RICE VALUE CHAIN IN UGANDA 2015
MINISTRY OF FINANCE,PLANNING & ECONOMIC DEVELOPMENT
3
Competitiveness & Investment Climate Strategy
Enhancing Compentitiveness through public private partnerships
RICE VALUE CHAIN IN UGANDA 2015
Over view
Table 1: Top five producing countries
Rice is one of the 12 priority commodities in the National Development Plan II (NDP) identified for economic growth in the country. The crop has a long value chain that employs many players, high gross margins and also has an ability to develop other sectors for example feeds for the livestock industry through its by products. The goal in the Uganda
1Food and Agriculture Organization,2013
National Rice Development Strategy (UNRDS, 2008-2018) is to triple rice production to over 499,000mt by 2018. This paper highlights the challenges/pain points along the entire rice value chain, which if not addressed may affect the achievement of the goal and ultimate contribution to the overall vision.
The boom in rice production in the Asian part of the world is attributed to development and adoption of modern farming technologies especially early maturing varieties that can produce 2-3 crops a year.
The 3 major systems under which various rice varieties are grown worldwide include;
• Irrigated low land systems that produce nearly three quarters of world rice production,
• Rain-fed lowlands which produce about
20% of world’s rice
• Upland rice farming which produces
only 4%
Yields generally range from 1t/ha under poor rain fed conditions to 10t/ha in intensive temperate irrigated systems. Average rice yields for big players like Japan are 5.8MT/ha, China-5.6MT/ha and Indonesia-4.3MT/ha as compared to world average of 3MT/ha, an indicator that it is possible to have such yields and even more in all other areas especially Sub- Saharan Africa that is more endowed naturally than other rice growing areas. Global per capita consumption is currently estimated to be 57.3kg per year. This justifies the estimate that one third of the world’s population heavily depends on rice and rice products for food and with the consistent increases in demand, it is expected that by 2040, the demand will have risen by 40%.
2United States Department of Agriculture, Economic Research Service,2015
MoFPED 1
Demand trends have influenced the strict restrictions that most Asian countries have imposed on rice imports and exports in order to ensure food security for the locals. This has also influenced the global rice trade which accounts for only 7-9% of total rice production (USDA, 2015). Table 2 shows major countries controlling the rice market worldwide.
Table2: World’s Leading Rice Exporters and Importers
The United States though producing less than 2% of world’s rice, it accounts for more than 10% of global rice trade. It emerged among the top five exporters in 2014/2015 with over 3,000metric tons exported mainly to Mexico, North East Asia and smaller volumes to Canada, EU and sub-Saharan Africa (USDA, 2014).
Source: Statista online portal,2013
The Rice commodity in Africa
their rice requirements which is a good market opportunity for Uganda.
Africa produces and consumes an average of 14.6 million tons (2.6% of world production) of rice per year on 7.3 million hectares (4.6% of world total area under rice). Annual per capita consumption has doubled since the 1970s to 27kg owing to the increase in importance of the crop in some of the countries like Cote d’Ivoire, Mali, Mauritania, Niger, Nigeria and Tanzania. This is in addition to the fact that it is also a staple crop in countries including; Cape Verde, Comoros, Gambia, Madagascar, Liberia, Egypt, Senegal,
Guinea, Guinea Bissau, Sierra Leone and for some countries like Ghana, Uganda, Angola, Benin, Burkina-Faso, it is very important for food security aspects (UNDP,20123). However, the general average grain yield on the continent is 2Mt/ha as compared to 3.4Mt/ha worldwide and only 11% of rice area is irrigated compared with 53% world-wide. Due to the low productivity levels, 21 out of 39 rice producing countries can hardly produce enough for own consumption. They import between 50 and 99% of
Rice production in Africa is characterized by;
• Small quantities compared to demand
• Poorly processed/packaged rice that
cannot compete with imported rice.
Most of the countries are now trying to create an enabling environment that will help boost production quantities and quality and reduce dependency on imports. Graphs below show rice production by region.
Graph 1&2: Rice production by region in Africa
Source: International rice commission newsletter,2015
The use of improved technology has created a boost for rice sectors in the Northern Hemisphere especially in Egypt which is an implication of importance of increased productivity in relation to expansion.
