The just ended coffee year started with mammoth challenges brought about by the largest economic turmoil the global economy has ever faced. There were fears about the effect on global coffee consumption as a result of the economic meltdown. International coffee values were challenged with huge periods of uncertainty. Currency volatility increased dramatically. The credit worthiness of many businesses was cast under long shadows as fiscal liquidity became every company treasurer’s nightmare. Added to all of this was a large LIFFE backwardation during November 2008 running into January 2009. The first half of the coffee year was indeed new turf for even the oldest of players in all sectors. During the second half of the year values crystalised a little more convincingly and we started to see a more solid market albeit characterised by ongoing bouts of extreme volatility in the futures markets, the arbitrage, currencies, interest rates and washed arabica differentials.

It is a wonder that we have all come through intact and whilst business is not yet quite back to “normal” the global outlook is certainly much improved from a year ago.

Uganda has fared well during the period with the impacts of the global mayhem reasonably limited with robust economic policy at the national level and the Bank of Uganda management keeping our internal situation relatively healthy when all things are considered. The ability of the banking sector to provide working capital for exporters was better than the pessimists expected enabling the orderly funding of activities. Payment delays and defaults by overseas buyers were, sadly, in evidence and some of our members suffered considerable losses from this factor.

Despite all the challenges on the day to day commercial front, the Uganda coffee sector continues to evolve most positively in many segments. Many of our members, for example, are fully engaged in sustainability projects, replanting exercises, certification initiatives and a whole array of activities aimed at improving and supporting the industry at the grower’s level.

The differentiation of quality is particularly noticeable in the washed arabica segment but is also present across the range of coffees we produce in Uganda. In this regard the Uganda Coffee Trade Federation [UCTF] has been proactive in approaching the Uganda Coffee Development Authority [UCDA] with the aim of modernising the grading standards to reflect more accurately current quality norms adopted globally by buyers and other exporting nations. We believe this is of critical importance given the clear linkage between quality and yield at farm level.

A committee has been formed to address coffee research in Uganda and we are optimistic given the support of key industry players and certain donor organisations that this critical sector will benefit significantly from our efforts.

During the coming coffee year the UCTF will be focused on these two key initiatives consolidating the broadening of officially recognised grades of coffee and bringing coffee research into the mainstream as we seek avenues to assist in the ongoing improvement and sustainability of the industry for all of our stakeholders.

On the logistics front there has been huge improvement partly, it has to be said, as a result of the down turn in import cargo through the main Port of Mombasa. During the year, however, we have seen Heads of Government focus a lot of attention on the region’s infrastructure challenges and the benefits are being felt. Mombasa Port is, for example, running on a 24 hour basis. This and many other improvements combined with a new regional mindset to the infrastructure challenges means that we are seeing transit times from Kampala to Mombasa much reduced. Exporters have been able to stuff containers in Kampala and receive ocean bills of lading in less than 21 days during the last six months which is substantially better than we have seen over the last few years – in fact since 2001. We are optimistic that this much improved situation is here to last meaning reduced funding costs, mitigation of transit damages, avoidance of late shipment penalties and so forth.
The incidence of theft of coffee in transit from Uganda to Mombasa has reduced enormously from the “bad days” in calendar year 2007. Once again this is due to improved practices in the region and realisation of just how damaging these issues are to our terms of trade.

Total exports for the coffee year, whilst good, were a little disappointing compared to the previous year coming in at 3,060,000 bags. Volumes were seriously impacted by the effects of the drought experienced in the first half of 2009. Outlook for the coming year is mixed but with much improved weather patterns during the last couple of months and fingers crossed we hope that production will hold and improve.

We wish all our members and coffee friends a successful Coffee Year 2009/2010.

David Barry, president UCTF