This study identifies the reasons for low producer prices of rice that have not covered its production costs for many years in Madagascar. The following points will be discussed: the farmers’ marketing conditions and the rural rice market structure, including the functions of each intervening trader preceding rice distribution in urban centers. The study also assesses current functions of the agricultural farmer cooperative: an organization expected to enable the establishment of fair trade in the domestic rice market. The data come from interviews conducted with 120 farmers, 20 traders, and the survey of the overall cooperative associations in two prefectures and main rice suppliers of the capital city. The analysis reveals that farmers were often compelled to sell their products largely to the nearby village assemblers who are under the commission of large traders located in urban cities. Despite the fact that farmers do not maintain bargaining power for a variety of reasons, there have been no rural organizations, such as agricultural farmer cooperatives, established to support them in many areas. The few agricultural farmer cooperatives that have been introduced recently maintain only limited market power because they are ill-suited to deal with the farmers’ conditions. The results suggest that the major issues which may deserve more attention are: the emergence and furtherance of a cooperative movement which fits the local conditions, the enforcement of market rules, and the establishment of marketing institutions that ensure fair trade.