Abstract

The organic pineapple sub-sector in Uganda has existed for slightly over 10 years. Whereas the sub-sector targets the organic market, slightly more than half of the organic pineapples produced by farmers are sold in this market and the rest is sold to the conventional market. This study aimed at determining the transaction costs that limit the amount of organic pineapples sold by farmers to the organic market. The study also aimed at establishing the relationship between the transaction costs and governance of the transactions between farmers and exporters. Data were collected from 140 organic pineapple farmers and seven organic pineapple export companies. Qualitative methods and econometric methods were used in data analysis. Findings show that there were high asset specificity and uncertainty in organic transactions, which resulted into farmers selling only a proportion of their produce to exporters. Involving farmer in contract formulation, trust, distance to collection centers and high asset specificity increased the proportion of pineapple sold by the farmers while farmers’ experience reduced the proportion sold. There were three forms of governances between farmers and organic exporters; the captive, modular and relational governance. The relational governance had the highest transaction costs, and less proportion of organic pineapples were sold in this governance. The study recommends transaction cost reduction strategies such as organizing farmers in cooperatives, trust building and engaging farmers in contract formulation.

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