Plan for Modernization of Agriculture:
Commodity value chain approach for Prosperity.

The Government of Uganda is committed to raising household incomes through agricultural interventions that guarantee a minimum living standard for every household. To achieve this objective, it is necessary that the entire commodity value chains are understood so that interventions are appropriately targeted. A commodity value chain describes the activities and roles of different players right from production through processing (primary and secondary) to marketing and finally to the consumer. A simplified version of a commodity chain can be illustrated as below:

At each of these components of the commodity chain, there are different roles for the public and private sectors that need to be carefully articulated.

Last year, the PMA Secretariat received funding from the Ministry of Finance, Planning and Economic Development, to undertake technical analysis of value chains for 8 commodities. These were selected according to various government requests and the information gaps that were found in the existing commodity vale chains. These analyses will be used to guide public and private agricultural investments in the country.

The overall objective of conducting these agricultural commodity chain analyses was to obtain detailed understanding of the actors, activities, costs, and opportunities. Information for these analyses was obtained through interviews with samples of actors along each node of the value chain. These included farmers, input dealers, service providers, traders, processors and local leaders.

For the selected agricultural commodities, the specific objectives were to:

Identify the key players/actors along the commodity chain, from the farm level to the consumer at local, national, regional and international levels

Identify constraints, opportunities and areas for possible intervention in order to improve the functioning of the commodity chain

Propose short- and long-term measures to deal with each of the barriers along the commodity chain, clearly defining roles of the public and private sector, as well as areas where public-private partnerships are required.

Estimate cost associated with each of the proposed interventions, especially those by the public sector.

Commodities studied and areas where they were carried out:
1. Aloe vera (West Budama, Butaleja and Luwero),
2. Apiculture (West Nile - Moyo Yumbe, Arua, Nebbi) and Nakasongola Districts
3. Cotton (Apac, Lira, Pader and Kitgum in Acholi and Lango Sub region)
4. Citrus (Teso region - Bukedea, Soroti, Katakwi and Kaberamaido Districts)
5. Dairy (Kabarole and Kyenjonjo Districts in greater Kabarole region )
6. Maize (Iganga and Kamuli Districts)
7. Rice (Lira, Apac, Amuru and Kitgum Districts)
8. Oil seeds (Central region-Mityana, Mubende and Luwero)

Key highlights on six studies:
Citrus in Teso sub-region.
Citrus production is a priority enterprise in all the 6 districts in the Teso sub region. The main varieties of citrus grown are Valencia, Hamlin and Washington navel. It is estimated that there are currently 1.5 million trees of which about 900,000 trees are fruiting, yielding about 200,000 metric tons of fresh oranges. It is estimated that by 2011, there will be 5 million trees in the sub-region, and the yield will be about 360,000 MT. About 30,000 households are involved in citrus production, of whom 50% have productive trees of improved varieties. The current production value is about Sh 67 bn and will be about Sh111billion by 2011.

The key value chain actors in production are mother garden and nursery operators, Teso Tropical Fruit Growers Association (TTFGA), extension service providers (mainly NAADS), agro-input dealers, in marketing there are traders majorly from Mbale, Kenya, Kampala and Kigali, nearby hospitals and schools. Over 60 percent of citrus growers are grouped into commercial and semi commercial farmers.

Production is basically on individual basis. Citrus farmers are constrained by the continued pests and disease attacks, inadequate rainfall, lack of advisory services and lack of access to rural finance and credit. The study also established high cost of seedlings and other agro-inputs, lack of quality control of seedlings sold by nursery operators and persistent drought.

Farmer institutional organization has remained weak and has not been able to question the promoters of citrus enterprise on pertinent issues such as available markets, types of crop varieties required by the market, cooperation in the chain and availability of inputs. Marketing is done individually and in all the areas, processing is a missing link in the chain. Farmers are always growing crops and waiting for buyers to give a price.

However, there are emerging opportunities for the citrus enterprise because of farmers have gained great interest in planting more citrus trees, there is local and political leaders' support, land availability for expansion and demanding rise for fresh fruit consumption in domestic and regional markets.

Government support should be increased towards water for production, nursery management. There is also need to institute trade policies that favour investment in fruit processing and encourage farmers to use standardized measurements and grades in during marketing of their products to avoid being cheated. The private and public partnerships should support existing citrus farmers' groups to organize themselves for improved marketing and availability of market information. Already Government has committed 5bn in the 2009/10 budget towards fruit processing in Teso Sub region.

Aloe Vera value chain in West Budama and Luwero:
It is estimated that about 46 farmers in Budama, 31 in Luwero and 130,000 farmers nationwide are engaged in the crop's cultivation. Key players in the chain are ERISCO Enterprises and South Bukedi Growers Union who mobilize farmers; multiply seedlings, farm inputs, and train farmers. Other players involved include Tweyanze Farmer's Cooperative Group and community health Development, Uganda Commercial A.V. Farmer's Association.

