Workshop on primary commodity problems and stabilization schemes

Abstract

After a brief presentation by Paul Chan, the following salient points related mainly to the optimal strategies to reduce price fluctuations and variability in export earnings of rubber were made. 1. The model presented in the Lee-Navamukundan-Chan paper represents a departure from the orthodox buffer stock schemes (BS) in that compensatory financing or price compensation (PC) is introduced as a complementary strategy. In their perspective, compensatory financing relates to outright one-time payments to either producer or consumer suffering a shortfall in the price received or excess in price paid for rubber. Several questions were raised on the issue of compensatory financing including: a. Determination of the floor price has to be related to the average cost of production of small-holders and estates and, probably, an element of opportunity cost has to be imputed also. The ceiling price could be established at levels beyond which more research into synthetic rubber would be motivated. International differences in production costs will have to be reconciled although the experience of the International Tin Agreement in coordinating, with some difficulty, the interests of the low-cost and high-cost tin producers could be used as an object lesson.