KAWERI COFFEE FARMERS ALLIANCE SUPPORT PROJECT

Transcription

1 KAWERI COFFEE FARMERS ALLIANCE SUPPORT PROJECT Establishment of the Uganda Coffee Farmers Alliance End of Project Report February 2005 February 2010 Stefan Cognigni Project Coordinator 1

2 Table of Contents Important Milestones... 5 Executive Summary... 6 Background... 8 The NKG Coffee Alliance Trust Project Implementation Project Area Project Beneficiaries Project Partners Field Set up Activities and Results Result 1: Project farmers are organized and their organizations act transparently and professionally in favour of their members Result 2: Farmers achieve higher yields in coffee production in a sustainable manner Result 3: Farmers produce and commercialize coffee of improved quality Overall Impact on Farmers Incomes Result 4: Professional coffee know-how is disseminated to other parts of Uganda Result 5: Farmers are being effectively assisted by project partners and in the long term have access to qualified support services supporting them in meeting their objectives Uganda Coffee Farmers Alliance Project Budget and Expenditures Conclusion

3 Table of Figures Diagram 1: NKG Coffee Alliance Trust Organizational Chart Diagram 2: Field staff organization Diagram 3: Levels of Farmer Organizations Diagram 4: Value Addition process Diagram 5: Extension set up Map 1: Map of Uganda showing project area Map 2: Map showing the 3 project zones Graph 1: Farmer Field Book results Table 1: List of DC Companies Table 2: Computation of Value Addition Table 3: DC Marketing Costs and Farmer Deductions Table 4: DC Company Overheads and Office Costs Table 5: Volume of Coffee bulk-marketed by DC Companies (Kg of Kiboko equivalent) Table 6: Demonstration Plot Yields Table 7: Cost of Production on Demonstration Plots Table 8: Farmer Field School Establishment Table 9: Adoption Levels of Good Agricultural Practices Table 10: UBOS statistics for adoption levels of GAP Table 11: Location of nurseries set up by the project Table 12: Comparison of screen size between project and conventional coffee Table 13: Different marketing situations for different farmers before and at the end of the project Table 14: Combined effect on farmers incomes resulting from value addition, improved marketing and from adoption of good agricultural practices Table 15: Effect of new planting on annual net income from coffee per farm in Ushs Table 16: UCDA Monthly Report for February '10 showing export value of coffee Table 17: FOT values of Robusta coffee exported Table 18: Project Budget in Euros

4 Acronyms and Abbreviations APEP ASPS CBO CFAU CFC COREC CWD DC EU FAQ FFB FOT GAP HRNS IPM KCFASP KCP LEAD LF MAAIF MOU MUDFA NAADS NAO NARO NKG NUCAFE OU PMU PO POT SFO STABEX UCDA UCFA UNADA WFP Agricultural Productivity Enhancement Program Agricultural Sector Programme Support Community Based Organization Coffee Farmers Alliances Uganda Company Formation Committee Coffee Research Center Coffee Wilt Disease Depot Committee European Union Fair Average Quality Farmer Field Book Free on Truck Good Agricultural Practices Hanns R. Neumann Stiftung Integrated Pest Management Kaweri Coffee Farmers Alliance Support Project Kaweri Coffee Plantation Livelihood and Enterprise for Agricultural Development Lead Farmer Ministry of Agriculture, Animal Industry & Fisheries Memorandum of Understanding Mubende District Farmers Association National Agricultural Advisory Services National Authorizing Officer National Agricultural Research Organization Neumann Kaffee Gruppe National Union of Coffee Agribusinesses Opportunity Uganda Project Management Unit Producer Organization Producer Organization Trainer Senior Field Officer Stabilization of Export Earnings Uganda Coffee Development Authority Uganda Coffee Farmers Alliance Uganda National Agro-Dealers Association World Food Program 4

5 Important Milestones 5

6 Executive Summary The Kaweri Coffee Farmers Alliance Support Project (KCFASP) was implemented over a period of 5 years (Feb 2005 Feb 2010) through a Grant contract with the NAO/EU. The KCFASP involved a number of different partners, both public and private, whose contributions have been crucial in the development of this project. The steering committee, composed of development and coffee sector stakeholders, was instrumental in guiding the project process. By addressing critical constraints, this project has created an environment where smallholder farmers are now able to develop their agricultural potential and to participate more prominently in the coffee value chain. This potential was always there, but was restricted due to a lack of knowhow and empowerment. The establishment of strong and transparent farmer organizations, with technical, managerial and entrepreneurial capacity, has unleashed this potential and created opportunities for farmers to significantly enhance their competitiveness. The project has successfully achieved the following: 14,574 Smallholder coffee farmers have organized themselves at primary level into 447 Producer Organizations (PO) and at secondary level into 24 Depot Committee (DC) Companies. Both these farmer organizations are 100% farmer owned; An Apex body, the Uganda Coffee Farmers Alliance (UCFA) has been designed, set up and registered; By primary processing and bulk marketing directly to exporters in Kampala, farmers have been able to add about 25% value (net of marketing costs) to their coffee. For the average project farmer this translates into a 44% increase in net income (from Ushs 147,000 to Ushs 211,500). If we also take into account current improvements in yields, farmers net incomes have increased by 212% (to Ushs 459,300). Once the large amount of new planting comes into production, the combined effect of value addition, yield improvement and new planting, will result in a 418% increase in farmers net incomes (to Ushs 761,508). DC Companies have become interesting commercial partners for financial institutions. Loans have already been granted to a number of them and further discussions on credit requirements for marketing and production are ongoing; Regular internal audits and a strong focus on transparency and accountability, has 6

7 been crucial to build trust among farmers and to generate active participation. This is of course key for the sustainability of the organizations; Further to coffee, a number of DC Companies have also engaged in bulk marketing of other crops such as maize and beans, seeking to enter into contracts with large buyers such as the WFP; Adoption levels of Good Agricultural Practices (GAP) by project farmers have more than trebled over the project period; The average production of farmers has more than doubled and production on most demonstration sites has quadrupled; Hulling outturns have increased from 48-50% to 55% on average. Outturns of up to 58% have also been registered; By delivering coffee directly to exporters in Kampala, DC Companies have achieved a price (average for the 09/10 main crop season) equivalent to 86% of the FOT export value of the coffee. After deductions of marketing costs and Company commissions, farmers still received a price equivalent to 77% of the FOT export value. This is a significant achievement compared to the farm gate price which is normally below 70% and as low as 50-55% of FOT value if the farmers are repaying loans with coffee; Availability of agricultural inputs has improved considerably in the project area. 14 out of 24 DC Companies have set up input supply schemes. Private stockists have also reported higher sales; With over 2 million new coffee trees having been planted by project farmers, Mityana and Mubende today rank among the districts with the highest replanting rate in Uganda; 6 nurseries and 7 mother gardens have been established, with a capacity to produce approximately 378,000 clonal plantlets per year; 447 Farmer Field Schools have been developed; The quality of the coffee produced has improved significantly. FAQ outturns, screen sizes and percentages of under-grades have all improved; the cup is cleaner with fewer defects; A Farmer Field Book monitoring system was tested with a sample of farmers. It is 7

8 now being revised to make it more adaptable to the local situation; Coffee has been selected as the priority crop in both Mityana and Mubende under the NAADS Prioritization of Enterprises Scheme; The project has been visited by a number of Government Officials and is often referred to as a model when designing new agricultural development programs; Stakeholders have shown keen interest and willingness to support the replication of this project in other districts in Uganda. The rolling out process has already begun in Luwero and Masaka districts; Successful elements are being shared with stakeholders, for example, through the National Coffee Production Campaign; The functional structures that have been established have become very appealing for other development organizations as well as for service providers and financial institutions. They provide a platform for the dissemination of information and services. A number of them are already taking full advantage of this. Background In close cooperation with the farmers in Mubende, the Ministries of Agriculture and Finance of Uganda, the Uganda Coffee Development Authority, the Secretariat of the Plan for Modernization of Agriculture, the Secretariat of the Medium Term Competitiveness Strategy, the European Commission, the Agricultural Productivity Enhancement Program, the Agricultural Sector Program Support Project, the Africa Project Development Facility and Neumann Kaffee Gruppe came together and designed this project for establishing the Kaweri Coffee Farmers Alliance (subsequently renamed as Uganda Coffee Farmers Alliance). The Alliance was designed to become a model for the collaboration between organized small holder coffee farmers and the international coffee business. The project was implemented over a period of five years and incorporated up to 15,000 coffee farmers in Mubende and Mityana districts. This 5 year period included a 3 year pilot phase and a 2 year consolidation phase. The initial plan was to set up a partnership between well organized farmer groups and the Kaweri Coffee Plantation (KCP). Such a partnership was meant to promote sustainable, 8

9 quality oriented coffee production and processing, and marketing of high quality Robusta coffee, taking advantage of KCP s direct links to the international market. However, early into the project it was agreed with project partners that for long term sustainability it was important for the farmers groups not to rely on KPC for marketing their coffee, but rather to remain independent and to develop their own processing and marketing skills. The decision to design this project stemmed from the identification of the following problems which hindered economic growth and competitiveness for smallholder coffee farmers: Low productivity and quality due to poor extension and training facilities on improved agricultural practices Lack of savings and access to finance to invest in coffee production and other income generating activities Reduced coffee tree population due to the devastating effects of Coffee Wilt Disease Poor and inefficient market access due to a lack of organizational structure and market information, and a strong dependency on middlemen preventing a move along the value chain All partners agreed that there were opportunities for these small holder coffee farmers to process and trade their coffee though their own professional groups, adding value to their product and fetching attractive prices for an improved quality coffee marketed in bulk. To make this happen, small holder farmers needed to be organized in viable production and processing units capable of effectively accessing coffee extension services, handling and marketing large quantities of improved quality coffee, implementing internal control systems to ensure transparency in operations and effectively negotiating with market players for adequate prices and other services. With this understanding and with committed support from a number of coffee and development partners, the implementation of the Kaweri Coffee Farmers Alliance Support Project (KCFASP) commenced in February The overall aim of the KCFASP was to increase on a sustainable basis net farm incomes of 15,000 dedicated smallholder coffee farmers in Mubende and Mityana districts. This was to be achieved through focused training and support on production, organizational development, value addition and market access. 9

10 The specific objectives of the project were therefore formulated as follows: To increase total coffee production of farmers participating in the Kaweri Coffee Farmers Alliance To improve the quality of coffee being produced and processed and to tap into international markets To establish commercially viable farmer organizations that operate in a transparent and professional manner in favour of their members To facilitate the establishment of an effective smallholder farmer controlled coffee processing and marketing structure in Mubende District and adjacent areas To serve as a model and generate best practices for private partnerships for the development of rural areas in Uganda that build around industry investments in the agricultural sector. The project would work closely with existing organisations like NAADS, NARO, UCDA, and the Ministry of Agriculture, and existing farmer support programmes, like APEP, ASPS, and later LEAD, significantly benefitting from their expertise, staff, infrastructure and financial contributions. The project approach was in line with Uganda s Plan for Modernization of Agriculture vision which was to eradicate poverty through a profitable, competitive, sustainable and dynamic agricultural and agro-industrial sector. The participatory approach of the project was also seen as relevant in enhancing beneficiary participation in project implementation and development. The NKG Coffee Alliance Trust The NKG Coffee Alliance Trust was established as a non-profit Trust under Ugandan law. As the Project Management Unit (PMU), it has been responsible for implementing the project and for coordinating the activities by the various partners. Project staff, including the Project Coordinator (who also acted as the Manager of the Trust), was employed by the Trust. 10

