Stockpiling Process

Stockpiling Process

Stockpiling, the process by which some part of current production is not consumed or put into use but is added to stocks. The term is-most frequently applied to primary products, mainly raw materials, stocks of which may be built up to meet an emergency or may accumulate as a result of a decline in demand to which current output cannot adjust quickly enough. It is more usual for the term to be applied in a situation in which stocks are built up intentionally because, for example, of an outbreak or threat of war. In such circumstances stockpiling can take place as a result both of an increase in production in excess of current requirements and of a diversion of raw materials from non-war use or exports.

Abnormal stockpiling of raw materials is an addition to normal demand: one likely result is thus to increase, sometimes considerably, the market price of the commodities stockpiled. Frequently after an emergency considerable stockpiles become available for normal commercial use; such a sudden and substantial increase in supply depresses prices and can lead to drastic reductions in current production. Even if surpluses are not released immediately their likelihood influences 'forward' transactions (for delivery at a future date), and thus current prices.

Subsidies, Government grants of money to industries to raise incomes in it or lower the prices of its products (as in British agriculture), or encourage exports, or enable local authorities to let council houses at rents below the free market level, etc. In the early ig6o's subsidies to British agriculture were estimated as equal to the contribution of agriculture to the national income. Subsidies are usually given for social, military, political or other noneconomic reasons.

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