Uneven Harvests: Market Failures in Maize and Banana Sectors Undermine Food Security

A new report by the World Bank’s Agriculture and Global Food Practice in collaboration with the FAO Investment Centre, titled Market Structure and Efficiency in Agricultural Value Chains: Deep Dives in El Salvador and the Dominican Republic, examines how weak price transmission, market inefficiencies, and policy gaps are worsening food insecurity across Central America. The report zeroes in on two vital agricultural value chains, white maize in El Salvador and bananas in the Dominican Republic, to understand how both consumers and producers are being underserved by the current market systems. Despite rising global prices for staple foods due to disruptions like the COVID-19 pandemic and the Ukraine war, local wholesale prices in Central America have remained largely unresponsive. A World Bank analysis revealed that less than 10 percent of international price changes are reflected in domestic wholesale markets for key commodities like white maize, beans, and bananas. This suggests serious inefficiencies in how market signals travel from international to local levels, ultimately affecting both affordability for consumers and incomes for producers.

El Salvador’s White Maize: Fragmentation and Parallel Systems

White maize in El Salvador is more than a dietary staple; it is the most important caloric contributor to the national diet. It is grown by over 340,000 smallholder farmers, many of whom cultivate it on plots smaller than one hectare. Much of this maize is used for self-consumption, while the rest is sold through informal intermediaries in cash transactions without receipts or price guarantees. This contrasts sharply with imported white maize, which is controlled by a few large-scale importers and agro-processing firms such as Harisa, Distribuidora de Alimentos Básicos, and Cemersa. These companies rely exclusively on imported grain purchased through futures contracts and processed into flour and other retail products for urban supermarkets. The domestic and import-based supply chains operate in parallel, with minimal integration or overlap. As a result, smallholder farmers are effectively locked out of the formal, high-value segments of the maize market. Wholesale and retail prices in El Salvador have risen steeply since 2020, with domestic white maize prices doubling between 2021 and 2023. Yet farmers have not benefited proportionally, largely due to input price volatility and climate-induced production shocks. Meanwhile, intermediaries and wholesalers have managed to maintain stable profit margins, shielding themselves from the risks borne by producers.

Bananas in the Dominican Republic: Export Success, Domestic Fragility

Bananas are a major export crop for the Dominican Republic, especially in organic and certified markets in Europe. However, this export success does not translate into domestic market strength or improved livelihoods for all producers. Around 21 percent of banana production is exported, while the remainder is consumed locally through informal networks dominated by fragmented intermediaries. Export prices are governed by formalized futures contracts aligned with international benchmarks, but domestic prices depend largely on ad-hoc negotiations between small-scale producers, wholesalers, and vendors. As a result, many banana farmers, particularly smallholders, remain food insecure. Investments have been made in plantation renewal and organic certification, supported by institutions like IDIAF and producer organizations. Yet the lack of a cohesive strategy and weak integration between the domestic and export value chains leave many producers unable to benefit from international price premiums. Much like in El Salvador, the communication of price signals is inconsistent, and producers are often unable to align their practices with market demands due to poor access to information and technical services.

Policy Shortfalls and Emerging Trends

In both countries, the policy landscape has shifted in ways that are shaping the agricultural market with mixed outcomes. El Salvador’s decision to replace its physical input distribution scheme (PIATEC) with a flexible voucher system reflects an effort to modernize support and allow farmers to diversify. However, the value of the support has also been cut by nearly a third, which may prompt some producers to exit maize cultivation altogether. The government has also fully liberalized maize imports and extended tariff eliminations through 2026 in a bid to stabilize consumer prices. Yet these measures, without strategic coordination, risk deepening the divide between domestic producers and formal supply chains. Similarly, in the Dominican Republic, while policies have strengthened producer associations and export-oriented infrastructure, they have not sufficiently addressed the fragmented nature of domestic market systems. Public institutions in both countries, such as CENTA in El Salvador and IDIAF in the Dominican Republic, play important roles in providing extension services and research, but often lack the scale, coordination, or funding to drive systemic transformation.

Towards a More Inclusive and Efficient Food System

The report concludes with a series of actionable policy recommendations aimed at improving market efficiency and inclusiveness. These include forming productive alliances between smallholder organizations and agro-industrial firms, expanding risk-based insurance for farmers, and investing in critical infrastructure such as storage and transportation. Improved information systems, particularly in pricing and demand trends, are emphasized as essential tools to reduce asymmetries and improve decision-making along the value chain. Importantly, the authors argue for a more participatory approach to sectoral planning, involving both private sector actors and farmer organizations. Consumer protection measures should also shift toward more targeted financial support for vulnerable groups rather than broad food price subsidies. Without these changes, the food systems in El Salvador and the Dominican Republic will likely continue to reproduce inequality, hinder rural development, and remain vulnerable to external shocks. The report makes clear that the path to food security in Central America lies not only in producing more food but in building smarter, more equitable market systems that benefit everyone, from farmer to consumer.