11 The diagram below shows the staff, employed by the NKG Coffee Alliance Trust, which has been active in the implementation of the project. Diagram 1: NKG Coffee Alliance Trust Organizational Chart Manager of the NKG Coffee Alliance Trust Project Coordinator Field Operations Manager Project Accountant Office Administrator Field Officers (3) Commercial Coordinator Data Base Officer Monitoring & Evaluation Officer Producer Organization Trainers (3) Field Office Secretary Driver Field Driver Office Assistant The Trust, with most of its trustees and employees being coffee professionals, had vast expertise, from production, to processing, to marketing, all key for the implementation of such a large scale project, the first of its size in Uganda. Under the umbrella of the Hanns R. Neumann Stiftung, the Manager of the Trust also had access to tools and approaches developed in coffee projects in other producing countries; he was able to share this information with the relevant project coordinators. The Trust was also responsible for the promotion of the project in Uganda and internationally. For this, it could rely on the extensive network of the Hanns R. Neumann Stiftung. The project was implemented under a Grant Contract signed between the NKG Coffee Alliance Trust and the National Authorizing Officer using STABEX funding provided by the European Union. The overall supervision over the beneficiary s activities within the framework of this agreement was devolved by the supervisor to the Uganda Coffee Development Authority, who acted as the supervisor s representative. 11

12 The Project Coordinator reported twice a year to a Project Steering Committee composed of members from key supporting partner organizations and stakeholders from the coffee and development sector. The Project Steering Committee Members included: Uganda Coffee Development Authority (as the Chair) Development Partners (EU, APEP, ASPS, LEAD) Ministry of Finance, Planning and Economic Development (through the NAO) Ministry of Agriculture, Animal Industry and Fisheries National Agricultural Advisory Services Farmer Representatives NKG Coffee Alliance Trust Trustees Kaweri Coffee Plantation Hanns R. Neumann Stiftung (through EDE Consulting) KCFASP management The PMU managed the project on the basis of annual work programmes and budgets which were endorsed by the Project Steering Committee and in accordance with EC rules and regulations. The PMU also produced half yearly progress reports. The overall project budget amounted to approximately Euro 4 million, of which the EU contributed Euro 2,309,840. Contributions from the other partners were both in kind and in cash. Annual financial audits were carried out, as well as 2 project evaluations: mid-term and final. Project Implementation Project Area The project area is located in the districts of Mityana and Mubende both of which are in the central region of Uganda. Mityana used to be part of Mubende district but in 2005 it was separated and made into a district of its own. Today, Mubende district covers an area of 4,645 sq. Km and has a population of 540,670 while Mityana covers an area of 1,953 sq. Km and has a population of 295,

13 In both districts, the prime activity is agriculture with over 70% of the population depending on subsistence farming as the main source of livelihood. The main food crops grown are sweet potatoes, beans, cassava, maize, bananas, ground nuts and a number of vegetables such as tomatoes, onions and cabbages. The main cash crops are coffee and tea. Livestock is also an important activity in Mubende district. Once covered by forests, excessive logging, production of charcoal and land clearing for agriculture, have changed the landscape into hills covered by sparse trees. Altitudes lie between 1,100 and 1,300 meters with an annual precipitation of about 1,200 1,500 mm. This optimal altitude together with adequate rainfall makes it an ideal Robusta coffee growing area, with two harvesting seasons. Map 1: Map of Uganda showing project area 13

14 Project Beneficiaries Project beneficiaries were typical smallholder farmers trying to make a living from an intercropped plot of land. Plot sizes varied between half an acre and 5 acres with coffee occupying only a portion of the land, and typically intercropped with Matooke and a few other crops. The average farmer had between 250 and 300 poorly managed coffee trees and in many cases totally neglected. Years of low prices, unattractive marketing opportunities and the devastating effects of Coffee Wilt Disease (CWD), which wiped out about 40% of the coffee tree population, did not provide the farmers an incentive to focus and invest in coffee production. Further to this, there was a scarcity of planting material to replace the trees that had died, and a lack of efficient extension. The poor condition of the coffee trees resulted in very low yields of about 1Kg of dry cherry per tree or approximately 500 Kg clean coffee per Ha. This was far below the potential of the trees which, if properly managed, could produce around 2-3 MT per Ha. With a lack of organizational structures, farmers were also not empowered to move further down the value chain and therefore released control of their coffee at farm gate earning the lowest possible price. This was a serious situation as income from coffee should pay for education, health and other basic needs. Project Partners The project was designed to be a multi-stakeholder initiative with partners from both the private and from the public sector. The organizations that were contacted found a lot of merit in the design and approach of the project, and were eager to contribute to it. All contributions received, whether in kind or in cash, were crucial towards the achievement of the project aim. The following were the main project partners: European Union (EU) The European Union was the main funder. They provided a grant that funded the PMU and a large part of the filed activities. 14

15 Uganda Coffee Development Authority (UCDA) The UCDA carried out a supervisory role on behalf of the Ministry of Agriculture and chaired the steering committee. They also promoted the project by organizing a number of field visits for Government Officials. Through the Coffee Replanting Program they provided a large number of seedlings to project farmers. Agricultural Productivity Enhancement Program (APEP) / USAID APEP have been instrumental in the organizational development process, providing Producer Organization Trainers, introducing a methodology that has proven very successful and facilitating farmer groups with tools and equipment. Further to this they have contributed to the establishment of demonstration plots and have funded a number of consultants and experts. Agricultural Sector Programme Support (APEP) / DANIDA Their contribution has been crucial in the establishment of coffee nurseries and mother gardens, in supporting the capacity building process of farmer organizations and in funding a number of consultants, experts and trainers. Kaweri Coffee Plantation (KPC) KPC provided technical expertise in the training of nursery operators and in the establishment of mother gardens. KCP has also made available high quality planting material for the mother gardens and a large number of cuttings for rooting in the nurseries. Livelihoods and Enterprises for Agricultural Development (LEAD) / USAID Even though the LEAD program started during the final project year, very important support and expertise was provided for the establishment of Farmer Field Schools which have rapidly encouraged farmer to farmer learning. LEAD will become a more prominent partner in the rolling out process. National Agricultural Advisory Services (NAADS) NAADS have contributed to agricultural extension and have provided additional coffee seedlings to project farmers. Ibero (Uganda) Ltd Ibero has provided market information to farmer groups and a market for their coffee. They have signed MOUs with microfinance institutions and DC Companies in order for 15

16 loans to be granted. They have also been promoting the project coffee internationally through their trading network. Field Set up In order to execute the project a field office was established in Mityana town and the project area was divided into 3 zones; Mityana, Kassanda and Buwekula, each comprising of approx 5,000 project beneficiaries. Map 2: Map showing the 3 project zones BUWEKULA Zone 1 KASSANDA Zone 2 MITYANA Zone 3 Some field staff such as the Field Officers and the Producer Organization Trainers were allocated to specific zones while others such as the Field Operations Manager, the Monitoring & Evaluation Officer and the Commercial Coordinator covered the entire project area. Additional support staff was based at the field office. Field Officers and Producer Organization Trainers designed weekly work plans which were approved by the Field Operations Manager. 16

17 With such an extensive number of beneficiaries to be reached, it was necessary to also involve a large number of farmers as trainers, such as Lead farmers, Demonstration Plot Holders and Depot Committee Extensionists. As such, the Trainer of Trainers approach was employed. The diagram below shows the organization in the field: Diagram 2: Field staff organization Field Operations Manager Field Office Support Staff Database Officer Zone 1 Mityana Zone 2 Kassanda Zone 3 Buwekula Office Administrator Driver Field Officer Producer Organization Trainer Field Officer Producer Organization Trainer Field Officer Producer Organization Trainer Monitoring & Evaluation Officer Commercial Coordinator Activities and Results The 5 specific results that were outlined in the project proposal were the following: 1. Project farmers are organized and their organizations act transparently and professionally in favour of their members 2. Farmers achieve higher yields in coffee production in a sustainable manner 3. Farmers produce and commercialize coffee of improved quality 17

18 4. Professional coffee know-how is disseminated to other parts of Uganda 5. Farmers are being effectively assisted by project partners and in the long term have access to qualified support services supporting them in meeting their objectives Hereunder, the activities and achievements are discussed under each of the Specific Results. Result 1: Project farmers are organized and their organizations act transparently and professionally in favour of their members Just as in most other districts, also in Mityana and Mubende the coffee cooperatives collapsed as a result of inefficient leadership that was not able to compete in a liberalized coffee market against new highly flexible and efficient private buyers and traders. However, whilst liberalization crated a relatively efficient internal marketing structure, it also enabled the development of many levels of coffee transfer and value addition between the farmers and exporters. Farmers, however, did not have the capacity and the infrastructure to move further along the value chain, and therefore released control of their coffee at farm gate earning the lowest possible value for it. It was thus necessary to reorganize producers into organizations that would enable value addition activities such as bulk processing and marketing, thereby reducing the dependency and vulnerability of farmers on middlemen and on their exploitative practices. Following the sensitization process, organizational development activities began immediately with the formation of Producer Organizations (PO) which grouped about farmers in each PO. POs were set up at village level. The Mubende District Farmers Association (MUDFA) collaborated in identifying the main coffee areas (parishes and subcounties) in the 2 districts that would benefit the most from this project. During the establishment of the POs, the concept of the Depot Committees (DC) was also introduced as a second tier structure, one that would focus mainly on value addition, access to a better market and that would provide additional services to the members such as access to extension, finance and inputs. A DC grouped approx POs. An Apex body, the Uganda Coffee Farmers Alliance (UCFA) was also established as a third tier level. The UCFA was established towards the end of the project as it was important for the POs and DCs to be properly functioning before this Apex body could be set up. The UCFA will be discussed more in detail later on in this report. 18

