1. Organic Value Chains: Vehicle for Sustained Economic Growth Presentation to the Panel Discussion on ‘Agricultural Value-Chains as a Strategy for Sustained Economic Growth‘ Charles Walaga (Phd) CEO Uganda Organic Certification

2. Contents of the presentation 1.Background on the organisation of agricultural marketing in Uganda 2.Uganda‘s markets for agricultural products 3.Food security outcomes 4.OA trade requirements 5.Challenges

3. 1. Background: Pre-1990 agricultural marketing chains (before economic liberalisation policies) –Marketing was organised through the farmers‘ cooperative movement which was responsible for bulking of farmers‘ produce, primary processing and quality control, provision of extension services, input procurement and distribution, farm credit, etc –Government Marketing Boards set seasonal prices for the farmers‘ produce, did the final bulking (national level) and quality control, produce export (and control of product supply to the international markets) The coop movement failed to compete under the economic liberalisation policy environment and has now, more or less, collapsed

4. Background cont. Post 1990s (the Economic liberalisation era): –The marketing chains are shorter with individual farmers selling directly to the processor/exporter –In the absence of alternative organisations, the collapse of the Coope Mvt greately diminished farmers‘ social capital –Farmers have negligable bargaining power and influence on price of produce –There is negligable value addition at farm level or at the level of farmers‘ organisation –Poor flow of information between the farmers and the proccessor/exporter and the consumers resulting into low quality products, high post harvest losses, excess production, etc. –High exposure to price fractuations. The exporter may not even buy when world market prices are very low

5. 2. Agricultural markets Local and Regional Markets: –Uganda is a predominatly agricultural country –Agric provides more than 80% of employement, a livelihood to more than 90% of the propulation and contributes about 40% of GDP –More than ¾ of the total number of households are smallholder farmers cultivating about 1.5 ha of land –This type of population doesn‘t provide a viable national market for agricultural products since almost everybody is a farmer –Regional markets exist for mostly maize and beans. However, even these markets are dependant on countries in the region being struck with a drought. Not a good prospect for Uganda to build its prosperity on!

6. Agricultural markets cont. International markets: –The international market for agricultural products remains the only viable market on which Uganda can realistically build its prosperity –But international market are undergoing drastic changes due to raising consumer concerns for health, enviroment, social equity, animal welfare, etc. –The most interesting development in the agriculture sector in recent times is Organic Agriculture (OA) –OA has gained worldwide acceptance mostly because of its environmental sustainability and production of food that is safer for human health –OA is also moving towards incorporating social and ethical trade concerns and hence enlarging the scope of consumer concerns that it addresses

7. Agricultural markets cont. Uganda‘s agriculture is particulary well suited to OA conversion due to the low usage of synthetic agrochemicals in agricultural production Certified OA started in 1993/1994 as a strategy for achieving equitable economic returns through the accessing of the growing world organic niche market (SIDA, 2000; Walaga, 2001). Developed from less than 500 in 1994 to almost 100,000 by 2007. Export value was estimated at 22m USD.

8. Price comparisons: ProductOrganic Price (Shs per kg) Conventional Price (Shs per kg) Pineapples400 - 500100 - 200 Apple bananas250100 Passion fruit1,000400 – 700 Ginger2,000 – 2,5001,000 – 2,000 Robusta Coffee (Dry Cherry) 600450 Sesame1,100900 – 1,000 Vanilla5,000 – 7,0002,000 -3,000 Cocoa1,500800 Cotton450350

9. Net revenue from Organic Value-Chains: The Danish Institute for International Studies (DIIS) study of increased net cash revenue for organic farmers: Price premiums average 14-40% above conventional equivalents CropNet cash revenue Cocoa100% Vanilla100% Coffee75% Pineapples48% Ref: www.diis.dk/SAFEwww.diis.dk/SAFE

10. Number of organic product exporting companies

11. 3. Food security outcomes Numerous studies have cocluded that OA in Uganda and other tropical and subtropical countries leads to improved food security through: –Improving soil fertility and leads to improved yields –Improving variety of products produced on the farm through multicropping systems (rotations and intercrops) –Improving the resilience of farming systems –Improved household incomes (Refs: Pretty, 2002; Walaga and Kakinda,2002; Walaga and Hauser 2005; DIIS 2007).

12. Organic Certification bodies Cotton Development Organisation Donors Organic cotton farmers Cotton Ginners (Processors and Exporter Organic Textile manufactures in Singapore, S. Africa... Local organic textile manufacturer Brands/Retailers in EU & USA Consumers EU & USA Figure 5.1.1.1b Structure of the organic cotton sub-system  Black arrows: the flow of the organic cotton  Green arrows: the flow of consumer demands and organic premium price  Yellow arrows: the flow of certification  Red arrows: CDO’s implementation of seed and export regulations  Brown arrow is donor funding In Uganda Importing Countries

13. 4. OA trade requirements OA is a regulated production system with production,handling and documentation specifications for primary production in the field to the final consumer (Standards and regulations) Multiple standards: Mandatory regulations and private standards (voluntary) Smallholder farmers to be able to meet these requirements, need to establish internal quality assurance systems. Most common is the ‘Internal Control System‘ (ICS) developed during EPOPA Phase 1 (1995 – 1999)

14. Farmers Field Officer Accounts clerk Field Manager Records Officer Coordinator/M anaging Director Figure 4.2.3a Organisational structure of Internal Control System in Commercial organic projects in Uganda

15. Organic Value-Chains (OVC) It is difficult for rural smallholder farmers to quickly aligne their production systems to changing world consumption patterns and new trends OVC enable smallholder farmers to be linked with changing consumer patterns and hence to quickly adjust their production systems to meet the emerging consumer needs OVC provides for mediation of consumer needs and farmers‘ aspirations and their farming capabilities (thru participatory dvt of standards & cert systms)

16. 5. Challenges: i.Farmers lack the resources (financial and technical) to develop and manage internal quality compliance systems ii.High literacy levels among farmers making management of quality compliance systems difficult iii.Week farmers‘ organisations that can not effectively engage in OVC development iv.Lack of research support in developing solutions to farming constraints in OA

17. Challenges cont. v.Lack of an implicit national OA policy (Still in draft form) hence minimal govt technical and financial support vi.Compliance to unrealistic standards that are not made for tropical farming conditions vii.Still weak lobbying and advocacy capabilities

18. 6. Possible solutions Financial and technical support for developing and implimenting internal quality compliance systems Support to organisational development of farmers‘ organisations Policy development and support to harmonisation of organic standards and regulatory mechanisms Financial and technical support for developing farmers skills in organic farming

19. Possible solutions cont. Research and technology development of OA Training and education for frontline extension workes and quality system managers