Improving Agricultural Market Performance:
Creation and Development of Market Institutions
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interventions are necessarily wrong: market failures are common and it typically falls to
governments to correct them.
Consequently, performance of markets and of market institutions must take into account the
government’s high-level social and political objectives. As noted in Chapter 1, these objectives
can include:
 Food security
 Food safety and quality
 Environmental protection
 Agricultural production and productivity
 Agricultural and food exports
 Domestic and foreign investment in the agro-food sector
These high-level objectives may then translate into more specific policies and actions of
market institutions, such as:
 Agricultural price supports
 Agricultural finance (lending and other financial instruments)
 Agriculture producer subsidies
 Agricultural research and extension
 Produce marketing boards
 Animal hygiene and plant protection
 Food subsidies
 Public sector food storage and distribution
 Import tariffs and quotas
To be sure, other institutions and interventions also affect agro-food market performance.
These include Ministries of Finance, Central Banks, Ministries of Land/Planning, Ministries of
Education, Ministries of Transport and Public Works, tax and customs authorities, investment
and trade promotion organizations, and many others. But this analysis , while recognizing the
importance of these other institutions, concerns itself primarily, if not exclusively, with those
institutions that intervene directly in agro-food markets, either by putting in place policies and
policy frameworks that target the agro-food markets, or by operating in those markets.
It is not possible within the scope of this analysis to assess every type of institution or market
intervention. It is, however, possible, by examining the actions of several different kinds of
market institutions in several countries, to draw some overarching conclusions about the links
between market institutions and market performance and of the structure and actions of
institutions most likely to produce positive or negative results.
These examples highlight the direct actions of institutions to shape or influence markets, and
they evaluate performance based not on improvements in macroeconomic indicators but in
the benefits that accrue directly to market participants and their communities. In this section,
we examine institutions and initiatives in several countries, which have had positive or
negative and measurable effects on market performance. These initiatives concern agricultural
lending, warehouse receipt system financing, agricultural price supports, and public buffer
stocks for food security.