19 The diagram below summarizes the 3 levels of organizations, indicating for each, the main functions and the key staff: Diagram 3: Levels of Farmer Organizations Producer Depot Committee Uganda Coffee Organization (PO) (DC) Farmers Alliance (Groups of Farmers) Approx. 20 POs (Association of DCs) Area Village Level Parish Level Regional / National Level Key Bulking Bulking and Marketing Contact to Exporters Functions Extension Value Addition Marketing Support Locally Farmer Field School Market Information and Internationally Demonstration Plot Link to Agricultural Services Networking Link to Input Suppliers Technical Support to POs Link to Financial Services Code of Conduct Extension Key Staff Executive Committee Executive Committee Executive Committee Lead Farmers (2) Manager Manager Demo Holder Extensionist Office support staff FFS Facilitator Stockist Organizing farmers into these structures has been a step by step process. A lot of sensitization was initially carried out at village level to explain the importance of organizational development and the benefits that would result from it, such as: The establishment of an extension system where farmers would be trained in groups. The development of Farmer Field Schools which would provide a platform for farmers to meet regularly and to address issues of common interest, and to collectively discuss measures and solutions. The possibility of bulk marketing and value addition which would not be possible by individual farmers. The possibility of accessing services in groups, for example credit from financial institutions. 19

20 The establishment of the POs was, therefore, the first step before the formation of the DCs could be initiated. The time period between the formation of these two structures varied anywhere between 2 and 6 months. This depended on the speed of forming approximately 8-10 POs which is the minimum number for starting the process of DC formation. Therefore the main steps that were adopted in the development of the DCs were the following: Identification of a number of POs that were willing to come together Election of an executive committee Drafting of a constitution and bylaws Setting up an office/store for administrative functions and for collection of coffee Appointment of a Marketing Manager and an Extensionist Election of a Marketing Committee, a Finance Committee and a Legal & Disciplinary Committee Election of an audit committee to monitor transparency of operations In order to achieve the above, specialized training both by project field staff and by professional consultants was provided on the following topics: Election of leaders and group dynamics Professional conduct and good business practices Administration (documentation and record keeping) and logistics of bulking and marketing coffee Post harvest coffee handling and quality control Financial management, accounting and banking Auditing procedures During the 4 th project year a step further was taken in DC development and they were registered and incorporated as Companies Limited by Guarantee. Two studies were conducted by legal experts and both concluded that this status was the most appropriate. With the plan of eventually forming an Apex Organization, the legal DC set up had to also facilitate the establishment of the next level. The option of setting up a Cooperative at Apex 20

21 level would have been rather complex as the DCs would have had to become Secondary Cooperative Societies and the POs Primary Cooperative Societies. Further to this, farmers were not very keen on the Cooperative setup. The most straight forward and least complex setup was the Company Limited by Guarantee, where PO Lead Farmers became the founding members or promoters of each DC Company. DC Companies Chairmen (in some cases also Managers) then became the promoters for registering the Apex Organization. A total of 443 Producer Organization and 24 Depot Committee Companies have been established. All these structures are 100% farmer owned and managed. They are commercially driven and focused to achieve the best possible market and to provide their members with important services that will enable further development. Table 1: List of DC Companies Name of DC Company Buwekula zone Number of member Producer Organizations Number of member Farmers Kigando Coffee Farmers Company Naluwondwa Coffee Farmers Company Kitenga Agali Awamu Coffee Farmers Company Nak- kasambya Coffee Development Farmers Company Gayaza Coffee Growers Company Kijjumba Integrated Farmers Company Kasambya Coffee Growers Company Kanseera Farmers Company Namagogo Coffee Farmers Company Kassanda Zone Kiteredde Coffee Farmers Development Company Kaluma Coffee Growers Company Kassanda Coffee Growers Company

22 Kabulubutu Coffee Producers Company Bukuya United Farmers Company Kamaga Farmers Company Kizira Farmers Company Kiganda 1 Coffee Growers Company Mityana Zone Nabumbugu Coffee Growers Company Kakindu Integrated Coffee Farmers Company Kalangalo Integrated Coffee Development Farmers Company Manyi Coffee Farmers Company Miseebe Coffee Farmers Company Taanacopa Coffee Farmers Company Busiiki Farmers Company Total ,574 All DC Companies have elected a Board of Directors; recruited an Executive Committee (composed of a Chairman, a Vice-Chairman, a Treasurer, a Secretary, a Marketing manager and an Extensionist); set up control committees and have established a location (store/office) from where business is conducted. Over the 5 project years DC overheads and operating costs (office rent, stationery, staff costs, etc) have gradually been passed on to the DCs and to date they are all able to meet these costs. Their main form of income is from commissions charged to their members for the marketing service provided. 20 Out of 24 Companies now have operational bank accounts. The control committees have been set up to enhance transparency by involving a number of people in the decision making process. In the early stages of DC formation the Marketing Managers and the Treasurers were carrying out transactions without needing the prior approval of a committee; this led in some circumstances to personal interests overriding those of the DC. For this reason supervisory/control committees were set up with the committee members being rotated on a regular basis. 22

23 The 3 supervisory committees that were identified as important and necessary to enhance transparency and to provide sufficient assurance to DC members were the following: Marketing/Business Committee: Responsible for monitoring the performance of the Marketing Manager and for ensuring that the coffee is sold to the best possible market. This committee is also actively involved in mobilizing farmers during the harvesting season and in coordinating logistics and commercialization activities, as well as in negotiating with service providers such as transporters and hulling factories. Financial Committee: Their main responsibility is to approve and monitor financial transactions, and to participate in audit exercises. They also participate in the development of marketing budgets and manage bank accounts. Recently, they have also been coordinating with financial institutions for credit issues. Legal & Disciplinary Committee: Their role is to ensure that procedures and regulations within the Company are adhered to. They enforce professional conduct from the management and from member farmers. DC Companies prepare marketing budgets before each coffee harvesting season and carry out audits at the end of every season to ensure full accountability of all transactions carried out. As there are two coffee seasons each year, the audit exercise is carried out twice a year. In each project zone (Mityana, Kassanda and Buwekula) the audit team is composed of representatives from the finance committees of different DC Companies; this way DC Companies cross audit each other. Audit results are then discussed in DC council meetings with open participation for members. To date, these meetings have been supervised by project management, however, starting form the next season the supervisory responsibility will be passed on to the Manager of the Uganda Coffee Farmers Alliance (UCFA). The requirement for introducing internal audits became apparent as farmers needed reassurance that their leaders were managing their organizations in a transparent and accountable manner. Thus, training on auditing became a very important activity of the project. Auditing has, therefore, been instrumental for identifying loopholes and areas where controls needed to be enhanced. Further to this, it has also led to changes in the management of a number of DC Companies. It is a result of the audits that supervisory/control committees have been put in place. It is also a result of the audits that the mechanism for remunerating the Marketing Manager has been revised. Previously, Marketing Managers received a fixed commission for every Kg of coffee bulk marketed regardless of where it was sold; as such there was no incentive for achieving the best price. 23

24 Under the new system, Marketing Managers receive a percentage of the profits generated, and this provides them with an incentive to look for the highest price and to strengthen negotiations with service providers. Over the last year this system has resulted in an improvement in performance by a number of Marketing Managers. DC Companies are also discussing the importance of recognizing the efforts of the Lead Farmers who operate at PO level and who are at the first stage of the bulking process. They do not market the coffee but play a critical role in mobilizing farmers and in collecting the coffee at PO level. Therefore, it may be reasonable to motivate them through a small payment based on performance. Coffee marketing has evolved over the 5 project years and at each stage additional value was added to the product. During the first 2 years farmers delivered bulked dry cherries to 3 central warehouses (one in each zone) where they release ownership of the product to a number of different buyers: exporters, traders, hullers, etc. This already represented a step forward in comparison to the traditional practice of selling fresh or dry cherries directly at farm gate to middlemen. During years 3 and 4, DCs began hulling the dry cherries and selling FAQ coffee taking advantage of an improved hulling outturn (percentage of green coffee out of dry cherries). This practice added further value to the product and, coupled with an enhancement in quality, led to an increased competition amongst buyers which pushed prices higher. Unfortunately, most of the coffee purchased by local FAQ traders was then mixed with cheaper and lower quality coffee purchased outside the project area. Nevertheless, for project farmers it represented a further increment in income. In year 5, with the DCs registered as Companies, a significantly bigger step was taken and DC Companies began delivering FAQ coffee directly to the exporter s premises in Kampala, bypassing all the middlemen and traders. This move further down the value chain was prompted by an increased feeling of ownership and by a significant improvement in capacity with regards to coffee marketing and logistics. DC Companies took the initiative of setting up zonal marketing committees to coordinate sharing of trucks and collection of coffee. This process of delivering FAQ to exporters in Kampala, therefore, involves a number of steps: collection of dry cherries from member POs; quality control; processing into FAQ and transportation. These activities require coordination of coffee deliveries, record keeping, access to market information, negotiations with service providers (hullers and transporters) and financial management, all of which the DC Companies are now able to perform. The table below demonstrates the process of value addition as farmers progressed in their marketing through their Companies (computed with the average prices during the 09/10 main crop season): 24

25 Table 2: Computation of Value Addition Point of Sale / Buyer Farm Gate / Kiboko Middleman Hulling Factory / FAQ Trader FAQ Price Ushs/Kg DC Company Deduction Ushs/Kg Net FAQ price for farmers Ushs/Kg Net price *Kiboko equivalent Ushs/Kg Total value addition Ushs/Kg Kiboko , ,850 1, Kampala / Exporter 2, ,010 1, * Kiboko equivalent price has been computed taking into account the average hulling outturn during the season which was 55% Based on the above numbers, farmers achieve 14% additional value between selling dry cherry at farm gate and selling FAQ at the hulling factory, and an additional 10% by delivering the FAQ to exporter in Kampala. This is represented in the diagram below. Diagram 4: Schematic representation of the value addition process in Table 2 above Selling Kiboko at Farm Gate Selling + 14% FAQ at Hulling + 10% Factory Delivering FAQ to Kampala + 24% In the above calculations we have considered the farm gate Kiboko price for untied coffee, i.e. for coffee that is not handed over to middlemen in repayment of a loan, in which case the value would be significantly lower, probably as low as Ushs 600/Kg. 25

26 The 24% value addition computed above is therefore on a net basis, i.e. after deduction of marketing costs and Company commission. An approximate breakdown of the Ushs 235/Kg FAQ deducted by the DC Companies is here below. These are all costs associated with moving the coffee along the value chain, from the POs to the exporter and include handling, processing, transport and commissions payable. These costs will vary slightly from delivery to delivery and between DC Companies depending on location, distances, volumes, etc. Table 3: DC Marketing Costs and Farmer Deductions Deductions from the selling price to cover costs Ushs/Kg FAQ Collection from PO 15 Handling at DC Company 4 Transport to Hulling Factory 20 Hulling fee 80 Loading at hulling factory 2 Transport to Kampala 50 Marketing Manager Commission 14 Total Costs 185 DC Company Commission 50 Total Deduction 235 The DC Company commission will be used to cover Company overheads and office running costs. Here under is an example of the types of costs that are incurred by an average DC Company during the year. Table 4: DC Company Overheads and Office Costs Cost Item Unit Cost Units Office Furniture (over 10 years) Office and store rent General meetings Cost per Year Ushs 120,000 12,000 20, ,000 50, ,000 Board Meetings 30, ,000 26

