General Knowledge
Dina Umali-Deininger
The World Bank
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Social Development
All Regions

Linking Small Farmers to the Market

Far-reaching changes in domestic and global markets are creating big opportunities for
farmers and agribusiness entrepreneurs. With rising incomes, expanding cities, liberalized
trade, increased foreign investment flows to developing countries and new technologies,
demand is growing for high-value primary and processed products, such as fruits,
vegetables, meat, dairy and fish products. Markets for these products are expanding
rapidly, driving faster agricultural and nonfarm growth in rural areas, boosting incomes
and creating jobs. But these new markets also present challenges: farmers must deliver
higher quality products and on time, and they must develop economies of scale in

In many developing countries, staple foods such as rice, maize, beans and root crops
remain a mainstay for most households, many of them poor. The recent jump in world
grain prices highlights the importance of staples not only for food security, but also to the
overall economic well-being of people in developing countries. The price increases hold
promise for smallhold farmers, but obstacles stand in the way of realizing that promise
for many.

Staple food markets in developing countries often do not peform efficiently, as they are
hampered by poor infrastructure, inadequate support services, and weak institutions,
increasing transaction costs and the volatility of prices. How markets for staple foods
function deeply affects livelihoods, welfare, and food security, especially for poor

Agricultural marketing systems that function well can reduce the cost of food and assure
stability of supply, improving the food security of poor and non-poor households. By
linking farmers more closely to consumers, marketing systems transmit signals to farmers
on new market opportunities and guide their production to meet changing consumer
preferences for quantity, quality, variety, and food safety. Efficient markets require good
governance and public policy—infrastructure, institutions, and services that provide
market information, establish grades and standards, manage risks, and enforce contracts.
These demands present continuing challenges in many countries. Even when they are
met, however, they do not guarantee equitable outcomes. For this, smallholders may need
to build their bargaining power through their producer organizations, assisted by public