Seize cocoa and coffee boom for sustainable growth

In recent years, Uganda’s agricultural sector has undergone a significant transformation, catalysed by a surge in cocoa and coffee prices, presenting profound opportunities for the nation’s economy and its neighbouring regions. This surge, characterised by a gradual ascent over two years followed by an unprecedented spike this year, has propelled Uganda’s cocoa and coffee industries to unprecedented heights, with futures contracts more than doubling in just three months, reaching unique levels.

The genesis of this surge can be traced to the fields of small farms in West Africa, where cocoa cultivation serves as a cornerstone of local economies. However, the narrative extends beyond the farms to encompass broader happenings such as climate change and the intricacies of the future market. Disruptions in major cocoa-producing regions due to climate change-induced factors have caused supply shortages, worsening market volatility and propelling prices to uncharted territories.

The recent escalation in cocoa prices can be attributed, in part, to financial turbulence, underscoring the complexities inherent in commodity markets and the challenges associated with managing volatility. As cocoa prices surge, consumers anticipate potential consequences – potentially higher prices for chocolate and reduced serving sizes. Even if prices moderate from their current peaks, economists foresee a sustained elevation for years to come, signalling a fundamental shift in consumption patterns and supply chains within the chocolate industry.

Economists often advocate that high prices can serve as a remedy for high prices, fostering increased supply and curbing demand. However, the cocoa market’s intricacies complicate this theory, as market dynamics and structural constraints hinder the translation of price signals into tangible shifts in supply and demand. Despite the potential for increased production in response to higher prices, factors such as limited arable land and prolonged gestation periods for new plantings present formidable obstacles to supply expansion.

Amidst this backdrop of market volatility and uncertainty, Uganda stands at a pivotal juncture. As one of the producers of cocoa and coffee in East Africa, Uganda is poised to reap significant benefits from the price surge. The windfall from heightened cocoa and coffee prices offers an opportunity for Uganda to reinforce its agricultural sector, invest in infrastructure and technology, and strengthen its global market presence.

To seize this opportunity, Uganda can draw inspiration from success stories in countries like Ethiopia and Vietnam, which have effectively leveraged their cocoa and coffee industries for sustainable growth. These nations have implemented strategies focused on value addition, market diversification, and importantly empowerment of smallholder farmers, yielding substantial economic gains and bolstering global competitiveness.

Recent data underscores Uganda’s cocoa and coffee industries’ immense potential, with cocoa exports reaching a record high last year. Similarly, coffee exports have witnessed steady growth, exceeding billions annually. These figures underscore the pivotal role of Uganda’s cocoa and coffee sectors in driving economic growth and poverty alleviation.

To capitalise on this rare opportunity, Uganda Coffee Development Authority (UCDA) must intensify efforts to support smallholder farmers, enhance agricultural practices, and promote value addition in the cocoa and coffee sector. Additionally, collaboration between government agencies and development partners is imperative to invest in infrastructure, provide access to finance, and facilitate market linkages for cocoa and coffee producers.

Ms Katia Mugenzi, Marketing manager and partnership, Agribusiness Development Centre