27 Transport for Marketing Manager Salary of Extensionist Stationery Airtime / Communication Annual Audit Total 20, ,000 50, ,000 15, ,000 12, ,000 80, ,000 1,726,000 With a commission of Ushs 50/Kg the break even volume would be about 35 MT of FAQ. Even though this volume is currently not being fully achieved by individual Companies, it is expected that more and more farmers will be attracted by the additional income generated through the system: this would include both farmers that are already members but not yet active and new participants motivated by the developments. Company Directors and Executives are very confident that volumes will increase substantially during the next seasons for the following reasons: farmers who are already delivering will deliver more; farmers, who have not delivered so far, will soon begin not to miss out on the significantly improved prices; improved yields and new planting will increase the overall production volume. Further income is also raised by the Companies through sales of inputs and in some cases through membership fees. A marketing study, conducted in the project in 2009, segmented the project farmers into 4 main categories according to their marketing requirements: (A) 20% of Farmers Highest Price (C) 10% of Farmers Attachment to Trader (B) 55%of Farmers Available Payment on Delivery (D) 15% of Farmers Convenience Group A Highest price. This group represents the most loyal suppliers to the PO/DC structure as they deliver the majority of their production to the PO collection point. They are motivated in supporting the development of the POs and DCs, because they are aware that prices will fall again if the DC Companies fail to develop a sustainable business. Even when the value addition process was not as advanced as it is today, and prices offered by the DCs were only marginally higher than those offered by the middlemen, they still supported the DCs, confident that at some point in the future this differential would be significantly higher. This group tends to include the more wealthy farmers who are less 27

28 desperate for immediate cash. They can also be associated with first-movers; they support the idea before it has been proven successful. Group B Available payment on delivery. This group is the largest, and farmers in this group deliver very little to the POs. The main barrier for them is lack of pre-finance available by the DCs. They don t yet fully trust the system and are not comfortable in releasing their coffee without, at least, receiving a part payment. They are also sceptical about somebody else commercializing their coffee. This mistrust is probably based on previous experiences with the cooperative structure. Nevertheless, these farmers are very appreciative of the training and other services they receive from the POs and DCs. Many have adopted good agricultural practices and are already achieving important yield improvements. Group C Attachment to trader. The farmers in this group have a strong link or relationship with traders, especially with the smaller bicycle traders at village level. They may be related or may have financial connections. Farmers in this group are the most difficult for the DCs to attract. Group D Convenience. In this group there are farmers who look for the easier sale rather than the most rewarding one. In this sense, nothing is easier than handing over the coffee at farm gate, especially when the buyer is not concerned about quality. These farmers also tend to have immediate cash requirements due to bad planning. This (simplified) analysis should provide the DCs with an indication of priority, i.e. of their most important clients that they should focus on servicing first. Group A and group B, which comprise the majority of the members, should be priority. They also fit with the strategy of improving production and quality. Therefore, the main reasons which have been identified for which a relatively large amount of coffee, estimated at about 70%, still ends up in the hands of middlemen are the following. Most of these are already seriously being addressed by DC Companies and significant steps forward have already and been made in finding solutions: Farmers still depend heavily on middlemen for access to loans, and these are usually repaid in coffee. Not only will the farmer group lose out on the volume of coffee, but the exorbitant interest rate will result in a heavily discounted price to the farmer (up to 40-50%). A number of DC Companies are discussing the possibility of building a pool of funds that can be used to provide small loans to farmers so that they don t have to rely on 28

29 middlemen. Further to this, they are also encouraging the establishment of saving schemes (VSLAs) at PO level. In a number of DCs, for example in Kiteredde, and POs these activities are already in progress. Farmers require a part payment when delivering their coffee; however, most DC Companies do not have the funds to offer such payment on delivery. A link has been established between the DC Companies and Opportunity Uganda (OU), a microfinance institution subsidiary of Opportunity International. During the last main crop season a pilot was conducted and OU granted loans to 2 DC Companies: Ushs 6M to Naluwondwa Coffee Farmers Company and Ushs 8M to Kitenga Agali Awamu Coffee Farmers Company. Unfortunately these funds were only released in the middle of the marketing season and thus it has been difficult to determine the full effect of the loan on the volume of coffee bulk marketed. Other DC Companies such as Bukuya United Farmers Company and Kiteredde Coffee Farmers Development Company have been able to access loans of Ushs 3.5M and Ushs 2M respectively from Equity Bank. In some DC Companies, for example Busiki and Kakindu, funds were raised internally through contributions from some farmers who had no urgency to get cash. These farmers allowed the DCs to sell part of their coffee and to use the proceeds as a revolving fund to buy from other farmers who were in need of immediate cash. They were then repaid at the end of the season with a small interest. These members contributions ranged between Ushs 2-4 M in total. Lead Farmers who are at the first stage of the bulking process are not always motivated as they are not being remunerated for their work. DCs have realized that it is as important to compensate Lead Farmers as it is to compensate the Marketing Manager. A number of Companies, such as Busiki, will test a performance incentive for the Lead farmers during the next harvesting season. The fact that DC Companies have began transacting in a commercial manner with clear documentation and with payments being received in a bank account, has made them an attractive partner for financial institutions. Managers from a number of banks in Mityana and Mubende have held meetings with Executive Committees and Finance Committees to discuss financial needs. Opportunity Uganda is also determined to devise a system through which loans for inputs can be availed to individual farmers. These loans will be granted to POs in proportion to the volume of coffee delivered to the DCs during the previous marketing season. This condition is important as it will provide the POs with an incentive 29

30 to deliver more coffee in order to obtain a bigger loan the following year. Group guarantees will also be required for additional security. It is expected that higher incomes through improved yields, value addition and better market access will encourage more savings. This should in the medium to long term reduce the farmers dependency on external finance. The table below shows the volumes of coffee (in Kg of dry cherry equivalent) that have been bulk marketed by the DCs over the years. Table 5: Volume of Coffee bulk-marketed by DC Companies (Kg of Kiboko equivalent) Coffee Season Main Crop Oct / Feb Kg dry cherry Fly Crop June / Aug Kg dry cherry Totals Crop Kg dry cherry 05/06 142, , ,174 06/07 605, , ,744 07/08 667, , ,942 08/09 705, , ,921 09/10 491,068 The reduction in the 09/10 main crop is largely due to drought that has affected most parts of Kassanda and Buwekula zones. In fact, Mityana contributes to almost half the volume with 227,677 Kg while Buwekula and Kassanda with 130,049 Kg and 133,342 Kg respectively. The adverse weather conditions were also evident from the very small size of the beans (screen size) from these affected areas. Drought affected coffee tends to result in a poor FAQ outturn if hulled and very likely to yield a negative value addition if the outturn falls to 50% or below. It may therefore have been a calculated decision by some Companies not to bulk and process the Kiboko, but rather to sell the coffee as Kiboko to middlemen. All Companies have the instruments necessary to carry out hulling tests. In addition to marketing coffee, a number of DC Companies have also started to look into other crops such as beans and maize. These are crops that become attractive in large volumes and as such will acquire significantly more value if bulked. Companies such as Kalangalo Coffee Development Integrated Farmers and Nak-Kasambya Coffee Farmers Development have already approached the WFP for contracts to supply maize. Kitenga 30

31 Agali Awamu Coffee Farmers Company also started bulk marketing maize during the last season. Now that the infrastructure is in place, what has been achieved with coffee can also be replicated with other commodities. Result 2: Farmers achieve higher yields in coffee production in a sustainable manner One other very important objective of the project was to improve farmers yields and overall coffee production. Yields were very low at approximately 500 Kg green coffee/ha. This converts to about 2 Kg of fresh cherry or 1 Kg of dry cherry per tree. These low levels were principally due to a lack of adoption of good agricultural practices and to non utilization of inputs. A number of farms were also neglected for a number of years. Under good coffee husbandry practices and normal weather conditions, production should reach 2,000-2,500 Kg green coffee/ha. These levels have been achieved in Uganda by some estates and by some very progressive farmers. Fortunately the Robusta tree is fairly hardy and with a proper rehabilitation program it can be brought back to vigor and good production. Depending on the condition of the trees, rehabilitation may require some initial drastic measures such as very intensive pruning to remove all the old unproductive wood. In order to train and encourage the farmers to employ better coffee husbandry practices, an extension system was set up. Project Field Officers, DC Extensionists and Lead Farmers at PO level created the link through which training would reach the farmers and information would flow in both directions. The first step in the development of the extension system was to identify willing and committed farmers both at DC and PO level to take up the important role of becoming trainers. Following some selection criteria that were pointed out by project staff, the nomination of the candidates was carried out by the farmers themselves. Project Field Officers visited each nominated person to ensure that they met the requirements for becoming trainers. An inspection of their farms was also part of the final approval process. As farmers joined the project over the years, POs and DCs were established over time. This meant that also Lead farmers and DC Extensionists were appointed over time. By the end of the project a total of 24 DC Extensionists and 443 Lead Farmers were involved in the extension system. The diagram below shows how extension was set up; given the very large number of farmers it was necessary to establish different levels for reaching all the farmers. During the initial trainings Field Officers worked closely with DC Extensionists but they also held training sessions for Lead Farmers. Similarly, DC Extensionists trained the Lead Farmers and the Demo Holders and monitored their performance on a regular basis. Field Officers 31

32 also carried out spot checks of farmers fields to ensure that training had reached them and that they had been visited by their Lead Farmer. Diagram 5: Extension set up Field Officer X 3 DC Extensionist DC Extensionist X 24 PO Lead Farmer PO Lead Farmer PO Lead Farmer PO Lead Farmer X 443 F F F F F F F F F F F F X 14,574 Feedback and information from the field flowed in the same way; Lead Farmers reported to the DC Extensionists and DC Extensionists reported to the Field Officers. Spot checks were carried out to ascertain the information received. Demonstration Plots Further to selecting a Lead farmer each PO also appointed a demonstration farmer who would host a demonstration plot on his farm. The selection requirements for this position were quite stringent as there were a number of important considerations to take into account such as: Sufficient literacy level to be able to keep records Farm located near a road which would make it more accessible and visible Willingness of the demo holder to allow other farmers access to his plot High motivation level for wanting to adopt good agricultural practices 32

33 Demo plots are field training centers where farmers come together for practical demonstrations of different agricultural practices. For the first 4 years inputs were provided by the project and these included tools such as pruning saws, secateurs and tarpaulins, and agrochemical inputs such as herbicides and fertilizers. During the last year most demo holders purchased the inputs themselves with the additional income from the already highly improved production. A total of 1,288 demo plots were established; 328 large demo plots and 960 small demo plots of 110 and 25 coffee trees respectively. The small demo plots were encouraged by APEP in order to expose more farmers to the benefits of inputs. However, it was the large demo plots that acted as training centers and the ones that were monitored closely in order to collect production information. The main agronomic activities that were carried out on the demo plots for training farmers were: Weeding: to reduce competition for soil moisture and nutrients Pruning: to rejuvenate and improve the vigor of the tree by removing old unproductive wood and promoting young suckers Soil and water conservation: digging trenches to reduce runoff and hold as much water as possible in the field. This practice is also important for erosion control Mulching: very beneficial to retain moisture in the soil and add nutrients back to the soil when the material rots and decomposes. Mulching also suppresses weed growth Fertilizing: to make available to crops essential elements that have become deficient in soils as a result of decades of extraction without replenishment Planting of shade trees: recommended practice to reduce the amount of evapotranspiration in the field These are all very important practices for coffee trees, in order to improve their yields. Before the project, farmers were hardly implementing these and as a result achieved very low production levels. Fortunately, a number of these practices do not have a price tag attached to them, as the main input is the farmer s own time. For the average size coffee plot, activities such as pruning, soil and water conservation and weeding (by slashing) can be carried out by the farmer himself without needing additional labour. These activities alone would already have a significant impact on yields. Some mulching material can also be obtained from the farm itself. 33

