Agricultural trade and market power

Shoumitro Chatterjee

Chapter 1 in Elgar Encyclopedia of International Trade, 2026, pp 4-7 from Edward Elgar Publishing

Abstract: Agricultural trade is shaped by significant market power across supply chains, with intermediaries often capturing a disproportionate share of value relative to farmers. This power arises from structural features of agricultural markets—smallholder dominance, quality assaying challenges, and exposure to climate shocks—and manifests differently in developing and advanced economies. In developing countries, credit frictions, licensing restrictions, and weak contract enforcement create opportunities for monopsony power, while in advanced economies, market concentration in processing, input supply, and trading raises similar concerns. Intermediary market power can harm farmer welfare, distort production choices, and reduce investment incentives, yet in contexts with high contracting frictions, some degree of market power may sustain supply chains. Climate change further interacts with market structures and trade policy, amplifying risks. Understanding these interactions is essential for designing policies that balance competition, efficiency, and resilience in agricultural markets while ensuring fairer outcomes for farmers and sustainable global food systems.

Keywords: Agriculture; Trade; Supply chains; Market power (search for similar items in EconPapers)
Date: 2026
ISBN: 9781035327492
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