Problems of intervention in the market for Cocoa

... Problems of intervention in the market for Cocoa ai)The buffer stock scheme was intended to keep prices almost constant but due to a single target price i.e. a fixed price offered it would encourage farmers to mass produce goods that may not necessarily be needed/demanded as they knew that anything left over would be bought by the authorities as buffer stock. This would lead to "butter mountains" and wine lakes". This way when the price is between a certain range no intervention will be needed, however if there may be a good harvest one year then the authorities would purchase the stock and store it as buffer stock. This way it means that the excess stock is purchased and the price would increase. In case of a bad harvest, the authorities would sell back the buffer stock to decrease prices. This scheme would therefore regulate the cocoa market as prices should

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