34 On demonstration plots, however, where these practices were carried out year on year, a fourfold increment in yields (on average) was measured during the 5 th project year. The table below shows the average fresh cherry yield per tree (in Kg) for the demo plots in each DC area. Table 6: Demonstration Plot Yields In Kg of fresh cherry per tree DCs where demo plots are situated Crop season 07/08 Main + Fly Crop season 08/09 Main + Fly Crop season 09/10 Main only Busiki Kakindu Maanyi Miseebe Nabumbugu Kalangalo Kassanda Bukuya Kabulubutu Kiteredde Naka-Kasambya Namagogo Kitenga Naluwondwa Kijjumba Kanseera Gayaza Kigando Kamaga Overall Average This is a significant improvement considering that the coffee trees were only producing approximately 2-3 kg of fresh cherry during a whole season. In order to determine the cost-benefit of applying good agricultural practices and the impact generated on income, we have to analyze the costs associated with demo plot production. These costs were captured both by demo holders as well as by a sample group 34

35 of farmers that were involved in testing a new monitoring instrument, the Farmer Field Book (FFB). The FFB was developed as a tool for registering farmer activities and for analyzing labour and input efficiency, nutrient flows and household economics in coffee. The outcome from such an analysis is of great benefit for farmers as it provides information on: Cost-benefit Efficiency of different field management techniques, employed by different farmers Sensitivity of farming systems to changes in market prices, input prices, etc Impact on yields and income The FFB was developed by the Hanns. R. Neumann Stiftung in collaboration with the DE Foundation, and was already being tested in a number of smallholder projects in Vietnam. However, it was important to also test it in another environment with a different production system, such as the typical intercropped coffee production system in Uganda; very contrasting from the pure stand, high inputs, production system employed by Vietnamese farmers. As such a trial was carried out in the KCFA project. During the 07/08 coffee season, interesting results were achieved through the FFB application. However, it was also detected that for the specific framework conditions and challenges in the project, the tool was too complex in the analysis and not sufficiently user friendly for a broader application. These findings were fed into the process of developing an improved and more user friendly software which has just been initiated by the HRNS office in Vietnam. Soon, this upgraded version, called Simpatica, will be available; this time with more flexibility to the production system. Nevertheless, the results that were obtained during testing already provide a clear indication of the benefits of improving agricultural practices and of investing in inputs. The graph below shows the difference in costs, yields and net incomes between demo plots representing high adopters and regular farmers who, then, represented relatively low adopters. The numbers in the graph below (averages for all 150 participants) show that the additional investment in good agricultural practices and in inputs, has led to a 190% increase in yields and to a 177% increase in net income. 35

36 Net Income (Ushs / tree) NKG Coffee Alliance Trust - Kaweri Coffee Farmers Alliance Support Project Graph 1: Farmer Field Book results , , , Regular Demo The size of the bubble represents the yield of fresh cherry in Kg per tree Total cost (Ushs / tree) These results were explained to the participants and discussed. Each farmer also received a report with the specific results for his field; these, of course, could only be as accurate as the information received and fed into the analysis. As already mentioned, a number of farmers found the recording of daily activities rather complicated and as such not all reports portrayed an accurate status of operations. Nevertheless, farmers seemed to clearly understand the concept of cost/benefit, and the relationship between different variables (inputs and outputs) such as labour time, labour cost, material cost, yields, gross income, net income, etc. They were also able to plot their own coordinates on graphs and to discuss about the efficiency of use of inputs by different individuals. It is also important to note that during the 07/08 season the farmer groups had just started hulling their coffee; therefore, value addition was still fairly limited. If we had taken into account the full additional value that the farmer groups are capable of achieving today, the above net income would have been even higher. The table below shows the more up to date costs per tree associated with demo production. Inputs and tools where provided by the project while labour was provided by the demo holder: 36

37 Table 7: Cost of Production on Demonstration Plots Cost Item Cost per tree/year (Ushs) Cost per Ha/year (Ushs) Fertilizer (NPK, Urea) ,200 Herbicide ,650 Mulch ,300 Labour ,000 Tools (knapsack, pruning saw) over 5 years ,000 Tarpaulins over 3 years 70 60,000 Total 1,515 1,735,150 As can be seen fertilizer alone accounts for almost half of the total cost. Other inputs include mulching material, labour and herbicides. A low adopter may use some herbicides, as this is cheaper than labour for weeding, some mulching material and perhaps small amounts of manure. His total cost is, therefore, much lower to that indicated above and could be stated at Ushs 400 per tree. On the other hand, the KCFA project farmers have reached approximately 60% adoption rate in most good agricultural practices. For this we could say that they would be incurring approximately 60% of the demo plot cost indicated in the above table. Therefore their cost could be estimated at about Ushs 900 per tree. Further to demonstration plots other extension tools that were employed were literature on agronomy such as coffee production manuals, extension bulletins and posters showing good practices Vs bad ones. Extension bulletins were mainly aimed at DC Extensionists and Lead farmers as these were more technical, while the production manual was very pictorial and relatively easy to understand, even for illiterate farmers. These were given to DCs and POs, where farmers were able to consult them. In addition any material obtained from the UCDA, NAADS and other organizations was also distributed and made available at DC and PO level. During the first 3 years of the project, to expose selected farmers to coffee production in other parts of Uganda, a number of field visits were organized. A total of 455 participants, who were mainly DC Extensionists, Demo Holders and Lead Farmers, were taken to areas in Masaka and Rakai districts where the smallholders are a little bigger in size and where coffee and matooke are produced with a more commercial focus. Alliance farmers were able to exchange views and thoughts with these more progressive farmers. The response from these field visits was very positive with most participants motivated to improve their own production. 37

38 Farmer Field Schools The above mentioned field visits also exposed the Alliance farmers to the concept of Farmer Field Schools (FFS) as the areas they had visited had already implemented FFS for a few years. What was interesting for the visitors was that through participation in FFSs the production of the various farms became more uniform in terms of practices employed, timing of activities and yields of the trees. This is what happens when farmers visit each other s fields and share information on successful practices. With the cooperation with the LEAD project, and through their specific focus on Farmer Field Schools, this concept was prominently introduced half way through the 5 th and final project year. The introduction of FFSs transformed the extension system from a top down approach to a demand driven, prioritized and participatory program which encourages communication between farmers and joint development of field trials. Focus is predominantly on agricultural practices for the purpose of improving productivity and for developing more efficient practices with regards to pest and disease control, soil water conservation and other important crop husbandry practices. However, also non agronomic topics such as marketing and social concerns are discussed. For long term sustainability, it was important to pass on the responsibility for managing the extension system to the farmers and FFSs are the ideal approach for achieving this. The POs were also the ideal size for the establishment of FFSs, each comprising of farmers. The process involved the selection and training of FFS Facilitators at DC level, each one responsible for the establishment of approximately 6 FFSs. In total 447 FFSs have been established and 72 FFS Facilitators have been selected and trained. The table below shows the number of FFSs in every DC Company, the number of FFS sessions held and participation levels between July 09 and Feb 10 Table 8: Farmer Field School Establishment Name of DC Company Number of FFS in DC Company Total Number of FFS sessions Total no. of participants Average no. of sessions per FFS July 09- Feb 10 Average number of participants per FFS session Buwekula zone Kigando Coffee Farmers Company ,

39 Naluwondwa Coffee Farmers Company Kitenga Agali Awamu Coffee Farmers Company Nak- Kasambya Coffee Development Farmers Company Gayaza Coffee Growers Company Kijjumba Integrated Farmers Company Kasambya Coffee Growers Company Kanseera Farmers Company Namagogo Coffee Farmers Company , , , Kassanda Zone Kiteredde Coffee Farmers Development Company Kaluma Coffee Growers Company Kassanda Coffee Growers Company Kabulubutu Coffee Producers Company Bukuya United Farmers Company Kamaga Farmers Company Kizira Farmers Company Kiganda 1 Coffee Growers Company , , , , , , Mityana Zone Nabumbugu Coffee Growers Company ,

40 Kakindu Integrated Coffee Farmers Company Kalangalo Integrated Coffee Development Farmers Company Maanyi Coffee Farmers Company Miseebe Coffee Farmers Company Taanacopa Coffee Farmers Company Busiki Farmers Company , , , , Total 447 2,846 29, The above table shows that each FFS has held 6 sessions in 8 months and that on average each session was attended by 10 farmers, i.e. just over one third of the number of farmers in a PO/FFS. Just as with the introduction of other new concepts, there is always a time for reflection before the idea is accepted and active participation sets in. Therefore, these initial numbers are quite encouraging and expected to grow significantly. Farmers have already started visiting each other s fields and experimenting in groups; for example in Sangala FFS they have successfully tested Jatropha seed oil as a way of controlling Root Mealy Bug. In Kibogo FFS they are comparing inorganic fertilizers (NPK and UREA) to organic farm manure and compost. In Nayise FFS farmers are testing different methods of organic soil fertilization, including different types of mulching material. There are a number of other examples of FFSs where the farmers have embarked on experimental trials to see how their production can be further assisted. Farmer Field Schools have also become a platform for discussing marketing issues and for disseminating market information. DC Companies are hopeful that FFSs will help boost the amount of coffee that will be collected by the POs and delivered to the DCs. As the FFSs have only recently been established, further support will be provided over the next couple of years to ensure their successful development. Adoption levels The various tools that have been employed in the extension system have resulted in a significant improvement in the adoption of good agricultural practices. This has, however, 40

