Improving Agricultural Market Performance:

Creation and Development of Market Institutions

In addition, institutions such as cooperatives, producers’ associations, and exporters’

associations, often serve to increase the market power of producers, exporters, traders, and

transporters and to advocate for market reforms. They may also set quality standards and

develop and maintain brand images for certain products, sometimes in cooperation with

public sector trade or import promotion organizations.

The composition of these agricultural and food market institutions depends on their objective,

mandate, legal form, and organizational structure they take. These agricultural market

institutions can be classified into nine types:



Commodity market regulation authorities

– Commodity market regulation

authorities directly shape the agricultural and food market through rules and

regulations on, for instance, property protection, governance, accountability systems,

quality standards and grade, anti-monopoly regulation, and price controls.



Cooperatives

– Cooperatives have the potential to reduce market and transaction

costs by coordinating production, transportation, improving bargaining power (and

hence counterbalancing imperfect competition), and distributing credit or subsidized

inputs. Cooperatives may also provide training and education to members,

but their

main purpose is to carry out collective commercial activities such as common

processing, branding, marketing, and distribution; development and application of

quality standards; and purchase of inputs).

A number of OIC Member Countries’

Governments actively intervened and supported the development of cooperatives but

which failed to deliver their expected roles. In response, cooperatives have been

privatized and operate more autonomously. A key to success for cooperatives is

control, by the primary producers, through direct ownership or contractual

arrangements backed by the producers’ common market power, of the downstream

processing, marketing, and distribution elements of the market system. Without such

control, the producers are price-takers and their share of the overall proceeds from

the market systems tend to be much smaller. US cooperatives such as Land o’ Lakes

(dairy), Ocean Spray (cranberries), Welch’s (grape jams and juices), and Blue Diamond

(tree nuts), in which growers/farmers control, through the cooperative, the entire

downstream market system, illustrate this principle. Within these principles,

cooperative members generally receive a share of the profit from the cooperative’s

commercial activities.

Shiferaw, B. & Muricho, G. (2011), “Farmer organizations and collective action institutions for improving market access

and technology adoption in subSaharan Africa: Review of experiences and implications for policy,” in ILRI (eds.),

Towards

Priority Actions for Market Development for African Farmers

, pp. 293-313, Addis Ababa: International Livestock Research

Institute.

Mangisoni, J. (2006), “Markets, Institutions and Agricultural Performance in Africa,”

ATPS Special Paper Series

, No. 27, pp.

2-7.

FAO/INRA (2016),

Innovative markets for sustainable agriculture - How innovations in market institutions encourage

sustainable agriculture in developing countries

, p. 2, Rome: Food and Agriculture Organization of the United Nations and