Improving Agricultural Market Performance:
Creation and Development of Market Institutions
2
The composition of these market institutions depends on their objective, mandate, legal form,
and organizational structure they take. This study focuses on six types of agricultural market
institutions, which are actively engaged in agricultural markets to concentrate the bargaining
power of agricultural and food producers, produce and disseminate market intelligence,
develop and administer infrastructure and facilities, support technological improvement,
encourage and support agricultural investment and trade, increase the competitiveness of
agricultural and food market systems, mitigate price and financial risk to producers, stabilize
commodity prices and ensure adequate food supplies. These selected market institutions
include:
1. Commodity market regulation authorities;
2. Cooperatives;
3. State-owned economic enterprises;
4. Marketing boards;
5. Licensed public warehousing companies; and
6. Commodity exchange platforms.
The extent to which Governments have used these market institutions as tool to intervene has
changed, particularly from the mid-19th century onwards. Government intervention reached
its peak in the 1970s, while it eventually became evident many of these inefficient and
unsustainable market institutions actually impeded and restricted agricultural market
systems. Many Governments started reforms, withdrew from agricultural market systems, and
liberalized their agricultural market systems. In the context of this report, many marketing
boards in Uganda were privatized while the Government of Indonesia curtailed previously
exclusive monopoly powers of some of its market institutions.
However, the liberalization of the agricultural market system did not always realize the
desired improvement. State intervention and agricultural market institutions re-emerged to
mitigate market failures and to address issues related to food security, oligopolistic market
power, and a dual market system, where an efficient agricultural market system is only
accessible for market participants with the right size, scale, and skills, leaving out smallholders.
The reconstitution of the Uganda Development Corporation and the (future) establishment of
Indonesia’s National Food Authority are examples of the re-emergence of Government
interference.
The degree of agricultural market intervention and, hence, creation of market institutions
varies wildly across the nations of the OIC. Several OIC Member Countries have been strong,
long-term members of the global agricultural economy for some time, and have the institutions
to enable this. Countries such as Nigeria appear to have a comprehensive approach to
addressing food safety, and have even established specific agencies for that purpose. Some
nations, such as Tunisia, have gone beyond the concepts of food safety and regulation by
creating institutions specifically to aid industry compliance with national regulations and for
improving the state of food infrastructure. Indonesia’s focus on realizing self-sufficiency for a
number of agricultural commodities is, among others, facilitated by its market institutions.
Still, other nations establish market legislation if and only as needed. Mozambique is one
example, and has a slate of different Ministerial orders addressing individual foodstuffs.
Regions within the OIC cope with various problems. In the poorer OIC Member Countries,
largely though not exclusively in Africa, agricultural market is constrained by high transaction