By Neil McRoberts and Lee Pearson
As outsiders and relatively inexperienced newcomers to the complexities of the coffee supply chain in Uganda, it is easy for us to be naive both about the nature of any problems which exist and the ease with which they might be fixed. On the other hand, our perspective as friendly outsiders looking in, may be useful if it helps to highlight important issues. Although we are interested in the whole of the supply chain, our main focus is on the livelihoods of the small-holders at the very start of that chain. Any talk of improving the quality or increasing the supply of Ugandan coffee overall must start with a realistic acceptance that the majority of the 3-4 million bags of coffee exported each year start their life on small-holdings of 1 acre or less. These small-holdings are owned by the 1.3+ million farmers who grow a mixture of cash crops (such as coffee, vegetables and matoke) and the food which feeds them on their small farms. We recently started working with farmers in the Buikwe district to gain an appreciation of how they view the coffee value chain and to help in facilitating discussions about how they might gain more value for their coffee.
”Coffee quality starts with us” That’s the opinion which the participants at a recent small-holder workshop at the Rural Agency for Sustainable Development (RASD) in Nkokonjeru expressed without reservation. We co-facilitated the workshop with RASD’s Director Ignitius Bwoogi and the opinion emerged in a lively discussion session about the coffee supply chain. This is a hopeful sign for the future of Ugandan robusta coffee because the the quality chain certainly starts with these farners’management of their coffee trees and in their harvesting practices. Another hopeful sign for the future is the level of optimism among these farmers for the future of Ugandan robusta and their belief that it can develop a reputation as number one for quality world-wide. It’s true that with a processed commodity like coffee a certain amount can be done to mitigate poor quality downstream from production; with skilful blending and roasting in the case of coffee. However,it’s also true that high quality production will always be rewarded. In the long term it is consistent high quality that is vital to establishing a reputation and commanding price premiums on the world market. Good news for Uganda then, that her farmers fully recognize their responsibility in what is likely to be a long process in re-establishing that reputation for excellence which Ugandan robusta once held. Of course, optimism on its own is not enough. Small-holder coffee growers in Uganda face considerable challenges even to achieve their part in the overall quality improvement of export coffee. There are numerous challenges beginning with the economic structure of the supply chain and the role which coffee plays in the household economy and these exacerbated by additional challenges which nature throws at the growers in the form of pests and diseases, such as black twig borer and coffee wilt disease.
When money grows on trees and ready cash is needed for school fees, salt, sugar, or other items that small-holders can’t grow for themselves, it is difficult for them not to liquidate those growing assets when the local coffee trader comes calling. For many small coffee growers in central Uganda coffee is their main—if not only—cash crop. When cash is needed, coffee is picked and sold, or sold on the tree for future picking by the trader. Under these circumstances, if traders are willing to buy or harvest poor quality or unripe berries farmers find it difficult to impossible to refuse to sell, allowing quality to be compromised at the very start of the chain. One shouldn’t develop a view that the local coffee markets consist solely of unscrupulous traders exploiting cash-strapped small-holders. The flexibility and looseness of the local trading system works to the benefit of the farmers too, since it allows them to sell small amounts of coffee when they need cash. They also know that there is likely to be a market for almost any berries they grow—no matter how low the quality and how little effort they invest in crop husbandry. Indeed the system of local, small-scale trades which starts the coffee supply chain can be viewed as a solution which has evolved to solve the central problem which faces Ugandan coffee at a national level; the problem of aggregation. With an industry based on over a million small-holders, the coffee generated by individuals’ production must be bulked somehow and the flexible small scale local trading system achieves this aggregation in a way that has benefits for the growers and the traders. Of course, the system has problems (there are the ones already mentioned and others besides; such as corruption with faulty scales or loading stones into the middle of coffee sacks to increase the apparent weight of bags delivered to processors) and while it may work tolerably well for many individual growers it will never be able to deliver the uniformly high quality coffee which is needed to lift the reputation of Ugandan robusta as a whole. The alternative system for aggregating production, and the one favoured by most analysts, is to encourage the formation of grower cooperatives or associations which handle the job of pooling local production and deal directly with larger regional traders, coffee exporters, or even international buyers. The price, then, for an individual cheating with stones or grabbing some extra volume with poor quality cherries becomes not just a one-off cost at the going market price, but a lost annuity of future sales at a quality price premium. Associations based on quality and traceability both raise the expected benefits of quality (e.g. with some level of price premium and guaranteed market) as well as the potential costs of poor quality (e.g. no market for poor quality and getting kicked out of the group), shifting the incentive structure such that the individuals’ optimum behaviour matches that of the wider group. However, such systems are not so easy to implement as they are to design.
In theory, by doing their own aggregation, cutting out several layers of middlemen, and dealing in large quantities of coffee, farmers should be able to capture some of the additional value in the supply chain which they simply can’t access as individuals. Whether such efforts at forming cooperatives should also be tied to registration for Fairtrade or other equitable trade brands is a moot point. Registration with such certification schemes can be a costly and time consuming process. Experience in Uganda so far suggests that the price premiums available to registered suppliers are insufficient to act as incentives to grower groups to take on the registration process and the resulting yearly fees for maintaining the certification. In any case, too strong a focus on price incentives probably detracts from a focus on quality and stability of supply, which are arguably more important targets for building sustainable supply chains. Furthermore, it seems that for many farmers it is the availability of cash when they need it, as well as a price with more limited volatility to allow budget planning, that matters more than gains of a few shillings per kilo in the price they get. If cooperatives are to become more widespread it may be more important to set up mechanisms for paying farmers when cash is needed, than establishing “premium” brand status. Single pay-outs when the entire crop is sold to an exporter are very unlikely to be flexible enough, so local credit systems need to be introduced as part
of the cooperative-forming process.
Focusing too much on the obstacles that have to be overcome in forming cooperatives or grower groups can lead one to an overly pessimistic view of the future. There are several successful examples of cooperative formation by growers (UGACOF already in operation, of which UGACOF and Good African Coffee probably have the highest profiles. Other groups who have the desire to take the future of the quality chain into their own hands can look to these groups for inspiration and guidance as to how to get started.