The major constraints to aloe vera chain are fungal rust on Aloe Vera, high cost of establishing a farm for farmers which goes up to sh7.2m.There is also lack of a serious market,which has discouraged farmers from growing and expanding, access to credit for production and high cost of agro-chemicals, among others. There was lack of technology and capacity to process competitive Aloe Vera products. The processors use crude methods to produce a number of products which include: Aloe Vera soap, tooth paste, tea, creams, syrup, juice, lotions and jelly. Farmers also lack cold chain system to keep the chemical properties of Aloe Vera, they produce poor ,non certified products that do not meet international standards. Farmers also are faced with high cost of long-term financing.

Local and political leaders are committed to promoting the Aloe Vera, there is increasing demand for products locally and internationally especially - pharmaceutical and cosmetic industry. There were some interventions by the NAADS and this had helped the local farmers to join groups, though NAADS still has to demonstrate to farmers how to control pests and diseases. Several players have expressed interest in investing in the crop, farmers under ERISCO & SBGCU intend to process Aloe Vera. Other processors include Sefa Organic, Hem Pharmaceutical UNIKA Aloe Vera, Adam and Eve and Afropinto labs.

The study recommends a public and private sector partnership. The public sector should identify a private sector investor to partner with in Aloe Vera processing and play the role of certification and standardization. The private sector on the other hand is supposed to expand acreage for production of Aloe vera to ensure sufficient and sustainable supply for processing in West Budama.

Cotton value chain in Lango and Acholi sub-regions
The study was done in Four districts (Lira, Apac, Pader and Kitgum) composed of 82 subcounties. In the cotton value chain, small scale farmers, Cotton Development Organization (CDO), Boweevil, Dunavant, Reinhert, Olam, Plexus and Phenix are the main players at production. At processing, Households-post harvest level sorting, Ginners, Multinational cotton trading COs. (Dunavant, Plexus, Reinhart CN cotton) offer credit, CDO- licenses and inspects ginneries, Oil miller, and Animal feed processors. At the marketing node The small scale farmers Traders, agents, ginners, oil millers, and Multinational companies are the main players.

Despite the fact that cotton is not a new crop, it is still constrained with weak distribution system and poor seed quality, inadequate extension support and high cost of inputs; uneconomic acreage, Cotton pests (high cost of agro-chemicals), unfavourable weather (too wet or too dry), the relatively long growing season of 6 months compared to crops like sunflower and simsim (3), there is also poor cotton management/husbandry (one of the lowest in the world) and high labor costs during the ploughing, weeding spraying and harvesting. At the processing levels it was established that there are still some post harvest handling constraints of sorting which is still a labor intensive activity. Ginning is characterized by excess capacity and low gin outturn. Inadequate cotton volumes, many ginneries are lying idle and some in a state of disrepair.

High transport costs (poor road network & poor quality of seed (unsorted) cotton, Low prices-(big gap between farmers & exporters), Lack of storage facilities, and Faulty weighing scales, human resource capacity, and high cost of power and drop in the quality of lint.

However, there are opportunities that can be exploited to develop the chain. cotton has many products ranging from yarn, garments, edible oil, soap stock and animal cake as products.

The AGOA preferential treatment, at regional level COMESA has put textiles high on its agenda and there is an estimated demand of 140 million pieces of garment per year. The increasing demand for organic cotton and its products and Supportive (liberal) trade policy for Uganda among others.

Government therefore needs to empower farmer systems, and cotton research, to establish a new viable seed system and development of cotton mechanization among others.

There is a need for public and private partnership; the public sector to ensure constant and affordable power, while the private sector installs modern equipment to increase gin outturn and diversification of processing of cotton products.

Rice value chain:
Rice is a priority enterprise in the region, Six districts (Gulu, Amuru, Oyam and Lira) Four sub-counties of Bungatira, Pabbo, Ngai and Bar. The key players include the small scale farmers of Itek (750 hhs) Okile (350hhs) Rice growers Multipurpose Cooperative Society, a remnant of Olweny Swamp Rice irrigation project. The donors which have played a key role in the promotion of the crop include (USAID/APEP, FAO-NERICA program, ACDI/VOCA), Private- (input supplier and stockist), Public-office of VP and NAADS (training & Tech Dev't) NGOs (IRC, World Vision, Oxfam AT Uganda and Caritas with an estimated production per hectare of 0.86 to 1.8 mt.

The rice value chain in the Lango and Acholi sub regions faces the following challenges: silted canals and a defunct system of the Olweny Irrigation Rice Scheme, poor soil fertility management due to lack of skills in soil and water conservation, lack of improved varieties and modern inputs (ox ploughs and tractors), pest and disease control among others. There is also poor agronomic practices and ineffective extension services, poor post harvest handling and storage facilities at farm level.

Farmers are not organized in marketing groups to bargain with traders. Spot marketing makes it difficult for traders to plan, Low prices offered to farmers by traders - farmers are price takers. The presence of stones and other foreign bodies in the rice lowers it price fetched and Absence of sorted, graded and branded rice for segmented markets reduces competition.

