocks can be absorbed, ensuring both the availability and affordability of food for all, contributing to food and nutrition security.

Through targeted procurement strategies, national or regional buffer stocks can also incentivize the production of more diverse, nutritious, and sustainable food crops, thereby reducing the environmental impact of food systems and actively building resilience through crop diversification and encouragement of sustainable growing practices. 

How can buffer stocks contribute to the transformation of food systems?

SvH: The High-Level Panel of Experts on Food Security and Nutrition defines food security as a situation when all people at all times — that is, in the short- and long term — have physical, social, and economic access to sufficient, safe, and nutritious food that meets their dietary needs and food preferences for an active and healthy life.

Global food systems are highly concentrated, with high levels of concentration at the trader, brander, and retail segments. Adverse consequences of high market concentration for the fair enumeration of farmers and the availability of affordable and nutritious food for consumers has been extensively documented. 

That a high level of concentration has reduced the choice of nutritious food for consumers with adverse health consequences is well-documented. The “double burden of malnutrition”, which is the simultaneous occurrence of both obesity and malnutrition within the same population, or even within the same individual, is a growing global health crisis.

High levels of market concentration have to be addressed in order to move to a more sustainable food system. Buffer stocks can be part of this push.

Market dominance and concentration by a few actors adversely impact both the affordability of food (especially in periods of crisis) and the choice of foods available to consumers. Both contribute to food insecurity and make our food system vulnerable to shocks, be it from geopolitical tensions or natural disasters.

A sustainable and just food system has to provide a fair income to those producing food and at the same time provide consumers with affordable and nutritious food. Buffer stocks can contribute to food and nutrition security by ensuring the availability and affordability of safe, nutritious, and desired food.

Public procurement can ensure a fair numeration of farmers and encourage sustainable and diverse crop production, while also safeguarding choice and affordability for consumers, actively working against the highly concentrated global food system. 

What other instruments or mechanisms could address high food prices and inflation and complement the instrument of buffer stocks in order to increase food security?

SvH: High levels of market concentration have to be addressed in order to move to a more sustainable food system. Buffer stocks can be part of this push, but regulatory changes are needed as well.

Effective regulation is challenging, as levels of market concentrations are often hidden due to the global footprint of companies and obscured multi-level ownership structures. Global collaboration and reporting standards are necessary to enable national regulators to comprehend and address levels of concentration in local markets.