Pricing policy and the disappearing farmers' income in Uganda's cotton industry

Abstract

This paper examines the effect pricing policies pursued by the Lint Marketing Board have had on the level and stability of cotton farmers' income over time. First, an accounting of the disbursement of total realised export income is used as the basis for determining the extent to which marketing board pricing has depressed and stabilised producer incomes. Secondly, supply elasticity analysis is incorporated in the model to measure the possible full magnitude of the income effect of pricing policy. Then, the income stabilisation role of the board is retested. The paper concludes that farmers have faced a two stage robbery machinery; firstly through the direct reduction in potentially realisable income with no adjustment in supply and secondly, through the inevitable upward supply adjustment if producer prices were anywhere close to export prices. With either approach, however, the board seems to have lessened the potential instability of producers' income.