Diversify from primary products
Aug 04, 2005
THE PRICE of vanilla has plummeted yet again, leaving farmers ruing their investment.
THE PRICE of vanilla has plummeted yet again, leaving farmers ruing their investment. The harvest season is on right now, but there is a lot of frustration as the farm gate price has fallen to sh500, down from sh2,000 a kilo a month ago. The frustration has taken to deadly levels as a farmer in Mukono, the principle producer area, was found hanging last month. He is said to have committed suicide after failing to secure a buyer for his one-acre plantation.
There is over production in both the world market and from Ugandan farms. Uganda went into overdrive a few years ago, when drought in Madagascar, the world’s largest producer, led to shortages. The price hit a peak of sh708,000 a kilo in 2003. Many Ugandans invested in vanilla, and these investments have remained largely the same even well after Madagascar recovered and local prices started tumbling.
An expert revealed that even before the July harvest season commenced, the world’s carryover stocks amounted to what would be a year’s demand. That in effect means that there shall be no demand for the new stock.
In a supply-demand market, this means that the price will inevitably drop. And because of this, the Government must continue to resist calls to set a minimum price. Otherwise, the burden would be passed on to the taxpayer, and we would also be guilty of granting subsidies to farmers, the very phenomenon we are fighting against as we try to penetrate the lucrative produce markets of the developed world.
It is the very nature of primary products, be they agricultural or mineral, to fluctuate wildly on the global market. The solution for producers lies in transforming products into more stable form. For instance, the price of instant coffee at the retail level the world over has remained basically the same in five years, in spite of swings in the world commodity market. If Uganda sold instant coffee, as opposed to cured beans, our revenue would be much more stable.
Ends
There is over production in both the world market and from Ugandan farms. Uganda went into overdrive a few years ago, when drought in Madagascar, the world’s largest producer, led to shortages. The price hit a peak of sh708,000 a kilo in 2003. Many Ugandans invested in vanilla, and these investments have remained largely the same even well after Madagascar recovered and local prices started tumbling.
An expert revealed that even before the July harvest season commenced, the world’s carryover stocks amounted to what would be a year’s demand. That in effect means that there shall be no demand for the new stock.
In a supply-demand market, this means that the price will inevitably drop. And because of this, the Government must continue to resist calls to set a minimum price. Otherwise, the burden would be passed on to the taxpayer, and we would also be guilty of granting subsidies to farmers, the very phenomenon we are fighting against as we try to penetrate the lucrative produce markets of the developed world.
It is the very nature of primary products, be they agricultural or mineral, to fluctuate wildly on the global market. The solution for producers lies in transforming products into more stable form. For instance, the price of instant coffee at the retail level the world over has remained basically the same in five years, in spite of swings in the world commodity market. If Uganda sold instant coffee, as opposed to cured beans, our revenue would be much more stable.
Ends