The impact of price and market liberalization policies on Uganda’s coffee supply response

Abstract

Econometric modelling using time series data on production and yields for the period 1970-93 was used to evaluate farmers’ supply response shown by price elasticities. The findings of the study revealed that pre- and post-liberalisation short-run output supply eiasticities(SRE) for Robusta coffee at 0.189 and 0.201 respectively, were not significantly different. Post-liberalisation SRE at 0.644 was significantly higher than the pre-liberalisation SRE at 0.465 for Arabica coffee. Pre- and post-liberalisation long-run elasticities(LRE) were 0.526 and 0.541 for Robusta coffee, and 0.722 and 0.988 for Arabica coffee, respectively. There were no statistically significant differences between elasticities before and after the liberalisation policies based on yield data of both Robusta and Arabica coffee. The policies had a positive and significant impact on Arabica coffee output. It was recommended that the price and market liberalisation policies be upheld. Yield and area LRE revealed that yield rather than area will increase Uganda’s future coffee supply. Therefore appropriate mechanisms for adoption of improved coffee production technologies should be put in place by concerted

efforts of Ministries and Organisations involved in the industry.