This paper investigates how external trade shocks transmit into household-level income volatility in Uganda, a low-income economy heavily dependent on cash-crop exports. Merging highly disaggregated customs data on coffee, cocoa, tea, and tobacco shipments with five waves of the Uganda National Panel Survey (UNPS, 2009/10–2019/20), we construct a shift-share measure of district-level trade exposure that exploits plausibly exogenous movements in world prices and destination-country demand.

Main findings:

Difference-in-differences and instrumental-variable estimates show that a one standard-deviation increase in export-price volatility raises the inter-temporal variance of farm profits by 9–12% and total household income by 6–8%, with effects concentrated among smallholders cultivating less than two hectares.

Transmission mechanisms:

Transmission operates through both price pass-through and quantity adjustments: farmers expand acreage and switch toward the volatile crop when global prices spike, but face sharper post-shock contractions in output prices when world markets soften.

Heterogeneity and buffering factors:

Heterogeneity analysis reveals that access to contract farming, cooperative membership, and mobile-money penetration each attenuate the volatility effect by roughly one-third. Conversely, households lacking formal savings instruments experience a threefold larger rise in income risk.

Counterfactual simulations:

Counterfactual simulations indicate that a 25% reduction in trade-policy uncertainty in destination markets would lower the probability of falling below the national poverty line by 4.5 percentage points.

Conclusion and policy recommendations:

Our findings highlight the double-edged role of global cash-crop markets: while they raise average incomes, they also expose vulnerable rural households to greater macroeconomic risk. Policy recommendations include deepening domestic price-stabilisation schemes, promoting farmer organisations, and expanding mobile-based savings to cushion external shocks.