6 September 2017

Uganda: Brazil Drought Gain for Uganda Coffee

The increase in coffee prices has contributed to higher returns and a narrowing of Uganda's current account deficit.

A report released in August by the Uganda Coffee Development Authority (UCDA) shows that the country has so far made Ush1.2 trillion ($327.4 million) this year.

This is just Ush157.8 billion ($44.3 million) short of the amount Uganda made out of coffee export earnings the whole of 2016.

The executive director of research at Bank of Uganda Adam Mugume, said the higher coffee export earnings combined with recovery from dependence on exports to troubled South Sudan helped improve the balance of payment account.

In the 2016/17 financial year Uganda registered a balance of payment surplus worth Ush1.6 trillion ($438 million). This is more than three times the surplus that had been registered in 2015/16.

Additionally, Uganda has managed to diversify export destinations, getting over the war in South Sudan which had largely crippled earnings, Dr Mugume said.

The Democratic Republic of Congo, Uganda's neighbour to the West has replaced South Sudan as the biggest export market.

Dr Mugume said that the increase in Uganda's coffee export earnings is as a result of the recovering commodity markets. This is backed by figures from UCDA.

Uganda's coffee has so far earned an average of Ush7,125.5 ($2) per kilogramme this year, which is 18 per cent higher than the earnings of last year.

Market intelligence and information manager at UCDA James Kizito, said that drought in Brazil has helped boost international prices for Uganda's coffee. The drought has been affecting Brazil for two years now. Robusta is now making more money than it has made previously.

Higher production in Uganda also played a part in boosting earnings.

Increased exports

Despite the drought that affected Uganda and many Eastern African countries, coffee production in the country almost doubled from 12.6 million kilogrammes in October 2016 to 24.6 million in November of the same year. Uganda has maintained the monthly coffee production above 24 million kilogrammes.

Officials at UCDA attribute this to increased distribution of seedlings in the 2013/2014 financial year. As coffee matures in about three years, this distribution is starting to pay off.

"The increase in coffee exports is attributed to the 57.4 million seedlings that were planted in 2013/2014 that are now starting to yield. This is triple the 19.6 million seedlings that were planted in 2012/2013," said UCDA public relations officer Laura Walusimbi.

Ms Walusimbi predicts by the end of the year, Uganda will have exported four million bags of coffee compared with the 3.54 bags in 2016 suggesting that despite distributing three times more seedlings than in 2012/13, there will only be a marginal increase in production.

Parliament's committee on agriculture blames the failure to translate increased seedling distribution into added productivity on government officials' tendency to provide farmers with crops they do not need. Farmers then collect, but do not plant the seedlings.

But Mr Kizito said that in the case of coffee, the drought that Uganda suffered in 2016 and parts of 2017, also affected production quantities. According to him, the Mt Elgon area, where the higher priced Arabica coffee is grown was hit the most.

Uganda

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