Global markets for cocaine, opiates and cannabis are steady or declining, the UN's annual drug report says.
Opium cultivation in Afghanistan fell by 19% in 2008 while cocaine production in Colombia dropped 28%, it says.
Consumption of the drugs in major markets in Western countries is said to be stable or declining.
But the production and consumption of synthetic drugs are thought to be growing as they shift increasingly to the developing world.
In its report, the UN Office for Drugs and Crime said that what used to be a cottage industry producing synthetic drugs - amphetamines, methamphetamine and ecstasy - has now become "big business".
The head of the agency, Antonio Maria Costa, also used the report to argue against legalising drugs, saying such a move would be a "historic mistake".
"A free market for drugs would unleash a drug epidemic, while a regulated one would create a parallel criminal market," he said.
Overall cultivation of opium poppies, which can be converted into heroin, fell 16% in 2008.
This was mainly attributed to the sharp decline in Afghanistan, where 93% of the world's opium is grown.
THE AFGHAN SITUATION
Martin Patience, Kabul
Coming after two record-breaking years of cultivation - the latest UN report will be cautiously welcomed by officials here. But they admit that an opium-free Afghanistan is a long way off.
One of the major reasons for this year's drop is what one drugs official called a "perfect storm". With falling opium prices - more farmers opted to grow wheat, which has seen prices shoot up. But plans to eradicate poppy have been scaled back as the US special envoy to region, Richard Holbrooke, says he believes they drive poor farmers to support the Taleban.
The drugs trade remains firmly entrenched in Afghanistan. Most officials admit that until they offer poor Afghan farmers a long-lasting alternative to opium, the poppy fields will continue to bloom.
For cocaine, there was some increase in production in Peru and Bolivia, but not enough to offset the 28% drop reported in Colombia - where half of the world's cocaine is produced.
Cultivation of cocaine fell by 18% in Colombia.
Mr Costa said changes in the cocaine market could help explain recent drug-related violence in Mexico, and that cartels in Central America were "fighting for a shrinking market".
"The $50bn global cocaine market is undergoing seismic shifts," said Mr Costa.
"Purity levels and seizures in main consumer countries are down, prices are up, and consumption patterns are in flux."
A fall in seizures of cocaine in West Africa after half a decade of rapid growth showed that international efforts to tackle trafficking there "were paying off", Mr Costa said.
But he also said European demand for cocaine was continuing to fuel violence and political instability in the region, especially in Guinea-Bissau.
Analysts know less about the production of cannabis and synthetic drugs, which can be produced anywhere in the world, but the report cited several indications that the problem for amphetamine-type stimulants (ATS) was worsening.
Huge laboratories in South East Asia, especially in the Greater Mekong sub-region (Cambodia, Laos, Burma, Thailand, Vietnam, and parts of southern China), are producing massive quantities of methamphetamine tablets, crystal meth and other substances including ketamine, it said.
It said EU countries were the main suppliers of ecstasy, while Canada had become a major hub for the trafficking of both ecstasy and meth.
But 30% of global ATS seizures in 2007 were made in the Near and Middle East, where use was reported to have risen sharply.
The UNODC said shifts in the production of ATS showed how criminal groups could exploit the situation in more vulnerable, developing states.
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