Improving Agricultural Market Performance:
Creation and Development of Market Institutions
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 Commodities exchanges typically suffer from a top-down approach that’s better at
attracting foreign aid than at improving farming practices and developing
transportation and communications networks while large trading volumes, a strong
financial sector, and a commitment to transparency – necessary for the success of
commodities exchanges - don’t yet exist in most (African) countries. South Africa’s
SAFEX has proven successful, however, for several reasons, which includes
innovations which created a favorable environment for both spot and futures trades,
the wide dissemination of SAFEX market data, the fact SAFEX price is widely used as
the reference price in forward contracts, and procedures and rules which evolved
along to meet the needs of the exchange’s users.
 Marketing boards frequently fail due to limited institutional capacity, preventing them
from imparting stability to markets, their conflicting roles as both regulator and
market participant, disorderly liberalization, and removal the surplus reserve that was
used to moderate price volatility as the Côte d’Ivoire example showed. However,
marketing boards can succeed if their function is to facilitate effective market
operations rather than to control and participate directly in those markets.
 Two public-private collaborations have been established in Indonesia: the Cocoa
Development Centers and PISAgro. The strength of the model, particularly the Cocoa
Development Centers, lies in the ability to align incentives among different actors in a
way that has typically not occurred in more top-down programs.
 In many countries, market institutions are concentrated on a single sector or market
system in order to anticipate on technical challenges and needs of different commodity
groups. But in some cases, especially in countries in with limited infrastructure,
administrative capacity, and business climate, a more widely focused agency may be
more appropriate, especially when it functions as part of an integrated and
coordinated network of Government and private institutions. Such national
coordination agencies have been established in Ethiopia, Nigeria, Guyana and Brazil,
and have generally become successful despite some initial challenges.