Coffee sector’s important contribution to household food security potentially undermined by price volatility
24 July 2014
A report from the Economic Policy Research Centre (EPRC) at Makerere University in Uganda, entitled “The potential of coffee to uplift people out of poverty in Northern Uganda”, maintains that “Northern Ugandan coffee-producing households are relatively better off economically compared to non-coffee producing households.” The report confirmed findings from a 2009/10 Uganda Bureau of Statistics (UBOS) study, which found that 56% of coffee households can afford three meals a day, compared to 48% of non-coffee producing households.
The report recommended that the government should “intensify the coffee expansion program in the sub-region to leverage the poverty-reducing effect of coffee”, address constraints on production and develop “processing infrastructure for value addition”, including moves into ready-to-drink coffee products, for domestic as well as export markets, given the rising import bill for instant coffee.
The current focus on raw bean exports is attributed to “the difficulties involved in accessing markets abroad for processed coffee”, according to stakeholders in the sector. The EPRC report also identified “price fluctuations, drought which affects yields, marketing and knowledge gaps” as major challenges.
Joshua Nkandu, executive director of Uganda’s National Union of Coffee Agribusiness and Farm Enterprises (NUCAFE), speaking at a national forum on agriculture and food security, commented that there is a need to improve the quality of Ugandan coffee as part of efforts to move into value-added processing. NUCAFE has called on the government to collaborate with the private sector in promoting local coffee consumption in order to “encourage players into processing”.
Overall, the Uganda Coffee Development Authority estimates that “about 1.3 million households” in the country are coffee growers. The government is supporting a programme to “plant 300 million coffee trees by 2016”, which forms part of the wider National Coffee Policy that the government is seeking to implement. Coffee “remains Uganda’s main agricultural export”, contributing on average 20% of total export revenues in the last decade.
Local press reports note that Uganda “currently produces 2–3 million 60-kg bags of coffee every year”, compared to 6.5 million in Ethiopia, 11 million in Colombia, 15 million in Vietnam and 42 million in the world’s leading producer, Brazil. Uganda, however, is the fourth largest global producer of robusta coffee beans.
In 2013/14, coffee prices fell, and Uganda’s 23% expansion in export volumes yielded only a 5.4% increase in export values in the year to March 2014. Exports to the EU accounted for 71.13% of total export volumes, a decline of 5,000 bags from the preceding year. Exports to Sudan fell by 6,174 bags, (down to 11.35% of exports, compared to 12.74% in 2013), while exports to India increased by 7,361 bags, (up to 4.54% of exports, compared to 2.27% in 2013).
In Tanzania, meanwhile, concerns have been expressed over the lack of “copyright” for Tanzanian coffee, which is seen as undermining efforts to secure price premiums through single-origin marketing of quality-assured coffee.
Editorial comment
If the contribution of the coffee sector is to fully contribute to household food security, then it is apparent that strategies for managing global market price volatility will need to be built into Uganda’s National Coffee Policy. The different experiences of Ethiopia and Rwanda suggest that establishing high-quality storage capacity, along with improved market intelligence, could help to reduce the impact of price volatility on total coffee export earnings to the benefit of the primary producer. (See Agritrade articles ‘ Ethiopian coffee sector caught out by declining global prices in 2013/14’, 21 July 2014, and ‘ Investment in storage reduces Rwandan coffee sector vulnerability to glo...’, 14 July 2014.)
The development of value-added processing and the targeting of high-quality, single-origin coffee market components could also assist in reducing the effects of price volatility on total coffee sector export earnings.
Given that a number of ACP coffee exporters face similar challenges in this regard, it would appear that benefits could be gained from sharing experiences and knowledge across ACP coffee producing countries. Indeed, scope could even exist for the development of joint branding of single-origin coffee promotion programmes, particularly when targeting non-traditional markets (e.g. India and China). This could draw on the experience of programmes such as the Authentic Caribbean Rum label managed by the West Indies Rum and Spirits Producers Association (see Agritrade article ‘ Lessons from the Caribbean rum programme’, 4 July 2010).