On the other hand, existence of Farmer Groups makes it conducive for block farming to promote large scale production. The existence of the defunct Olweny Irrigation Rice Scheme which can be revived, Great interest by farmers to grow rice, NAADS actively promoting rice, Political leaders committed to promoting rice e.g., V.P office, Favorable natural conditions for rice (soils, rainfall patterns), Land availability for expansion, Demand in domestic and regional markets (Kenya, Rwanda, South Sudan) There is a need to revive the Olweny Irrigation Rice Scheme (Okile and Itek), provide credit to farmer's stockiest for inputs, demonstrate simple technologies for water for production (e.g. water harvesting) and the NAADS to provide improved rice varieties, ox ploughs and tractors. When supported, the millers will introduce various packing units that enhance product development to penetrate the topmost market segment within the country. For increased rice production, there should also be a credit scheme to increase access to credit by chain actors to take care of procuring: ox-ploughs, harvesting equipment, packaging units, silos and driers.

Dairy industry value chain:
The research was done in the greater Kabarole region (Kabarole, Kasese and Kyenjojo Districts). The Dairy farmers (small, medium and large farmers, the Agro cottage), input dealers and service providers (NAADS) were the main actors at production node. There are about 53,000 heads of cattle in Kabarole out of which 18,000 are dairy animals. On average, each farm has 47 animals and overall, 90% the cattle are cross breeds.

The households, restaurants, hotels, cooler operators (5), Toro dairy cooperative society (TDCS) and Agro cottage dairy (ACD) plant are main players at the processing node. TDCS has a processing capacity of 6000 litres but only receives 600 litres per day, while ACD has a capacity of 2000 litres but recieves 1000 litres only. Milk traders, transporters, vendors, cooler operators and hotels and restaurants form the major players in marketing of milk.

The main constraints in production are over grazing, poor pastures, low prices of milk, poor AI services, high cost and adulteration of inputs, and lack of water harvesting technologies. There is limited technical capacity in milk processing into milk products such as yoghurt, inadequate infrastructure (roads, refrigeration facilities), unreliable power, adulteration of milk, weak farmer institutions and high cost of long term financing.

Existing opportunities are ideal climate for dairy production, Rabona Stock Farm, ready market in DRC, NAADS, and support from local leaders. There is potential for increase in milk production, adequate infrastructure for TDC, and its experience and the current government investment in infrastructure.

The study therefore recommended increased public support towards AI services, pasture improvement, credit access and demonstration of water harvesting technologies. Public private partnership needs to support bulk purchase of inputs to reduce unit costs, revamp TDC and identify another processor to support, milk collection and bulking infrastructure and public utility connections. Government should strengthen routine quality control to avoid adulteration and upgrade the road network in the region.

The apiculture value chain:
Apiculture is prioritized for the West Nile region in the Zoning strategy. Key actors include subsistence farmers (own 10 hives) and a few commercially oriented farmers who own about 70 or more hives, small holder farmer groups organized and given by NAADS, NUSAF, UCA, FIEFOC, input suppliers; private traders like Andifeki, Traders in Arua, TIMS youth, Blessed Bee for Life and Bee Natural Uganda among others.

There is a huge demand deficit for honey in Uganda which is an opportunity for investors in the sub-sector. Annual production of honey is 1,538 MT while domestic demand is 3,600 MT creating a deficit of 2,062 MT. With many export enquiries on Uganda's honey the overall deficit is even larger. Most of the beeswax produced in Uganda (90 percent) is wasted because it has limited domestic market. The buyers of beeswax are manufacturers of Langstroth hives, candles, works of arts and body creams but all these buy in small quantities.

Many of the farm activities like hive colonization, water provision; restocking hives with young queen bees and foliage management are left to nature. Other activities like hive inspection, pest management, apiary maintenance, harvesting and post harvest handling are poorly done. This reduces value addition at farm level because of low hive yields which average to 7-12 Kgs. Bee keepers are mainly constrained by lack of capital for investment, expensive inputs, bush burning, pests, poor farmer-market linkages and lack of apiary management skills. Apiculture extension services in West Nile is weak due to lack of trained personnel since it requires a lot of bee science and yet education institutions in Uganda have not been training apiculture experts. There is also poor quality honey due to poor packaging materials and unhygienic processing environments.

Emerging opportunities for the honey value chain is that LGs are actively promoting honey production, and there is high demand for honey both locally and internationally. The existence of BNU and the Nakasongola Training Centre, changing consumer habits and supportive liberal trade policy are opportunities to exploit in honey chain development.

Based on the analysis of the status and performance of the apiculture value chain, public, public and private partnerships support should focus on, certification of input suppliers, farmer training in apiary management, ensure utilization of redundant processing facilities, approving the apiculture policy and enactment of act to regulate honey trade, and NAADS to strengthen farmer institutions to improve production and marketing and information system.

For more information, contact the Director, PMA Secretariat, Mukwasi House Plot 39A, Lumumba Avenue, P.O.Box 5675, Kampala, Uganda