Tom Magumba
21 October 2008
Kampala — Most Ugandan coffee farmers sell their coffee beans to secondary dealers who then deliver to established firms that export to the international market.
The mere fact that majority lack price information many have not heard of the current global financial crisis that is tearing apart economies and could soon see their earnings drop to less than the current Shs2600 they earn per kilo of coffee.
A recent letter posted on the International Coffee Organisation (ICO) website by the executive director Mr Néstor Osorio said the crisis in the global financial markets is having a direct effect on commodities in general, including coffee, despite the fact that the coffee supply and demand fundamentals remain unchanged.
ICO is a London-based intergovernmental body of coffee exporting and importing countries. Mr Osorio said the current crisis in the financial markets appears to be having further repercussions on the coffee market, especially in view of the credit restrictions and lack of liquidity affecting major trade operators.
"Credit restrictions also affect producers, who are likely to be forced to reduce their expenditures on investment and maintenance, with a possible reduction in the supply of coffee in the medium term" he said in a recent communiqué. He added that Inflation levels are also going up in exporting and importing countries a development that could further affect the coffee market.
This comes against a September coffee report from Uganda Coffee Development Authority (UCDA) that noted that the continued drop in coffee prices on the global market dampened activities in the internal market.
The report says farmers, especially in the southwestern and Masaka coffee zones, who enjoyed good prices from their coffee due to quality, temporarily, withdrew from the market.
To benefit from the market at the current prices, the report says farmers bulked their coffee and bargained for better prices, to which the market responded by offering Shs2700 to Shs2850 per kilo depending on quality and quantity. Farmers and millers from other areas whose quantities were low and just average quality, received as low as Shs2600.
Uganda shipped far less volumes although the report does not clearly point out the fall in quantity compared to the August exports. A result, a total of 212,846 of the 60-kilo bags valued at US $26.8 million (more than shs 45 billion) were exported last month representing an increase in quantity and value of 19 per cent and 46 percent, respectively compared to the same month last year.
This was more than 111 lower and more than Shs26 billion lower compared to the previous month that saw a total of 324,127 of the 60-kilo bags worth US $ 41.6 million (more than Shs71 billion) shipped.
The overall increase in performance was more to Robusta, which went up by 27 percent in volume on the account of improved husbandry practices and favourable weather saw more of the coffee planted coming into production and the ongoing coffee productio n campaign further underpinned production.
"The stocktaking exercise to establish coffee stocks is in progress, but preliminary reports show that farmers and store operators still have sizeable stocks mainly due to the hiccup in price trends" the report says in part.
Although coffee harvesting is slowly gaining momentum, the weather forecast indicates that rainfall is likely adversely affect ripening, harvesting and the drying processes. Thus UCDA has based its October projections of 170,000 bags on the carryover stocks at the export and primary processing levels.
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