Markets and Trade

Agricultural markets and supply chains are at the heart of the development process. Food and agriculture markets expand consumers’ choices and create incentives for farmers. Well‐functioning markets and trade enable the optimal allocation of resources, diffuse knowledge and technologies, and provide avenues that link agriculture with other sectors of the economy through a network of agricultural commodity and input supply chains. Thus, the market mechanism is crucial for the structural transformation of the economy and for growth and development. Markets are vital to improving the livelihoods of millions of people and can provide additional benefits, such as contributing to food security by ensuring that food moves from surplus to deficit areas. 

The role of well-functioning markets, both global and domestic, is significant in driving economic growth. However, in some cases, markets may not reconcile the interests of individuals with those of society as a whole. Markets may result in negative environmental outcomes or fail to address social objectives, such as reducing inequality. In addition, when agricultural commodity and input supply chains are not efficient and resilient, they cannot rapidly respond to demand‐ and supply-side shocks, thereby threatening food security and livelihoods. Market failures and supply chain disruptions undermine the social, economic and environmental benefits central to the 2030 Agenda for Sustainable Development. 

Policies and mechanisms for sustainable markets

 

Trade has an important role to play in climate change adaptation efforts and can contribute to food security in many countries. In the short term, by moving food from surplus to deficit areas, trade can provide a mechanism to address production shortfalls due to extreme weather events. Global agricultural market integration could reinforce the adaptive role of trade by increasing availability of, and access to, food in countries that will be negatively affected by climate change.

 

Trade could also be central to climate change mitigation efforts. If trade could provide the necessary signals to farmers to produce low carbon footprint products, emissions could be reduced globally.

 

Enhancing the resilience of supply chains to risks can help safeguard food security and reduce social deprivation and political stresses associated with poverty and inequality. Importantly, the relationship between resilience and sustainability means that policies for each of these pieces need to be considered together.

 

Contract farming schemes can help address the constraints smallholders face in price risk, access to inputs and credit, and access to technology. These schemes can improve productivity, raise commercialization rates, increase incomes and reduce poverty.

 

Sustainability certification schemes can harness the market mechanism to provide information on how food is produced and how sustainability benefits the environment and society. As a result, the trade-offs between economic, social and environmental objectives can be addressed.

 

Governments set policy priorities and build general resilience, but it is actors throughout the supply chain who are directly affected and who need to consider business strategies and interventions to adapt and transform for the future.

Publications
28/06/2022

This edition of The State of Agricultural Commodity Markets (SOCO) discusses how trade policies, based on both multilateral and regional approaches, can address today’s challenges for sustainable development. Trade policies in food and agriculture should aim to safeguard global food security, address the trade-offs between economic and environmental objectives, and strengthen the resilience of the global agrifood system to shocks, such as conflicts, pandemics and extreme weather.

31/10/2020

The State of Agricultural Commodity Markets 2020 (SOCO 2020) aims to discuss policies and mechanisms that promote sustainable outcomes – economic, social and environmental – in agricultural and food markets, both global and domestic. The analysis is organized along the trends and challenges that lie at the heart of global discussions on trade and development.

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The State of Agricultural Commodity Markets 2022 (SOCO)
28/06/2022

This edition of The State of Agricultural Commodity Markets (SOCO) discusses how trade policies, based on both multilateral and regional approaches,...