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With the financial support of Results for an Eastern African Country: Incentives and disincentives for the rice sector in Uganda.

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Presentation on theme: "With the financial support of Results for an Eastern African Country: Incentives and disincentives for the rice sector in Uganda."— Presentation transcript:

1 With the financial support of Results for an Eastern African Country: Incentives and disincentives for the rice sector in Uganda

2 Introduction Rice is grown in almost all parts of the Country, But mainly in Eastern and Western regionsRice is grown in almost all parts of the Country, But mainly in Eastern and Western regions A number of rice varieties are being grown by farmerA number of rice varieties are being grown by farmer NERICA varieties introduced in 2003.NERICA varieties introduced in High yielding t/ha under low input & 5.0 t/ha or more under high input production system (PMA, 2009)High yielding t/ha under low input & 5.0 t/ha or more under high input production system (PMA, 2009)

3 Composition of public expenditures in Uganda: agriculture-supportive spending, average 2006/ /11 Composition of public expenditure in Uganda: agriculture-Specific spending, average 2006/ /11

4 Support to different categories of commodities

5 Support to a group of commodities (average ) Support to individual commodities(average 2006 – 12)

6 Production and consumption trends  Production increasing, but more from 2002 – 2010  Acreage is has also been increasing – extensive  Demand increasing – Consumption patterns, Substitution, Population & increase incomes  Gap between production & Consumption narrowing –self sustaining  Self sustaining-fall in prices & shift to other crops – affecting production level  Production-consumption gap – met by imports

7 Uganda sources of rice imports (2005/10)  Imports from mainly 3 countries – 87.5%  But about 75% from 2 countries  Small quantities from Thailand & other countries  45% of total imported rice is classified as ‘broken’ – low cost  Imports affected by different CIF prices

8 CIF price (USD/t) of imported rice to Uganda ( ) o Imported from Pakistan and Vietnam is much more expensive compared to that originating from Tanzania o Because it is subject to common EAC external tariff - unlike that of Tanzania o Uganda is not taking advantage of the low cost rice imports from Tanzania

9 Value Chain Rice farmers Smallholder, large-scale Primary market – village/rural traders Market vendors Hotel and restaurants Food groceries and retail stores Imports Travelling consumers Urban traders (incl. Kampala wholesalers) Millers Primary level

10 Policy environment affecting rice Uganda National Rice Development Strategy (NRDS) 2010/18 –lays strategy for promotion. –Sets to triple rice production by 2016 –Aims to raise H/H food security & poverty reduction The East African Community (EAC) common external tariff (CET). –Sets 75% ad-valorem duty or USD 200 per tone –whichever is higher Development Strategy & Investment Plan (DSIP - MAAIF –Objective - Production and productivity –

11 The impact of tariff on wholesale price and landed costs of imported of rice in Uganda  Tariff creates a price difference  Due to transport & other costs from Mombasa-Kampala the price difference ranges from %  The wedge whole sale & landed cost depends on the share of imports in the market shrinks with less imports  The tariff, the cost of importation and the total quantity imported are the major determinants of the wholesale prices of rice - transmitted totally or partially to other markets, i.e., farm gate and retail markets

12 Producers’ price  Rice producers apparently received a price above the reference price (or the equivalent world price at the farm gate).  No clear trend-varies from one year.  This leads to a positive price gap which is Interpreted here as an incentive to rice producers

13 Price gap at the farm level  Positive price gap measuring incentives to producers  Ranged from Ush 29,000 to almost Ushs 260,000 per ton  Major driver is the import tariff – acts as a form of protection of the rice producers against competition  These price incentives varies significantly over time.  Price incentives are highest during the years of high world prices ( and 2011).

14 Relative price incentives  In relative terms, incentives vary ranging from 12.1 to 61.2% and averages 39.40%  Note - relative price incentives are below the tariff rate in all years.  Implication - producers do not receive the full protection from the tariff (75%).

15 Relative price incentives – Con’t  Less than 75% incentives implies some of the tariff impact is captured at wholesale & import market levels.  Incentive to producers are policy transfers from consumers - pay for the high price - no any type of subsidies to consumers  Incentives to producers – explain progressive expansion of rice production – increased by 42.5%  This incentive & increased utilization of agro-inputs and sustainable soil management may help in the realization of the ambitions NRDS to triple rice production by 2016

16 Main messages 1.The protection at the wholesale level appears to be transmitted effectively at the farm gate but it is declining notably in recent years. 2.The incentives to rice producers may explain the progressive expansion of rice production in Uganda especially during the period of – But this is more through extensive rather than intensive – how long can this this trend continue? 3.The protection of producers is a tax on consumers – How can consumers be compensated/protected? 4.As domestic production continues to grow and imports shrinks, the protection to rice production due to tariff will continue to decrease and therefore unsustainable – what strategies shall be deploy when at self sufficiency? – drop in production


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