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This thesis is mainly aimed at analyzing an econometric study of the impact of agricultural foreign trade determinants of main agricultural crops in Uganda. Uganda has depended on agriculture as its back borne since the colonial times and face serious environmental threats. These include land degradation contributing to a serious climatic change with declining agricultural productivity, use of poor agricultural technology, rely on rain- fed agriculture, insufficient extension services, trade, poverty and food insecurity.An urgently needed increase in agricultural productivity will only come from modern agricultural practices that is believed to boost yields, productivities and in turn increase the exports of Uganda`s main agricultural crops in the world market. They should therefore Intensify modern agricultural practices to help transform the environment, increase exports and greatly impact on the country`s GDP.
The quality of the Uganda agriculture products that appears on the world market confess to be lacking, this because their production does not complete the values chain. This discourage the farmers because of the low return hence affecting the amount produced, and the return to the economy in the image of revenue. A wake-up call to present highly quality products on the market, is through putting the processing industries in presence, and ensuring the SOP’s product chain.
The thesis study problem was that, some fluctuations occurred in the trends of the quantity exported and imported of main crops in Uganda. To realize the reasons and how to determine the cause of these were the main motivations behind this research. Uganda’s climate is favorable for agricultural production of the most internationally traded crops. In addition, Uganda has two cropping seasons in the different agroecological zones throughout the year. This is an implication that Uganda has the potential to produce these crops in quantities enough to favorably compete on the international market, However, this is not the case. Secondly, the performance of agricultural foreign trade of the main crops are still lacking, mainly as a result of the grade /quantity of product exported. Coffee for example is mainly traded in form of beans, and tea as green leaves.
In order to deal with these problems, the relative importance tool was used to sort out the main crops (coffee, tea, and wheat) with high value in Uganda’s agricultural foreign trade. Time trend analysis was utilized to compliment findings and familiarize with general pattern or trend of main crops of both export and imports. The simultaneous equation model was employed to analyze the effect of real variables that are determinants of agricultural foreign trade of main crops of our study. The mechanism was suggested in order to develop and improve the agricultural foreign trade in Uganda.Using secondary data from published research journals, government and institutional websites, books written on the research subject matter and other online sources. The value and quantity of coffee and tea exported to world market will increase by completion of the production chain and increasing their production through adopting the modern farming technology. And increasing domestic wheat production in Uganda with all possible means, and increase the production of maize as its substitute, are some of the main ways to reduce its importation to Uganda.This thesis is organized in three chapters as follows:
Chapter 1: Literature Review and Theoretical Frame This chapter provides a better understanding how previous researchers provided the facts about the variables that determines the export of main crops like coffee, tea plus the import of wheat using different statistical methods and models, with reference to Uganda and Sub-Sahara Africa.
The main findings and recommendations emphasized on establishment of agreements with international coffee buyers to increase prices, prevent exchange rate depreciation, expansion in gross domestic product and reduction in interest rate on loans to producers and exporters thereby encouraging coffee production and increase in coffee exports. The implementation of the existing coffee policies and reforms in order to promote the international coffee markets and its competitiveness. The improvements of the main poverty dimensions, infrastructural development and formulation sustainable tea technologies to influence increased tea production.The theoretical frame that includes the agriculture production in Uganda, indicated some of the basic and important crops in Uganda’s agriculture production which are more noticeable than the other. These crops include, the main traditional cash crops which are, coffee, cocoa, cotton, tobacco, tea and sugarcane. Majority of the food crops are maize, beans, cassava, potatoes, sweet potatoes, groundnuts, bananas, finger millet, rice, as well as sorghum grown in different areas of the country are produced for both export and for local consumption. Livestock, fisheries, and dairy products are also produced both for export and domestic consumption as a way to boost farmers income.
