ABSTRACT
This chapter shows that agricultural trade liberalization has complex implications for world price, production, and stock variabilities. It outlines a method for obtaining price and production fluctuations in the model, considers a closed economy and then extends it to a multiple country model. A more liberal world trade environment in agricultural products, and especially cereals, implies that public interventions in stabilization operations and, hence, publicly held stocks will diminish. The level of the stocks, in turn, is most likely influenced by variables such as production variability that are likely to shift under a more liberalized environment. A general theoretical model of national excess supply is outlined and then the model is used to discuss trend levels of private stocks. A specification such as shows that the two key components of trend private stocks are the degree of production fluctuations and the trend of public stocks. World price fluctuations were seen to be substantially lessened after cereal trade liberalization.
