Quality upgrading and quality incentives in Uganda's coffee sector
This study investigates how domestic supply chains influence farmers’ incentives to produce high-quality coffee in Uganda. It finds that quality premiums diminish significantly as they move upstream due to trader market power and efficient post-harvest processing by intermediaries. The policy brief highlights that improving upstream access to export markets and reducing barriers to high-quality trade could enhance quality upgrading and increase returns for producers.
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Morjaria-et-al-Policy-Brief-May-2025.pdf
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- This research uses a combination of original data collection and a randomised experiment to examine how domestic supply chains shape the transmission of quality incentives further up the chain, from exporters to the farm gate, and how that affects the incentives to invest in quality along the chain.
- Two findings emerge: (i) first, farmers have limited direct access to export markets, with coffee changing hands on average twice before reaching the export gate; (ii) second, the quality premium—defined as the gap in price for high‑ vs. low‑quality coffee—is dampened as it flows from the export gate to the farm gate, with upstream actors enjoying only about half of the quality premium available downstream.
- The research explores two explanations for why quality incentives are dampened upstream: downstream value extraction through market power and value addition through productive substitutability.
- Preliminary results suggest that both the market and cost structure of domestic supply chains are critical for shaping quality incentives.
- Policies that improve access to the world‑market quality premium for both downstream and upstream actors could yield high returns.