Agriculture is the based-on sector in the economy where more than 66% of the population in the brackets of 10 years to older depend on its employment. Agriculture provides most of the raw materials for both Ugandan’s agro-based and some of non-agro-based industries. The challenge of the agriculture sector is that, Uganda being vulnerable to climate change, as most of its agriculture is rainfed. Variabilities in rainfall are reflected in agricultural productivity with adverse impacts on physical, environmental and socio-economic factors.Chapter 2: The Current Situation of Agricultural Crops in Uganda.This chapter presents Uganda’s main crops like coffee, where Uganda produces two kinds of coffee (Arabica and Robusta). Over the years, Robusta coffee has been produced in much more quantities compared to Arabica coffee. Uganda emerges as the leading Coffee producer in the East African Community accounting almost 64 of the total regional coffee productions. Ugandan Robusta is normally blended with other origins, making it difficult to isolate as an origin in the finished product. The challenge is to use the intrinsic quality characteristics of Ugandan Robusta to market it as an origin. The Best destination of the Uganda’s coffee export among the European countries is Italy, Sudan, USA, Morocco, and Algeria are among the main destinations of Uganda’s coffee.
Tea in Uganda is widely grown by large tea estates occupying about 72% of the tea production in the country, while the rest are out-growers. The number of out-growers has been increasing because tea is a source of income all year round, requires little investment and has low risk as a crop. Pakistan is the top destination for Ugandan and Kenyan tea exports over 130.56 million kilograms in 2017. Ugandan tea is exported through Mombasa as Kenyan tea under the East African Tea Trade Association whose membership consists of producers, middlemen and buyers. Both Uganda and Kenya tea are sold through the second largest tea auction in Mombasa that normally takes place at least twice a week. The dependency on the Mombasa port auction constrains the development of the tea sector in Uganda. This has hindered Uganda tea for greater premium prices due to involvement of several middlemen before it reaches the foreign market.
Uganda wheat production is still low though is expected to rise due to the increasing demand in urban areas. Wheat produced in Uganda is mainly consumed locally with farmers selling their outputs to cooperatives or private traders and millers. Others are marketed through the cooperative unions and related wheat products like flour to wholesalers, large retailers such as supermarket chains, and bakeries. Eastern African countries mostly import their wheat from Egypt, Argentina, USA, Ukraine, Russia, and others. The proportions of wheat imports from the main countries have differed over the years hence on the increasing rate due to the increasing population with high consumption of it.
The slope estimate indicates that on average Uganda’s coffee exports increased by about US$ 25.16million every year during the period 2002-2016. The slope estimate indicates that on average Uganda’s tea exports increased by about US$ 4.48million every year during the period 2002-2016. The slope estimate indicates that on average Uganda’s wheat imports during the period 2002-2016, increased up to the maximum at around 170.39 million dollars in 2011.
Chapter 3: Estimation the Econometric the Effects of Agricultural foreign trade Determinants of Main Crops in Uganda and their expectations
The results of the simultaneous equation model showed that, the exported quantity of Uganda’s coffee has inelastic demand and the quantity of exported coffee at previous year, export price, export price of tea, the exchange rate, export price of Ethiopia’s coffee, and the quantity of coffee produced in Uganda are the independent variables of the quantity of Uganda’s coffee exported. The expectations in using estimated models of Uganda’s coffee is in line with the general increments in coffee exports that could be seen through 2019-2025 from 233.9 thousand tons to 260.2 thousand tons. The quantity of Uganda’s tea exported has elastic demand and the export price, the population of the main importers of Uganda’s tea, national income of main importers, export price of coffee, the exchange rate, quantity of tea produced in Uganda, the quantity of tea consumed domestically in Uganda, and the local consumption of tea in Uganda at previous year are independent variables of the quantity exported of Uganda’s tea. The expectations using estimated models of Uganda’s tea indicate that, the study expects the export quantity of tea through period 2019 – 2025 to decrease yearly from 36.9 thousand tons to 15.1 thousand tons. The produced quantity of tea will increase yearly from 14.6 thousand tons to 18.4 thousand tons.
The quantity of wheat imported to Uganda has an inelastic supply. Moreover, the quantity of wheat imported to Uganda at previous year, the import price, and the local consumption of wheat in Uganda are the independent variables of the quantity imported of wheat to Uganda. The expectations using estimated models of wheat in Uganda indicate that, import quantity, production, and local consumption of wheat through period 2019 – 2025 to increase yearly from 579 thousand tons to 798.7 thousand tons, 136.8 thousand tons to 164.8 thousand tons, and 536.5 thousand tons to 644.5 thousand tons respectively.