Improving Agricultural Market Performance:
Creation and Development of Market Institutions
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include cereals and pulses. The project sought to promote privately-run warehouse systems,
improve assurance services for coffee and cotton, and develop a system of commodity trade
finance. A WRS Law was enacted in 2006 and accompanying regulations in 2007. Project
implementation was guided by the Uganda Commodity Exchange (UCE). In 2015 a regulatory
body, the Uganda Warehouse Receipt System Authority (UWRSA) was established.
4.4 Agricultural Price Supports
Price supports are one of the most common forms of market intervention. They account for a
high proportion of total public expenditure on agricultural market interventions worldwide, in
developed and developing countries alike.
The case study on South Africa in Chapter 5 is one example of this. According to OECD figures,
the average rate of “producer support estimate” 146 for the most heavily supported
commodities (accounting for about half of total agricultural production) in the United States
“ranges from about 55 percent of the value of production for sugar to about 22 percent for
oilseeds and accounts. For less-supported commodities the rate is typically below 5 percent.”
For the aggregate of OECD member states, the producer support estimate averages 31% of
production value. The forms of subsidy vary by country and commodity…but they include:
 Direct payments to farmers and landlords;
 Price supports implemented with government purchases and storage;
 Regulations that set minimum prices by location, end use, or some other characteristic;
 Subsidies for such items as crop insurance, disaster response, credit, marketing, and
irrigation water;
 Export subsidies; and
 Import barriers in the form of quotas, tariffs, or regulations.
As Sumner (2008) points out, “Supporters of farm subsidies have argued that such programs
stabilize agricultural commodity markets, aid low-income farmers, raise unduly low returns to
farm investments, aid rural development, compensate for monopoly in farm input supply and
farm marketing industries, help ensure national food security, offset farm subsidies provided
by other countries, and provide various other services. However, economists who have tried to
substantiate any of these benefits have been unable to do so…
Farm subsidy programs typically transfer income from consumers and taxpayers to farm
operators, especially to owners of farmland and other resources used in farm production.
Evidence shows…for example, that farm subsidies increase the rental rate on land to which
rights to receive those payments are attached. In other words, subsidies to farming are often
simply subsidies to landowners.”147
Agricultural price supports and similar subsidies also can distort international trade, a famous
example being U.S. cotton subsidies, which have disadvantaged African cotton producers.
146 “Producer support estimate” is a figure that incorporates into single index a large range of government programs,
including price supports and trade barriers, that transfer benefits to farm producers and landlords. This index measures the
size of the transfer in money terms but does not attempt to assess the programs’ effects on production or net income.
147 Sumner, D. (2008), Agricultural Subsidy Programs, available at
[Accessed August 2017].