41 been a gradual and fairly slow process. A monitoring exercise that began in 2007 shows the improvement over the years and as can be seen from the table below, approximately 60% of the farmers are now adopting improved agricultural practices. Table 9: Adoption Levels of Good Agricultural Practices Pruning and de-suckering Mulching % 63% 62% 62% 25% 34% 52% 51% Weed control Soil and water conservation % 64% 73% 63% 23% 40% 41% 52% Application of fertilizers % 48% 49% 57% For this monitoring exercise 375 farmers were selected randomly from 15 DCs, i.e. 25 per DC. This means that different farmers were monitored each year. There are 2 important considerations that should be made in relation to these results: 1. Inspections for adoption of good agricultural practices have become stricter over the years. In the first couple of years of monitoring, any attempt by farmers to apply better practices would have been considered as good, while in the last 2 monitoring exercises the evaluators have been more critical as to the quality and extent of the adoption; i.e. correct thickness of mulch (not just sparse mulch), pruning of the entire (or most) of the farm (not just a few trees), etc. In other words if we had applied the same stringent monitoring as we do today also in the first couple of years we would have recorded lower adoption levels then, and thus bigger changes over the years than what is shown in the table. 2. As new farmers have been joining the project throughout the first 3 years (some even in year 4), the random samples of farmers for monitoring contained farmers with different project participation lengths, including ones that had only been in for a relative short time. If the sample had included only farmers which had been with the project form the first year, the adoption levels would certainly have been higher. However, this now gives a more realistic average of adoption levels across all farmers, and not only for the ones that have been in the project since the beginning 41

42 Adoption levels were, unfortunately, not captured in the baseline study and this monitoring exercise was also not carried out during the first two project years. Therefore, we can only compare these numbers to ones reported in other statistical exercises. One such report is the Uganda National Household Survey 2005/2006 conducted by the Uganda Bureau of Statistics (UBOS). In the agriculture module they report the following statistics for the Central Region, which includes Mityana and Mubende districts: Table 10: UBOS statistics for adoption levels of GAP In the UBOS report table 6.1: Use of Agricultural Inputs (% of households) Region Improved Seeds Manure Chem. Fert. Pest+herb+fung Central 5.5% 8.7% 1.3% 4.8% In the UBOS report table 6.12: Percentage of households that used various soil conservation measures Region Bunds Terracing Mulching Central 10.1% 3.3% 15.7% The time when these statistics were collected also coincides fairly accurately with the start of the project. If we compare these numbers with the adoption levels monitored in the project it is clear that improvements are substantial: use of fertilizers (organic + inorganic) has gone up fivefold, applications of mulch have trebled and measures for conserving soil and water have quadrupled. Through the adoption of better agricultural practices most farmers have realized a significant increase in yields and an even bigger increase in overall production as a result of large amounts of new coffee planting that has started to come into production. Information on farmers incomes and field observations clearly indicate that most farmers have more than doubled their yields; a number of farmers have done much better than this and have trebled or quadrupled their yields. Weather has, however, had an adverse effect during the last main crop season in parts of Kassanda and Buwekula, as a prolonged period of drought had severely affected production. With adoption levels for good agricultural practices having reached an average of 60%, we could deduce that on average farmers are now realizing half the yields of the demonstration plots; i.e. 5.5 Kg fresh cherry or 2.2 Kg dry cherry. This represents slightly 42

43 more than double the yield of 1 Kg of dry cherry they were achieving before applying better practices. As previously mentioned, a number of farmers have achieved significantly higher yields, but there are also slow and late implementers that are still lagging behind. Farmers willingness to improve production is also shown by the fact that 13 DC Companies have set up inputs supply schemes (mainly for fertilizers and herbicides) through which member farmers can access reliable inputs at fair prices, also taking advantage of bulk discounts. Inflated prices, sub-standard and fake products have been a deterrent for farmers to increase the use of inputs, especially for farmers furthest away from commercial centers. In fact, most of these 13 DC Companies that have started an input scheme are located fairly far from trading centers and from input suppliers. Such input schemes also benefit the DC Companies in that they can generate small profits to help cover overheads, further to the longer term benefit of higher production by its members. Further to DC Companies setting up inputs supply schemes, a number of agro-input dealers in Mityana and Mubende have also reported increased sales over the last 3-4 years. For example, Florence Magembe, owner of AVEMA Vet Consults/Agrochemicals input store in Mityana town, reports that her volume of sales has more than trebled since the beginning of the project. This is an indication that demand for inputs has escalated. Training for DC stockists was provided by UNADA, covering issues of health and safety, storage and quality guarantee. Nurseries Further to enhancing yields the project also focused on improving the accessibility of coffee seedlings as there was an apparent shortage of nurseries in both districts. With funding from ASPS, 6 nurseries with mother gardens were established. These were not set up as community owned nurseries but were given to 6 farmers who were selected and trained as nursery operators. The costs were partly covered by the project and partly by the operators. The project contributed with materials such as shade nets, tools, plants for the mother gardens, rooting hormones, fencing wire, etc, while the farmers contributed mainly with labour for construction. The mother gardens have been planted with the best clones (A, B, C, D, F and H), obtained from Kaweri Coffee Plantation. Each clone has its own specific characteristics, for example A, B, C and D are more tolerant to dry spells than F and H; F and H produce a very large crop every second year and a smaller one in between while the other clones have more uniform crops from year to year; A, C and F have bigger beans but smaller clusters while B and D have bigger clusters but smaller beans, etc. Even though there are these differences, a mix of all 6 clones in the field is advisable. 43

44 Each mother garden was planted with 1,200 plants. At maturity, each mother plant will be able to provide about 60 cuttings per year for rooting. Therefore, the 6 mother gardens will have a total production of about 432,000 cuttings per year. Taking into account a 75% survival rate, this should result in a total availability of about 324,000 clonal plantlets per year. The 6 nurseries have been set up in the following locations and are owned and managed by the following farmers: Table 11: Location of nurseries set up by the project Name of Nursery operator Village Depot Committee Jitta Billy Kakindu Kakindu Sempiki Bilikwalira Madudu Naluwondwa Florence Kawalya Katungu Bukuya Florence Magembe Bbuye Miseebe Mugerwa Ignatius Ziwomeredde Kabulubutu Iyamulemye Stephen Katwe Namagogo A 7 th mother garden was also established at the Mubende District Farmers Association nursery as they were only producing elite seedlings from seed. It has to be noted that these mother gardens were not established with certified Coffee Wilt Disease (CWD) resistant plants. This was because when the first 3 mother gardens were established, the CWD resistance trials were still going on, and when the last mother gardens were established, the resistant material was not yet available in sufficient amounts. Given the high demand for planting material, it was decided to proceed with the regular high yielding clones rather than wait for a few more years for CWD resistant varieties. This way farmer could have a head start in increasing their overall coffee production. At some point in the future the mother gardens should be replaced with certified CWD resistant varieties. As mother gardens normally take between 2 and 3 years to mature, i.e. before cuttings can be harvested, the project brought in cuttings from Kaweri Plantation and from other 44

45 mother gardens in Masaka district. It was important to begin the production of planting material as soon as the nurseries were built. Further to the plants produced in the project nurseries a substantial number of elite seedlings were also provided to farmers by UCDA and NAADS. A total of 2,533,099 coffee plantlets have been made available to project farmers, 603,029 clones and 1,930,070 elite seedlings. This works out to an average of about 168 new coffee plants per farmer. This level of new planting has ranked Mityana and Mubende as the two districts with the highest coffee replanting rates in the country. Result 3: Farmers produce and commercialize coffee of improved quality Quality enhancement has been another main objective of the project. Achieving superior quality is crucial for product differentiation and marketing, and for achieving better prices. A consultant on coffee quality has spent a total of 24 months during the first 4 years in the project training DC Extensionists and Lead Farmers on techniques to improve quality and to monitor improvements over time. Training focused on the important practices of selective picking, separation of coffee picked from the tree and from the ground and drying off the ground to avoid any contact with the soil. During the course of the project a total of 14,166 tarpaulins have been made available to project farmers. Of these, 1,096 were given to demo holders as part of their kit and 13,020 were bought by project farmers. Further tarpaulins were also purchased by farmers from suppliers in trading centers. With the introduction of further value addition activities, some important quality testing instruments were given by the project to each of the 24 DC Companies. These instruments included a moisture meter, a weighing scale, a hand huller and a set of screens. They were all crucial in the development of a quality control system. Hand hullers enable the testing of FAQ outturn, i.e. the % of green coffee (FAQ) out of dry cherry. This information is important in the decision of whether to sell the coffee as dry cherry or as FAQ. For low outturns (50% and below) selling dry cherry would make sense, whereas for higher outturns there is value to be gained from selling FAQ. With the adoption of better agricultural practice it is normal for the FAQ outturn to improve. Over the 5 years, farmers average outturn improved from about 48-50% to 55%. Some DCs have recorded outturns as high as 58%. 45

46 Further to the outturn, DC Companies have also learned how to test the screen size of their coffee; this is an important indicator of the adoption of good agricultural practices and an important negotiating factor with buyers as larger screens have a higher value. If we compare the quality analyses carried out on project coffee to the ones carried out on conventional coffee during the last main crop season, we see a net improvement in the percentage of sound beans in deliveries from the project area. Unfortunately, most of the project area suffered from drought and as such screen sizes were affected, hence the higher percentage on conventional SCR 18. Buwekula and Kassanda zones were affected more severely resulting in 5.4% and 5.1% of SCR 18 respectively, while Mityana had an average of 9.3%. The values in the table below are averages for all project and conventional coffee deliveries to Ibero Uganda Ltd during the 09/10 main crop season. Project coffee deliveries originated from Mityana and Mubende only, while deliveries of conventional coffee originated from different districts, i.e. also from areas that have not suffered from a drought. Table 12: Comparison of screen size between project and conventional coffee Main Crop 09/10 season Fly Crop 09/10 Project Coffee Conventional Coffee (First month of fly crop deliveries from the project) Screen < Total sound beans However, if we also compare the values from the first month of deliveries of fly crop coffee, we see a very different picture. Good rains following the drought and good agricultural practices have resulted in a significant improvement in bean size and in the overall amount of sound beans. If we look at some of the main defects that are commonly present in Robusta coffee, we find that there are fewer of these in project coffee. For example black beans, which are deceased beans and most likely picked from the ground, amount to 2.3% in conventional coffee while only 0.9% in project coffees. Foreign matter, which consists mainly of sticks, stones, husk, 46

47 pods and other crops such as beans and maize, are also significantly lower in project coffees, 1% compared to 3.5% in conventional. This is an indication that care is taken in post harvest processing and handling. Foreign matter usually is mixed in with the coffee when the coffee is dried directly on the ground and then swept together. It is also a common practice for middlemen to add foreign matter, especially stones, to increase the weight of the bags. Further to the physical defects there are of course also defects in the cup which are brought about by poor picking and processing. For example green/immature beans will result in a grassy cup, while beans that are dried directly on the ground and bagged while still excessively moist will result in a musty and earthy cup. Project coffees are relatively free of these defects. Over the years they have been cupped by quality experts from some of the major international roasting companies such as Nespresso, Lavazza, Tchibo, Douwe Egberts, Lofberg, etc and comments were generally positive, i.e. clean cupping with good consistency. It is for this reason that buyers are generally willing to pay a higher price for well processed project coffee. For the exporters, a cleaner FAQ means fewer processing losses and an improved cup is important for their more demanding clients. Also FAQ traders are prepared to pay higher prices, but unfortunately for mixing it with much cheaper and lower quality coffee purchased elsewhere so as to improve the overall quality of the bulk. However, now that farmer groups are able to deliver directly to exporters and to add substantial more value to their product, it has become a bigger challenge for FAQ traders to get hold of the coffee from the DC Companies up-country. Some farmers have also started differentiating on quality depending on the final buyer. For sales to middlemen for example, possibly in repayment of a loan, farmers will not be committed to improving the quality as the coffee will be heavily discounted anyway. However, for delivering to their DC Company they will go to great lengths to produce a well dried and clean coffee. Overall Impact on Farmers Incomes So far we have seen how farmers have been able to add value to their coffee and how they have been able to improve their overall production as well as quality. How does all this impact on their income from coffee? 47

