Analysing milk price incentives to strengthen policies for dairy production and exports in Uganda
The dairy sector accounts for 6.5 percent of Uganda’s agricultural gross domestic product and is a key industry outlined in Uganda’s Third National Development Plan. Dairy export revenues reached a record high of UGX 358.6 billion in the period 2017–2020, but despite the impressive growth, dairy export values fell short of the Agro-Industrialisation Programme targets of UGX 368.7 billion for the first year. The dairy sector is also hampered by low milk productivity and demand, a large informal sector, and non-tariff barriers to international trade.
This study, produced jointly by the Food and Agriculture Organization of the United Nations (FAO) and Uganda’s Dairy Development Authority, reviews price incentives to smallholder dairy producers by assessing the effects of trade and market policies and dynamics on domestic milk prices in Uganda from 2005 to 2021, using indicators such as the nominal rate of protection (NRP), nominal rate of assistance (NRA) and the market development gap (MDG). These indicators reveal that milk farmers and traders receive prices below the international-equivalent price due to a largely informal and poorly integrated market, prohibitive marketing costs, and a drop in international demand of Ugandan milk. The study recommends increasing market access and commercialization of the sector by improving transport infrastructure, addressing food and mouth disease, diversifying export markets, incentivizing formalization through a training and certification scheme, and supporting a commodity manufacturing cooperative to promote value addition. This report informed the formulation and adoption of the Dairy Policy Action Plan by the Dairy Development Authority.
