For many years, coffee has been a major source of income to many Ugandans. Traditionally, Uganda coffee farmers have sold their coffee in unhulled form as dried cherries (Kiboko) through governmental parastatals. Structural changes in the agricultural sector arising from policy reforms that Uganda embraced since 1990 (notably liberalisation, privatisation and decentralization) removed the monopoly of governmental parastatals in agricultural marketing and pricing which was a disincentive to improvement of quality and quantity of output. Because of liberalisation, coffee quality and exports declined as the traders were more concerned about quantity rather than quality, which led to low prices and consequently low farm incomes. In response to this, value addition through hulling prior to marketing by farmers was suggested as one of the remedies. However, the rate of adoption of this strategy remains disappointingly low. The purpose of this study is to determine the factors underlying the adoption of coffee hulling by farmers, and to estimate the price elasticities for hulled and unhulled coffee sold. 300 farmers were randomly selected and interviewed using a structured questionnaire. Descriptive statistics were used to characterize and highlight differences between farmers who sell hulled and unhulled coffee. The censored Tobit model was used to analyse the factors that influence the sale of hulled coffee. Two OLS models for the marketed supply of unhulled and hulled coffee were estimated and their corresponding elasticities determined. The results indicate that higher market prices of hulled coffee positively and significantly (p<0.01) enhance the proportion of hulled coffee sold, while distance from the farmer’s home to the coffee processing factory and drought conditions during the season significantly (p<0.05) reduce the proportion of hulled coffee sold. Membership in farmer associations has a positive and significant influence on the amount of hulled coffee sold because it enables farmers to transport and sell together thereby reducing the transaction costs borne by each farmer. The sale of hulled coffee was found to be more price responsive than the sale of unhulled coffee both in the short and long run. Based on these findings the study recommends supporting the development of farmer institutions as a way of promoting the uptake of coffee hulling and value addition to improve farmers’ incomes. In addition, the bulking of coffee among farmers should be encouraged and accompanied by provision of market information to farmers for both hulled and unhulled coffee to help them to make informed decisions on where and what form of coffee to sell. There is also a need to invest in improving farmers’ access to processing facilities, since long distance to such facilities is shown to have a negative effect on the sale of hulled coffee.