Banana Marketing in Uganda, Foodnet 03

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Evaluating the Marketing Opportunities for Banana & its Products in the Principle Banana Growing Countries of ASARECA

(Uganda)

J.S. Spilsbury J.N. Jagwe R.S.B. Ferris

November, 2002

Table of Contents Table of Contents List of Figures List of Tables Executive Summary 1 2 3 3.1 3.2 3.3 3.4 3.5 3.6 3.7 3.8 INTRODUCTION METHODOLOGY SUB SECTOR ANALYSIS Rapid Overview Of The Economic Status Of The Countries Trade And Competitiveness: Recent Reforms, Performance And Market Access Types Of Banana Production Zones Production Levels Importance Of The Sub-Sector To Earnings, Rural Livelihoods, Poverty Alleviation And Economic Growth Consumption Production Constraints 3.8.1 Soil fertility 3.8.2 Pests and Diseases Marketing Constraints DEMAND ANALYSIS Size of National Markets Size and Growth Rates of Regional Markets Size and Growth Rates of World Markets Market Price Trends Major Products Overview of Market Potential for Banana and Banana Based Products SUPPLY ANALYSIS Analyse of the supply chain Market Linkages Production costs Trading Costs and Margins in the Supply Chain MAJOR FINDINGS RECOMMENDATIONS 2 3 3 4 6 6 6 6 7 7 9 11 12 13 14 14 14 17 20 20 22 24 25 27 29 33 33 36 37 37 41 44 50 53 56

3.9 4 4.1 4.2 4.3 4.4 4.5 4.6 5 5.1 5.2 5.3 5.4 6 7

Information Gathered with Businesses involved in Banana Markets References Appendix

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List of Figures Figure One Figure Two Production of Matooke by Region Volume of Ugandan Exports of Apple Banana and Bogoya Exports to Kenya Figure Three Value of Ugandan Exports of Apple Banana and Bogoya Exports to Kenya Figure Four Fresh Matooke and Apple Banana Export Volumes Figure Five Real Retail Prices for Selected Commodities (Kampala) Figure Six Grand Seasonal Index from Kampala Matooke Retail Prices Figure Seven The Banana Supply Chain List of Tables Table One Table Two Table Three Table Four Ugandan Banana Area Planted and Production Level Ugandan Banana Production (Tonnes) Crop Area, Plot Number and Size Percentage of Staple Food Consumption as a Percentage of Household Monthly Consumption Table Five Volume and Market Values For Three Main Kampala Markets Table Six Combined Present and Future Volumes for Three Main Kampala Markets Table Seven World Markets for Banana and Plantain Table Eight Approximate Kampala Prices of Local Waragi Table Nine Approximate Kampala Prices of Tonto Table Ten Correlation Coefficients for Matooke Prices in Selected Towns Table Eleven Gross Margins Under Hired and Family Labour for Matooke Table Twelve Trading Costs and Margins 11 12 12 13 20 21 24 27 28 36 37 38 10 22 22 24 25 26 33

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Executive Summary This report provides a review of banana production, processing and marketing in Uganda. The report specifically explores the current market status and investment options for the sub-sector. Market coverage includes banana and banana-based products in local, regional and international markets. This Ugandan study represents one component of a regional initiative that includes Tanzania, Kenya, and Rwanda. The methodology employed by the study was based on a rapid assessment technique using primary and secondary data. Primary data has been obtained through interviews with producers, traders, retailers and exporters. Secondary data was acquired by literature review and the collection of available statistics. Major findings include evidence for continuing shifts in the location of matooke production. New areas are planted further to the south and west of Uganda increasing transport distances to urban consumption centres. In established production areas planting is moving away from main roads increasing reliance on muram tracks that become difficult to use in the wet season. The main reason for production area shifts is declining soil fertility. Additional production constraints are weevils, nematodes and black sigatoka. Fusarium wilt is a major threat to sukali ndizi and bogoya (Gros Michel) production and hence a deterrent to investment in these dessert bananas. Analysis of net and gross margins for supply chain participants reveals that brokers who organise transport from rural to urban areas can make attractive daily incomes. Price peaks for the food staple matooke are found in April and December as demand increases with Easter and Christmas festivals. Farmers show little or no production response to these predictable and significant price movements. Regional export opportunities appear for matooke in Rwanda and for dessert varieties to Kenya. International banana markets appear as increasingly competitive. Recent changes in European Union banana policy reducing preferential access are seen to further increase competition. Within this context market potential for Ugandan bananas is seen in markets segments including organic or health focused fruit and naturally solar dried dessert bananas. Sales of matooke to Europe have almost doubled in the past five years with potential seen for further increase. However exports of fresh sukali ndizi to Europe have declined due to quality issues. European markets require sukali ndizi to have large unblemished fingers of uniform ripening and size. If these quality requirements can be achieved European market prices appear as attractive. Recommendations highlight the importance of addressing soil fertility issues to guarantee sustainable production systems. Further research is suggested to better establish what changes in soil fertility status are occurring and to determine why farmers do not manage soils in a sustainable manner through recognised soil management practices. Continued research and support to extension in encouraging better pest and disease cultural control is suggested for weevils, nematodes and black sigatoka.

