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Low prices hit Ugandan coffee men.

Low prices hit Ugandan coffee men

Many Ugandan coffee processors face bankruptcy because of the stringent quality control measures imposed by the government in Kampala to counteract low world coffee prices, according to Joseph Kanakulya Wasswa, chairman of Uganda's National Coffee Association (UNCA).

Coffee accounts for about 95% of Uganda's export trade and hence has a tremendous effect on the economy.

Wasswa told a special meeting of UNCA, whose members process 70% of the Uganda crop, that about 20 coffee processing factories already expected banks to seize their assets against overdrafts and loans.

With world coffee prices falling by 50% in the last year Uganda's return from coffee exports is expected to halve between $100 to $120 million in the crop year ending September 30th.

Wasswa also told the meeting that the state-controlled Coffee Marketing Board was imposing heavy penalties on processors who failed to meet the newly imposed quality standards, which had made operations uneconomical for many processors. He called for higher payments to coffee growers, in order to encourage them to produce more as well as better coffee, and also to the processors who had to carry large overheads. Although payments to both growers and processors were raised in the budget in June, Wasswa said that inflation had nullified these increases.

Wasswa concluded by saying that private processors should be allowed to export their coffee directly without having to use the marketing board.

Zimbabwean coffee industry

experiences a difficult season

The outgoing chairman of the Coffee Growers Association (CGA), Robin Fennell, speaking at the association's annual general meeting in Harare, described the 1989/90 season as one of the most difficult in the history of the CGA, due mainly to the steep fall in world coffee prices following the suspension of the International Coffee Organization quota system.

He said that by October 1989 it was clear that the prices obtained for coffee sales on the world market were very much lover than those paid to farmers, resulting in the Grain Marketing Board (GMB) trading account rapidly heading into a deficit. Remedial action had to be taken, and it was decided to reduce the producer price from Z$4,100 ($1,845) to Z$3,500 ($5,175) per ton for Class 5 coffee.

He added that at one stage even this price reduction appeared to be insufficient, and much discussion took place on the subject. He thanked the GMB, Agricultural Marketing Authority (AMA) and the local financial institutions, all of which displayed strong nerves but, most important, confidence in the long term future of the Zimbabwean coffee industry. With the improvement in the international coffee market in January 1990, it appeared that if a deficit was incurred by the GMB it would be less than once feared.

Fennell said that total coffee deliveries for the year ended March 31, 1990 were 14,603 tons and committed export sales as at June 30, 1990 were 9,497 tons valued at Z$42,148,923 ($17,281,057) giving an average realization of Z$4,438 ($1,820) per ton based on an exchange rate of Z$1 equaling $0.41. To date none of the lower qualities of coffee have been sold and, consequently, when this was sold there would be a reduction.

He added that a positive development on the marketing of coffee was the establishment of a coffee department within the GMB. However, the handling costs for coffee at the GMB had been escalating at an alarming rate. While some of this could be attributed to a more accurate apportionment of costs to the coffee trading account, not all the increases could be attributed to this factor. He knew that the GMB's management was equally concerned, and it was something that would be receiving much attention in the coming year.

Fennell said that labor was another major input cost affecting coffee farmers. The Agricultural Labor Bureau (ALB) was currently considering a number of ways to try and resolve the long running agro-industrial wage dispute. The CGA awaited the outcome of the 1990 wage negotiations. The chairman cautioned that the industry was in no position to meet large wage increases for the reasons already outlined.

Fennell was concerned that the Government had not yet started long-term research into the coffee berry disease. For example, it was not known how the disease had moved within Zimbabwe.
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Title Annotation:Uganda's National Coffee Association
Author:Kille, Turville
Publication:Tea & Coffee Trade Journal
Date:Nov 1, 1990
Previous Article:Potential washed Arabica contract in London.
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