Results for an Eastern African Country:

1. 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 regions • A number of rice varieties are being grown by farmer • NERICA varieties introduced in 2003. • High yielding - 2.5 t/ha under low input & 5.0 t/ha or more under high input production system (PMA, 2009)

3. Composition of public expenditure in Uganda: agriculture-Specific spending, average 2006/07-2010/11 Composition of public expenditures in Uganda: agriculture-supportive spending, average 2006/07-2010/11

4. Support to different categories of commodities

5. Support to a group of commodities (average 2006-10) 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 (2000-2010) • Imported from Pakistan and Vietnam is much more expensive compared to that originating from Tanzania • Because it is subject to common EAC external tariff - unlike that of Tanzania • Uganda is not taking advantage of the low cost rice imports from Tanzania

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

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 102-126% • 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. 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 (2008-2009 and 2011). Price gap at the farm level

14. 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%). Relative price incentives

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 • The protection at the wholesale level appears to be transmitted effectively at the farm gate but it is declining notably in recent years. • The incentives to rice producers may explain the progressive expansion of rice production in Uganda especially during the period of 2005-2010 – But this is more through extensive rather than intensive – how long can this this trend continue? • The protection of producers is a tax on consumers – How can consumers be compensated/protected? • 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