3United Nations Development Program,2012
2 CICS/MoFPED
East Africa Rice Sector
RICE VALUE CHAIN IN UGANDA 2015
The East African Community (EAC) region has seen consistent increases in rice production and demand. It comes second after maize in form of importation and exportation beyond EAC borders and it is also the most traded food commodity
across borders in the EAC region (UNDP, 20124). According to (Kilimo trust report, 20125), consumption of rice in East Africa has grown at an average rate of 4% per annum over the ten year period to 2012 with a strong upward trend of 7.21% that
was registered between 2001-2005. The recent decline in African imports though small is also attributed to East Africa. Table 3 shows statistics in the region at country level.
Table 3: Domestic rice supply in East Africa
Madagascar and Tanzania stand out as major rice growing countries. High population growth rates and inefficiencies in the value chain systems that limit quantities and quality have kept the region dependent on imports and this is increasingly becoming very risky, expensive and unsustainable.
Source: CICS analysis,2015
Rice sector in Uganda
Introduction
Rice is the 2nd most important grain commodity in Uganda after maize making it one of the 3 major grain commodities (maize, sorghum and rice) that are grown for commercial purposes in the country. Unlike other East African countries, Uganda can actually grow both upland and low land rice. According to the benefit cost analysis in studies done by National Agriculture Research Organization (NARO), both rice
types are profitable though low land rice has slightly higher margins than upland rice. Furthermore, rice byproducts if properly utilized are capable of leading to increased rice production and increased efficiency of the chain. Finally, it is also one of the most imported/exported commodities in the E.A.C.
With the promotion of upland rice, production is now done in all the regions including; the west (upland varieties),
Eastern (lowland varieties), northern (upland/lowland) and central regions (upland). However, the traditional growing areas include; Pallisa, Budaka, Butaleja, Tororo, Bugiri, Iganga. In the north, we have Gulu, Lira, Amuru and Kitgum. It is estimated that 59% of area under rice is under lowland rain-fed conditions, 36% is upland rain-fed rice and 5% irrigated rice.
Production trends
Rice demand has grown at an average rate of about 9.5% per year since 2000 and is currently at an average of 223,000mt and production is at 214,000mt. With a per capita consumption of 8kg, population growth rate of 3.2% and a production growth rate of 3%, the demand still outweighs production and will continue to grow. Despite the increase in production, average annual net import is still at about 60,000-125,000MT. Imports are mainly from Vietnam (37.7%), Pakistan (36.1%), Tanzania (13.7%) and Thailand (2.1%). Uganda does have some annual export sales that range from 40,000-70,000mt/year which is approximately USD 20-30 million. Main destinations include Rwanda, Kenya, DRC and Southern Sudan. Tables 4 and 5 show production and export trends for the last four years.
4United Nations Development Program,2012
5Expanding markets for Rice in the East African Community Region,2012
CICS/MoFPED 3
Table 4: Production trends
2010 / 2011 / 2012 / 2013Area(‘000 ha) / 87 / 90 / 92 / 93
Prod(‘000 tons) / 218 / 233 / 212 / 214
UBOS, 2014
Table 5: Export trends
Exports / 2010 / 2011 / 2012 / 2013Quantity(tons) / 33,323 / 38,254 / 69,914 / 71,017
Value(‘000 US $) / 16,456 / 18,442 / 38,886 / 36,966
UBOS, 20146
As seen above, area and quantities of rice produced have been increasing as well as exports. Export growth has also been driven by opening up of new markets like South Sudan. However, production increase was attributed more to land expansion, mainly driven by introduction and popularization of upland rice. Unfortunately this method is not sustainable due to;
• Finite nature of land.
• High population growth rate,
• Increased labor costs,
• Crop growing is also associated with mineral mining implying that new land also eventually loses its fertility.
Thus, this paper proposes that land intensification rather than land expansion is promoted for increased production. A study by Kilimo Trust projects productivity rising to 8MT/ha with intensification.
Below is a figure showing various stages rice commodity from production to consumption.
