The Impact of Coffee Price Changes on Rural Households in Uganda

Based on household survey data, this paper investigates the impact on coffee and non-coffee households of the pronounced coffee price fluctuations in Uganda during the 1990s. As expected, the price boom of the early 1990s was associated with substantial poverty reduction for coffee farmers. More strikingly, their poverty incidence continued to go down when prices fell again. This may be explained by a combination of factors: first, coffee production increased after 1995, probably as a delayed response to improved price incentives; second, there is evidence of consumption smoothing among specialized coffee farmers; and third, coffee farmers diversified into alternative crops. Non-coffee farmers seem to have benefited from the income generated through the coffee price boom. For the second halve of the 1990s, by contrast, it is impossible to discern any indirect effect of the fall in coffee prices from the data, which does, however, not necessarily indicate that there was none but may as well be due to the fact that other factors dominated the price change.