_would be a very big boast to the industry”_ (p. 5). _“We must join the rest of the coffee world on increasing the domestic consumption at the origins”_ (p. 7). _“Promote coffee consumption in pro‐ ducing countries”_ (p. 42). ” _... create public awareness and boost the domestic consumption”_ (p. 48). _“Other critical program features include ... increasing the domestic consumption of coffee”_ (p. 63).

If the objective of increasing domestic consumption (currently estimated at about 100,000 bags) is to enhance rural incomes, this is unlikely to be achieved because, as mentioned earlier, domestic coffee processors will pay the same price as exporters and hence producers will receive the same price regardless of whether their coffee is con‐ sumed in Kampala, Rome or Beijing.

On the other hand, if the objective is to counter declines in international prices of coffee by reducing Uganda’s supply to the international market, attainment of that ob‐ jective is also questionable. Given Uganda’s relatively small market, even large in‐ creases in domestic coffee consumption will not have any discernable impact on global consumption and hence no effect on world price. To see this, consider the most often cited cases: Brazil (world’s largest coffee supplier) and the US (world’s largest coffee consumer), both of which have per capita coffee consumption of about 4 kgs. With a population of a little over 24 million, even under a 5 percent annual growth assumption, it will take Uganda more than half a century to reach the per capita coffee consumption of Brazil or the US. Under this scenario Uganda will consume 1.6 million bags of coffee, unlikely to make any difference in the global market, as this would represent less than 1.5 percent of global consumption. (For comparison, consider that the combined coffee consumption of Brazil and the US is 36 million bags out of 120 million bags of global consumption, equivalent to a 30 percent share.) Moreover, since coffee is expensive for the average Ugandan, it is highly unlikely that a 5 percent annual growth (assumed in the above scenario) will be achieved. The domestic consumption survey conducted by UCDA in conjunction with the Uganda Coffee Roasters Association found that the key reasons for the low domestic coffee con‐ sumption in Uganda was the high price of coffee compared to close substitutes like tea (UCDA _2003/04 Annual Report_ , p. 12). According to the same survey, a cup of coffee in Uganda costs, on average, Ush 500, which is equivalent to almost a quarter of an un‐ skilled worker’s daily earnings. Further, any increase in coffee consumption is likely to come at the expense of tea (the preferred drink in Uganda according to the survey).

# **_5.5 Establishing a Coffee Auction_**

The introduction of a coffee auction has been often argued as a way to increase market‐ ing efficiency, especially price transparency. Given that an auction would be owned and managed by the private sector, the key issue is whether there are policy‐related im‐ pediments preventing the private sector from introducing it. It appears that such im‐ pediments do not exist. The coffee auctions of Moshi (Tanzania) and Nairobi (Kenya)

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