Fig.1: Rice value chain mapping
Adapted from ACF International report, 2014
Main constraints affecting actors at rice production stage
• Access to inputs and general
market information
Fertilizer and good quality seed can raise yield by more than 5-20% however accessibility is limited by high prices, transport costs and ignorance. Input
suppliers also lack adequate information about input market size which leads to over or under supply of inputs causing artificial price fluctuation. Over 50,000mt is needed to satisfy demand and yet slightly over 504mt is available from seed companies.
• Fake inputs on the market
These have biased farmers and
consequently discouraged growth of the input industry.
• Poor farming practices
Low awareness levels on productivity aspects which are worsened by in- availability of extension agents and the high farmer to extension ratio. NB: Low productivity has kept prices of local rice higher than those of imported
6Uganda Bureau of Statistics, Statistical abstract ,2014
4 CICS/MoFPED
rice. A rice farmer in Thailand spends 14 man-days in rice production while a Ugandan farmer spends an average of 130man-days per hectare per season. In addition, the high level of subsidization received by Asian farmers continues to erode any productivity gains made by our farmers.
• Research is poorly funded
This has limited quick availability of new seed types or production of enough breeder and foundation seed.
• Dependence on rain
Dependence on rain limits yield and the number of times rice can be grown in a year. Most developed countries are able to produce 3 crops a year due to well developed irrigation infrastructure. In Uganda, only 5% of irrigable land (15,000ha out of 40,000ha) is under formal irrigation, 77% of which is on private commercial plantations (JASAR, 2015)7
• Processing and Value addition Good quality rice is highly dependent on quality of post harvest handling activities. However, these post harvest activities are done manually and poorly lowering efficiency and consequently losses both in terms of quantity and quality. This is further complicated by the commonly used two stage mills with 65%
efficiency level. The country only has 11 good mills with de-stoners and packing units that are located far away from the production areas, mill-tops (21%) and rudimentary poor performing engel- bergs (78%). Important to note is the mills are not fully utilized throughout the year due to low production volumes and off season period (UNDP, 2012)8 . Major actors at this point include; millers, transporters and traders. By products such as rice husks are yet to find a high value market in Uganda.
Main constraints in rice value addition
• Low awareness levels
Post harvest machines such as threshers have been developed at Namalere research center however the challenge is their availability and affordability.
• Bad habits, finances and low storage capacity affect quantity and quality
Habits due to ignorance and lack of a clear vision such as drying rice on bare ground has greatly affected rice quality especially color and cleanliness. These habits are also greatly fuelled by inability of the middlemen to pre-finance production and being able to hire adequate storage and required post harvest material to
RICE VALUE CHAIN IN UGANDA 2015
contain the volumes.
• Low paddy volumes
Most of the big mills in the country are operating below capacity for example Upland rice millers with a capacity of 20,000mt can only manage 10,000mt. Kenyan market would be a good driver for increase in our production volumes since they import over 350,000mt from Pakistan. This would also in the long run help millers operate at full capacity. However, access to the market is limited by CET which is at 35% for Kenya instead of 75%.The difference in CET lower rice prices on the Kenyan market and encourages smuggling. The latter depresses prices of both imported and local rice on the Ugandan market which discourages local production volumes.
• Inefficient Gov/t service provision 70% of the rice mills in Uganda use electricity and are better preferred than those that use diesel due to lower maintenance and engine costs, however power cuts limit their efficiency and necessitate the need for the latter which lowers profit. The poor road net works raises transport costs and encourage presence of brokers who lower farmer profit.
• Milling efficiency
With the commonly used mills, byproducts are limited to bran mixed with husks yet with advanced mills, rice husks, bran and brewers rice are produced separately creating an enabling environment for the establishment of forward industries such as industries producing rice porridge, rice flour. Husks can be used in the energy industries while brewers’ rice can be used in manufacture of alcohol.
7Joint Agricultural Sector Annual Performance Review report,2015
8United Nations Development Program report on Development of inclusive markets in Agriculture and Trade,2012
CICS/MoFPED 5
• Marketing
40% of rice produced in Uganda is partly consumed as food and reserved for seed. The 60% is sold to middle men, traders and consumers at prices that vary from place to place between Ushs 1500 per kg – Ushs 2500 per kg of locally produced rice. Rice is majorly sold in 100kg bags by most business men except TILDA and Upland which lowers its appeal to the urban market. Major domestic outlet for local rice is Kampala. Major actors at this point include wholesalers and retailers.