Effects of pricing policy on seasonal storage of wheat in Pakistan

Most studies of stockholding in less developed countries have concentrated on public, interannual stocks. A recent change in Pakistan government policy for the pricing of wheat highlights the need to examine seasonal storage issues, considering explicitly the effects of policy on the behavior of private agents who hold seasonal stocks of grain. Using H. Working's supply of storage theory and a simple monthly model, implications of the policy change for fiscal cost, private storage, and government procurement are explored. Costs of the policy could be reduced dramatically by increasing marginally the gap between the procurement and release price. Expected cost to the consumer of a wider gap would be no larger than under the previous policy.