48 In order to determine this, we need to look at the different situations in marketing and production where farmers could find themselves, and their combined effect. The table below depicts these 5 scenarios; 1 and 2 represent the typical situation before the project and 3, 4 and 5 the situation where many farmers are today. Unfortunately, farmers that are still relying on middlemen finance (loans) are most likely to be still in situation 1. Table 13: Different marketing situations for different farmers before and at the end of the project Scenario Marketing method Production level Before Project 1 Farmer indebted to a middleman through a loan, selling dry cherry at farm Poor yields gate 2 Farmer selling dry cherry at farm gate Poor yields After Project 3 Farmer selling FAQ through the DC Company directly to exporter in Non adopter poor yields Kampala Farmer selling FAQ 4 through the DC Company Average project farmer - directly to exporter in Improved Production Kampala 5 Farmer selling FAQ through the DC Company directly to exporter in Kampala Demonstration plot highly improved production Using average prices during the last main crop season we can calculate the net profit that would have been generated in each of these scenarios. For the calculation, we take into account an average of 300 coffee trees per farmer and we use dry cherry equivalent yields and prices as indicated in Table 2 showing the computation of value addition. 48

49 Table 14: Combined effect on farmers incomes resulting from value addition, improved marketing and from adoption of good agricultural practices Scenario Number of Coffee Trees Cost of production per tree in Ushs Total cost of production in Ushs/Farm Yield per coffee tree in Kg of dry cherry *Selling Price in Ushs/Kg dry cherry Total income in Ushs/Farm ,515 90, , , , , ,105 1,105 1, , , , ,300 1,491,750 Net profit in Ushs/Farm *Selling price is net of marketing costs 90, , , ,300 1,037,250 In scenario 4, which represents the current status of the average project farmer, a cost of production of Ushs 900 per tree was considered (as previously explained). This reflects partial adoption of GAPs and a lower use of inputs and less hired labour (if any at all). From the above numbers it is clear that investing in inputs leads to significantly higher returns. The average project farmer s net income has trebled (difference between situation 2 and 4) as a result of improved yields, value addition and improved marketing. For farmers that have achieved demo plot yields (scenario 5), their net income has gone up by a factor of 7. Before the project, total annual coffee income (computed using 09/10 main crop prices) generated by the 15,000 project farmers would have been approximately USD 1.8M. However, with the current production levels, if all the project farmers sold all their coffee through their DC Companies, the total annual income generated would reach USD 5.6M; 49

50 this would mean an additional flow of income of USD 3.8M per annum into the project area to further drive the local economy. It also has to be considered that the above computations do not take into account the additional production from new planting, as on average, every farmer has planted an additional 168 coffee trees. Upon maturity, these new trees will significantly further boost overall production and incomes, i.e. an additional annual 3,000 MT of FAQ coffee with an approximately value of USD 3.1M. If we increase the number of coffee trees in Table 21 above to 468, to reflect new planting, under Scenario 4, which represents the average farmer, we will achieve a net income of Ushs 761,508. Depending on the planting period, it will take between 1-3 years for all the new plants to reach maturity. The table below summarizes how the project farmers incomes have improved over the years. This is a combined effect of adoption of good agricultural practices (which have enhanced yields), new planting, value addition and improved marketing. The last column in the table, once again, shows the potential income if demo yields were achieved on all 468 coffee trees. Table 15: Effect of new planting on annual net income from coffee per farm in Ushs Before Project Average Farmer 300 Coffee Trees Average Farmer 468 Coffee Trees Demo Yield 468 Coffee Trees Annual Cost 120, , , ,020 Annual Income 267, ,300 1,137,708 2,327,130 Annual Net Income 147, , ,508 1,618,110 Therefore, the combined effect of all the above mentioned factors, results in a 418% increase in net income compared to the situation before the project, i.e. from Ushs 147,000 to Ushs 761,508. The table and text below are extracted from the UCDA Monthly Report for February

51 Table 16: UCDA Monthly Report for February '10 showing export value of coffee TABLE 1.0 COMPARATIVE COFFEE EXPORT PERFORMANCE 60-KILO BAGS; US$ 2009/ /09 %-Age Change MONTHS Qty Value $ Qty Value $ Qty Value $ G/ Total 1,235, ,256,754 1,393, ,515,527 (11.5) (15.2) October 199,011 18,644, ,564 21,003, (11.2) Robusta 146,411 11,733, ,485 17,185,337 (3.3) (31.7) Arabica 52,600 6,911,276 28,079 3,818, November 235,171 22,097, ,732 27,598,387 (11.8) (19.9) Robusta 186,654 15,144, ,268 21,705,523 (15.3) (30.2) Arabica 48,517 6,952,505 46,464 5,892, December 272,779 25,764, ,648 29,240,135 (8.7) (11.9) Robusta 208,904 16,572, ,386 23,361,825 (16.9) (29.1) Arabica 63,875 9,192,182 47,262 5,878, January 264,314 25,351, ,211 30,469,346 (19.7) (16.8) Robusta 211,613 17,252, ,395 24,046,556 (21.4) (28.3) Arabica 52,701 8,098,778 59,816 6,422,790 (11.9) 26.1 February 264,373 26,398, ,605 31,204,063 (17.3) (15.4) Robusta 186,012 14,845, ,364 22,641,801 (25.6) (34.4) Arabica 78,361 11,553,718 71,241 8,562, Cumulatively, shipment in the first five months (Oct/Feb) of the current coffee year 2009/10 totalled 1.24 m bags valued at $ m, a drop of 11.5% and 15.2% in volume and value, respectively compared with a similar period last year. The drop was in Robusta coffee, which stood at 939,594 bags against 1,140,568 bags registered in Oct/Feb last coffee year. The performance of the two types of coffee Robusta and Arabica in the last three (3) years is illustrated in Chart 1 below. The drop in Robusta is a result of the dry spell that hit the Robusta coffee growing areas at a decisive stage of bean development. On the other hand, the continued rise in Arabica quantities is explained by the on cycle, and improved agronomic practices in response to good prices received by farmers. Extracted from the UCDA Monthly Report for February 2010 From the above table we can derive the average per Kg Robusta FOT export price for the period November 09 to February 10, which corresponds with the last main crop season and, therefore, also with the period during which the farmers marketed their coffee. The UCDA report also confirms the dry spell that has affected production in a number of coffee growing areas. 51

52 Extracted from the above, the table below shows a computation of the per Kg value of Robusta coffee on FOT basis. Table 17: FOT values of Robusta coffee exported MONTH 60 Kg bags FOT Value $ USD/Kg Ushs/Kg November 09 Exch. 1,950 Robusta 186,654 15,144, ,637 December 09 Robusta 208,904 16,572, ,578 January 10 Robusta 211,613 17,252, ,650 February 10 Robusta 186,012 14,845, ,594 Total 793,183 63,815, ,615 In Table 2 it was reported that the average FAQ price paid to the farmer groups delivering to the exporter in Kampala was Ushs 2,245/Kg. This works out to approximately 86% of the average FOT value shown in the above table. After DC Company deductions, farmers were paid a price of Ushs 2,010/Kg, equivalent to 77% of the FOT value. In comparison, farmers who sold dry cherry at farm gate (Ushs 890/Kg) only achieved about 68% of the FOT value. On the other hand, farmers who sold in advance and repaid their loans with coffee probably only achieved around 50%. Result 4: Professional coffee know-how is disseminated to other parts of Uganda The KCFASP has always been regarded by many stakeholders, including the Uganda Coffee Development Authority, as a model project. As such, during the 3 rd year of implementation, discussions began on the importance of replicating this project in other districts in Uganda. This rolling out process began in 2009 through a new 2 year grant from the EU to enlarge a small existing project in Luwero district to include 15,000 farmers. This project, now in its second year, has already reached well over 12,000 farmers in Luwero and in parts of Nakaseke and Nakasongola. As the funding for Luwero only covered a period of 2 years, which of course is not sufficiently long enough to execute the whole program and to create sustainable impact, 52

53 the Hanns R. Neumann Stiftung designed an additional project Coffee Farmers Alliances in Uganda (CFAU) which will extend Luwero by a further 3 years and also roll out into Masaka district. Further to this, it will also focus with specific activities in Mityana and Mubende for an additional 2 years to further consolidate the sustainability so far achieved through the KCFASP. The CFAU project will, therefore, mainly operate in Luwero and Masaka districts, but will also provide specific further support to the farmers in Mityana and Mubende districts. In total 35,000 smallholder farming households will be supported; 20,000 in Luwero and Masaka, and 15,000 in Mityana and Mubende. The aim of the project will remain the same, i.e. to raise productivity and quality of the coffee and to establish strong and transparent farmer organizations that can provide their members with access to essential support services. The project will focus on building the technical, managerial and entrepreneurial capacity of these structures to ensure their effectiveness and sustainability. The CFAU project, therefore, is founded on the experiences from the KCFASP, but, in addition, will also be incorporating the following components to further complement the concept of the project: Access to credit shall be substantially improved. In addition to short term funds for commercial operations, also financing for the crop cycle is planned. Farmers and their organizations shall be trained in financial literacy and business planning in order to better assess production costs, improve farm management and to plan the economic development of the organizational structures. Commercial partnerships between farmer organizations and their downstream supply chain partners shall be strengthened. A focus will be put on farm households, strengthening the potential to evolve as a whole (women, men and children). This includes enabling household members to better develop their potential, as well as looking at possibilities to raise income through diversification while reducing risk. A comprehensive mainstreaming gender approach will be designed and implemented as cross cutting through the entire project. 53

