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(MONITOR UGANDA) How global market prices, weather affected Uganda’s trade returns

How global market prices, weather affected Uganda’s trade returns
By Dorothy Nakaweesi (email the author)
Posted Wednesday, December 30 2009 at 00:00

In Summary

Tea, one of Uganda’s top five export earners suffered harsh weather conditions and exchange rate problems against the shilling in 2009. The price of fertilizers, a major input in the production of tea, went up thereby eating deep into exporters’ profits.

As 2009 comes to a close, Dorothy Nakaweesi makes a recap of major events and highlights in the commodities trade. Most commodities were affected by poor weather conditions and faltering prices on the international market.

Coffee

Coffee, Uganda’s leading foreign exchange earner was hit by unexpected shocks including the international economic recession and disease out-breaks and hostile weather.

The country registered a 25 per cent drop, cumulating to almost Shs200 billion worth of revenue missed in 2008/9 coffee year exports.

According to a September report, the month of the coffee year from the Uganda Coffee Development Authority, the country earned Shs568 billion in 2008/9 down from the previous years’ Shs757 billion.

“The value per metric tonne alone from August 2008-August 2009 dropped by 30 per cent. This means during this period alone we lost 800 metric tonnes,” said Mr Markus Vogel, the managing director, Ugacof Ltd, one of the coffee export firms.

“This is something which was beyond our control.”
Coffee is a source of livelihood to thousands of Ugandans especially those living in rural areas. A slump in earnings only means farmers are more affected and therefore unable to meet their daily spending needs.

The UCDA report further indicates that the volume of exports in that coffee year also dropped by 4.8 per cent. The country exported a total of 3,057,970 bags of coffee down from 3,211,256 exported in 2007/8.

Tea

Tea, one of Uganda’s top five export earners suffered harsh weather conditions and exchange rate problems against the shilling in 2009. The price of fertilizers, a major input in the production of tea, went up thereby eating deep into exporters’ profits.

Uganda imports all its fertilisers and other inputs for tea production from mainly Middle East and Europe.

“We used to buy each 5kg bag of fertilisers a year ago at Shs50,000. But this has since gone up to Shs120,000. We have no choice but to incur these costs if you are to have better yields,” Ms Hope Mugyenyi of Royale Tea, a small grower company, said.

Last year Uganda earned over Shs129.2 billion from close to 45 million bags of tea exported and projections for 2009 stood at over 46 million kilogrammes.

“The coming of the rains is a positive change in production. If it continues raining then we anticipate earning an average of Shs149.2 Billion,” Mr George William Ssekitooleko, the acting secretary general, Uganda Tea Association (UTA), said. Prices at the Mombasa auction have been high for the last two consecutive years sometimes hitting an average $1.8 (Shs3, 357) to $1.9 (Shs3, 543) per kilogramme.

Flowers
Once Uganda’s promising non-traditional export has performed below expectation this year. Exports volumes dropped despite the availability of good soils and weather, and the cheap labour.

Mr Joroen Verheul, Netherlands Ambassador, a country which largely consumes all Uganda’s flower exports said local conditions are inadequate and need to be improved.

Flower growers and exporters have complained of poor road infrastructure, expensive electricity and high freight charges as being the reasons for the poor performance.

This year however, a 10-year tax holiday to companies engaged in value added exports such as the flower sector, withholding tax exemptions, stamp duty exemption in share capital and mortgages was approved.

Fish Sector

Fish production has had one of the bleakest pictures after reports of depletion. There has been a continuous decline in both the volume and value of fish. By June, volumes stood at 8,212 tonnes, way below the 11,903 tonnes, exported in 2007 around the same time.

Value received a boost by the strong dollar over the last six months earning the country Shs80.5 billion down from Shs120 billion recorded around the same time last year.

Last year Uganda’s fish export brought in under $115 million (Shs224 billion) from about 23,000 tonnes of processed fish. This is another drop of $20 million (Shs39 billion) compared to the previous year. This brought about a loss of over Shs58.5 billion compared to the country’s best year, 2005 in which nearly Shs282 billion to premium markets and another Shs58.5 billion to regional markets was earned.

Labels: AGRICULTURE, COFFEE, COMMODITIES, FISHING, FLOWERS, TEA, UGANDA

posted by MrK @ 9:15 AM