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To reduce excessive margins existing within the market chain the involvement of government is recommended to find ways of reducing informal collusion between brokers, which may lead to the restriction of new entrants into the broker role. Provision of gross and net margin information to potential entrepreneurs is suggested, as is contact with micro finance providers to ensure potential new entrants can access credit. In urban markets efforts should be made to allow sufficient space for retailers. This is seen to be increasingly important as significant volume increases are expected with the increasing urbanisation of a growing population. Recommendations are made to maintain and improve roads and reduce theft especially in rural areas. To increase farm incomes, improve consistency in monthly volumes and reduce consumer price peaks development of a production response to seasonal price variation is recommended. Further research into the timing of planting new gardens, timing of de-suckering to control new growth and the use of appropriate irrigation systems to control water stress that stimulates fruiting is suggested. To support regional exports of matooke to Rwanda and dessert varieties to Kenya the provision of regional market price information using mediums currently giving Ugandan price information is put forward. Recommendations for the involvement and lobbying of regional governments to reduce border barriers including tariffs with efforts to ensure quick and efficient boarder crossing are made. On international markets focus is given to health focused naturally dried dessert banana markets, exports of fresh organic sukali ndizi and the further growth of matooke markets in Europe. Recommendations include better design of product packaging to compete in snack and sweet market outlets and improving the appearance of naturally dried banana through better drying techniques with plant breeding for visual characteristics. To improve the quality of fresh sukali ndizi destined for international markets further research is recommended into the control of fruit ripening after harvest by exploring post harvest packaging and temperature control. This research should actively involve private sector exporters. In addition improvement of fruit handling through out the supply chain is forwarded by use of capacity building approaches with fruit handlers. Further research is suggested to determine possibilities for further expansion of matooke sales in European markets particularly into UK based West Indian and Belgium based Congolese ethnic markets. To benefit all Ugandan fresh fruit and vegetable exports it is suggested that the Civil Aviation Authority and relevant government representatives are encouraged to facilitate competition in the airfreight market and ensure efficient airport freight administration and handling. This report should be used as a lobby tool to emphasis the importance of Entebbe airport in the export of fresh fruit and vegetables.

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1

INTRODUCTION

This report represents one output from a regional banana study that includes Tanzania, Kenya, and Rwanda. The purpose of the study is to provide a review of the current status and investment options for the banana sub-sector. To achieve this the project reviewed market segments that include: (i) (ii) (iii) (iv) Fresh cooking bananas Dessert bananas Processed banana fruit products Non-food banana based products.

The market coverage includes local, regional and overseas markets. An important element of the work is to examine the comparative and competitive advantages of specific products both spatially and in terms of economic gain based on investment. 2 METHODOLOGY

As with the other commodity studies in this series the methodology is based upon a rapid assessment technique developed by Holzman (1995). Due to its rapid nature the review is illustrative as opposed to rigorous. It uses both secondary and primary data to determine the market prospects for bananas and banana products. Primary data has been obtained through limited interviews using a structured informal questionnaire (see appendix one