54 Up-scaling of experiences will be realized by way of: Replicating: Raising the number of direct beneficiaries by taking experiences from Mityana and Mubende to Luwero and Masaka districts. Moving with the project close to producers in other key production areas of the country. Spreading: Developing tools and instruments to be shared with farmers and stakeholders throughout Uganda and the region. Institutionalizing: Strengthening the Uganda Coffee Farmers Alliance company as an Apex structure and service provider to farmer organizations; membership will be open along certain criteria to ensue coherence and compatibility of members. To ensure sustainability, the beneficiaries shall not only be provided short-term support. Ideally, they will expand their own knowledge and capacities to be able to: increase their production; raise the quality of their coffee; build up their organizations; improve their business network; and increase their incomes on a long-term basis. Through this, their communities will be strengthened and their living conditions will be improved while their environment will be better protected. This rolling out process should not stop in Luwero and Masaka; every effort will be made to progressively move to additional districts such as Rakai, Kamuli, etc. Successful elements from the KCFASP have also been shared with other stakeholders through presentations at steering committee meetings, project visits by numerous stakeholders and through the distribution of progress reports. Further to this the Project Coordinator also represents the coffee projects sector as a steering committee member of the Uganda National Coffee Platform who is implementing the Coffee Production Campaign. Result 5: Farmers are being effectively assisted by project partners and in the long term have access to qualified support services supporting them in meeting their objectives Project partners have contributed extensively with expertise and support for farmers and farmer groups during the project implementation period. Models, such as the APEP organizational development model, created the structure on which it was possible to build and develop. The establishment of coffee nurseries, funded by ASPS, has led to a significant improvement in the availability of high quality planting material; the expertise acquired by the nursery operators in clonal reproduction will become very important once Coffee Wilt Disease (CWD) resistant varieties will be made available to nursery operators by COREC. 54

55 The development of Farmer Field Schools has already shown that farmers are very willing to cooperate to improve their farming practices. This is an effective training mechanism and learning environment which serves to create capacity within a participatory bottom-up approach. Long term access to qualified support services will, however, be available through the Uganda Coffee Farmers Alliance (UCFA), a 100% farmer owned Apex Organization. Uganda Coffee Farmers Alliance Following various meetings and studies, the Uganda Coffee Farmers Alliance was finally incorporated at the end of the 5 th project year, as a Company limited by guarantee with no share capital. This activity was completed approximately 2 years later than envisaged at the beginning of the project, but it was important to first build sufficient capacity in the DC Companies to be able to support the apex body. The decision of registering the UCFA as a Company Limited by Guarantee without Share Capital was a result of two independent studies conducted by two legal consultants; both suggesting the same setup. The UCFA was formed by the DC Companies. Its motto is Emwanyi Bwe Bugagga which means Coffee is Wealth. This clearly reflects what this project has been about - showing the farmers how to turn coffee production, as it once was, into a profitable business. The UCFA was built over 3 years with full participation from the farmers. A Company Formation Committee (CFC) composed of 13 farmers from different Depot Committees was elected to drive the process, thereby participating in all the steps up to incorporation. Regular meetings were held with the CFC to exchange ideas, to discuss progress and to agree on the next steps. Also the two legal consultants who worked on the incorporation of the UCFA held several meetings with the CFC; this was important to clearly understand the farmers views and needs, to guide the registration process and to advise on the legal implications of setting up a Company. As such, the process was very much bottom up, taking into consideration information from grass root level and focusing on priorities and requirements of the farmers. It was critical to clearly understand the farmers expectations of the UCFA: what role it would play; what additional functions it could perform, which the individual Companies could not; how it would be financed; and how it would be governed and managed; etc. 55

56 From the various discussions it was clear that farmers saw a definite need and role for an Apex Organization. The following are some of the reasons that were brought forward: Coordination and communication role. There is concern that the absence of a project field office and staff will leave a vacuum in the coordination and communication of activities between the DC Companies. Linking the DC Companies to good markets and searching for the best marketing opportunities. Monitoring the market closely in order to be able to react to new trends and requirements. Taking advantage of economies of scale though an increased volume. Provision of additional services. The UCFA should establish links with service providers and other organizations, and negotiate on prices and fees. This would include financial institutions, input suppliers, transporters, processors, etc. Developing and enforcing a code of conduct to which members must comply. This is to ensure that all member organizations employ good business practices, operate along similar core values and that all support and contribute to the further development of the UCFA. There is no room for free riders. To contact and attract development organizations to the area. The organizational structure in place provides a very effective platform for dissemination of information and training. Any assistance in the fields of health & sanitation, education, literacy, alternative energy, etc, would greatly benefit the community. Representation at national and international level and promotion. Additional functions that have not been mentioned by the farmers but that could also be carried out by the UCFA, at a future stage would be: To manage a certification scheme and become the certificate holder on behalf of the farmers. To carry out export processing; initially to sell graded coffee to exporters but at some point in the future to also export. To carry out storage, position management, including hedging. 56

57 The CFC members were also very clear in their views of what would make the Alliance succeed and what would make it fail. They stressed the importance of good governance, transparency, effective communication and good support by the DCs as critical criteria for success. DC Companies have already agreed, as a start, that 0.5% of all coffee sales revenue should be paid to the UCFA as a commission. This is not sufficient to cover the full overheads, but for the first 2 years an outside budget will contribute to covering most of the costs. Volumes of coffee still need to increase significantly, both from the current members, i.e. the DC Companies in Mityana and Mubende, but also from new DC Companies that will be established in other districts such and Luwero, Masaka where the project has been rolled out. The UCFA is also open for membership for any other legally registered coffee farmer group who is willing to meet the membership requirements and to comply with the code of conduct. The UCFA will be based for the first year in Mityana town but will be relocated to Kampala once new member from other districts will start joining. Being in Kampala will also help in developing a closer contact with buyers and service providers. Initial operating costs, including overheads, will amount to approximately Ushs 100M per annum. This cost will have to be covered through commissions on coffee sales, membership fees and other means. The level of commission that the UCFA will be able to charge will depend on its ability of achieving the best possible price and on adding as much value to the coffee as possible. In about 2 years the UCFA should have at least 50 active members as the KCFA project has already been rolled out into Luwero and Masaka districts with the objective of establishing more DC Companies. With an average contribution of 30 MT FAQ from each Company, the total volume channeled through the UCFA would be about 1,500 MT FAQ. At current prices this volume of coffee would have a value of about Ushs 3.4 billion. Therefore, to cove the UCFA s yearly cost a commission equivalent to 3% of proceeds, or Ushs 66/Kg would need to be charged. This is very plausible both in terms of volume (in the long run expected to be even higher) and willingness of the farmers and DC Companies to pay this commission. Project Budget and Expenditures The total project budget for the 5 year period is outlined in the table below. 57

58 Table 18: Project Budget in Euros Project Phase 3 Year Pilot Phase 2 Year Extension Phase Total Budget over 5 Years European Union Government of Uganda Agricultural Development Programs Private Sector Total 1,768, , , ,300 3,583, ,140 92, ,200 85, ,340 2,309, ,500 1,020, ,300 4,404,190 The EU budget was all provided as cash, while the rest of the contributions were mainly inkind. Only about 10% of the Agricultural Development Programs (which includes APEP- USAID, ASPS-DANIDA and LEAD-USAID) support was provided as cash. In-kind contributions were mainly in the form of: Supply of inputs such as seedlings and agrochemicals for demonstration plots Procurement of equipment such as quality control instruments for DCs, tarpaulins and bicycles for Lead Farmers Construction of coffee nurseries and establishment of mother gardens Provision of expert field staff such as Producer Organization Trainers Training for field staff and farmers Recruitment of consultants and experts for specific missions From the EU, a total of Euro 2,078,062 was received. Of this amount, approximately Euro 2,033,000 was spent, about 88% of the funds received. It is, however, difficult to attribute an accurate value to the total in-kind contributions, mainly with regards to training costs, field staff, expert staff and some activities. 58

59 Conclusion Starting from a situation where farmers were on the verge of abandoning coffee production to the current situation where more coffee has been planted, good agricultural practices have been adopted, post harvest handling has been greatly improved and farmers have become prominent players in the coffee value chain, is a very big achievement. This project has shown farmers how to turn coffee production and marketing into a commercially viable business. The true potential of activities such as value addition and bulk commercialization was not known to the farmers. Their only previous experience was with poorly and inefficiently managed cooperatives, where leadership often lacked professionalism and transparency. It was, therefore, not surprising, that it was a big challenge to once again bring farmers together in producer groups. They were, understandably, initially skeptical about the project s objective of forming new farmer organizations. The organizational development process was, therefore, slower than envisaged as it took time for farmers to build up trust again. Most DCs changed their leadership a number of times and each time this resulted in a setback in their development. Nevertheless, once the right leadership was elected, and once it became apparent to farmers that they were able to accomplish much more in a group than individually, the momentum picked up and so did the pace of further development. Today, farmers are very eager to test new activities and the highly improved marketing system has provided them with a big incentive to further improve coffee production. Further to all the important achievements listed, the KCFASP project has also provided very important lessons and experiences which are invaluable in the rolling out process. These experiences are mainly with regards to activities carried out, to assumptions made vs. realities in the field and to elements which were not sufficiently taken into consideration during the project process. Some of the most important of these experiences and lessons are the following: The time required for the formation of functional farmer groups was definitely underestimated. The initial plan of establishing an Apex Organization during the first 3 years (pilot phase) was clearly unrealistic. In fact, it took 5 years for the DC Companies to gain sufficient capacity to support an Apex structure. 59

60 The extent to which farmers depend on middlemen for credit and loans has also been hugely underestimated. As already mentioned, one of the main reasons why DC Companies are currently only accessing about 30% of the members coffee is because most of it is tied up with middlemen in repayment of loans. This constraint should have been addressed sooner by focusing on alternative ways for farmers to borrow, at much lower interest rates, and still allowing their coffee to reach the Depot Committees. The development of Village Savings and Loans Schemes has been encouraged at PO level, and very importantly relationships between DC Companies and financial institutions have been developed for access to credit. Farmer Field Schools should have been introduced much earlier in the project as they have shown, in a relatively short period of time, their effectiveness in bringing farmers together to jointly attempt to find solutions to common issues. This would have also speeded up the uptake of good agricultural practices. Further to encouraging women participation in meetings and in taking up roles in the leadership of farmer organizations, a comprehensive focus on gender and youth was not part of the project. However, from observations it has become evident that, generally, farms perform better when there is dialog and cooperation between husband and wife within the household. The relationship between marketing efficiency, value addition and improvement in production was underestimated. Now that farmers have found a way of avoiding the devious practices of the middlemen, the drive to improve production has been revitalized. Ownership of the farmer groups has been strengthened significantly through the registration of Depot Committees as Companies. Farmers have realized that they own the decision making process and that they are now responsible for the success of their Company. The introduction of internal audits and control committees has been very successful in enhancing the trust of the farmers in their leadership. The establishment of Zonal Marketing Committees to coordinate sharing of trucks and deliveries to Kampala shows that DC Companies are willing to cooperate if efficiency can be enhanced and economies of scale can be achieved. This is very important for the success of the UCFA. All these experiences have contributed to a more in-depth and comprehensive understanding of the constraints faced by smallholder farmers. These lessons are invaluable for continuously updating and enhancing the approach, such that, interventions 60

61 in new areas, for example in the rolling out process, can be more focused and specific in addressing these issues. The project has also highlighted the advantage and the importance of a multi stakeholder approach, where different partners have contributed with their specific expertise and with additional tools, concepts and strategies. This has been very important for both enhancing and guiding the project process. As such, all the partners have played a key role in the successful outcome of the Kaweri Coffee Farmers Alliance Support Project and in enriching the project approach, which, in years to come, will benefit many more smallholder coffee farmers in Uganda. 61