Flower exporters enter high season amid euro jitters
What you need to know:
Flower growers say forex volatility, eurozone crisis and poor weather will reduce sales.
But industry players say the sector has witnessed “good” sales in the just-ended May to September low season ahead of fresh Christmas, Valentines and the European Mothers Day orders.
Over the last four years, while volumes have been static, returns have only gone up whenever the shilling has weakened further, which gives the industry a glimmer of hope.
The October high season for Kenya’s fresh produce starts this week with exporters optimistic of good business despite forecast that full-year numbers will fall short of 2011 sales.
Flower growers say forex volatility, eurozone crisis and poor weather will reduce sales. “We are going into the high season but the weather has been unfavourable. It has been extraordinarily cold which has prevented the flowers from blooming. This is in addition to the euro zone crisis,” said Kenya Flower Council CEO Jane Ngige
But industry players say the sector has witnessed “good” sales in the just-ended May to September low season ahead of fresh Christmas, Valentines and the European Mothers Day orders. The latter orders are expected to start trickling in October and throughout the next six months.
“Egypt and the whole of North Africa region are not selling much currently. Dry weather in Peru has also favoured us,” said Stephen Mbithi, chief executive of the Fresh Produce Exporters Association of Kenya (FPEAK).
Dr Mbithi, whose organisation mainly represents small and medium-sized growers of fruits and vegetables said in a telephone interview that recent heavy rainfall had hampered production in the Rift Valley while drought was the main challenge at the beginning of the year.
Besides the weather the volatile shilling against the euro and dollar mainly during the first half of the year has negatively impacted the sector, resulting in high production costs.
In 2011, the horticulture industry earned the country Sh91 billion, up from Sh36 billion in 2010. Of these, flowers realised Sh58 billion from the sale of 110,000 tonnes.
Over the last four years, while volumes have been static, returns have only gone up whenever the shilling has weakened further, which gives the industry a glimmer of hope.
“The market has been static in terms of tonnage. Now, the sterling pound is selling at 137/8 which is Sh10 more than last year. In terms of shillings, earnings have then gone up,” said Richard Fox, director for Sustainable Development at Finlays Flowers.
Forecasts by the meteorological department indicate that El Nino-like rains will be recorded in the main agricultural parts of the country further dampening the sector’s prospects.
Another hurdle is the conclusion of ongoing negotiations to craft a trade deal for retaining duty-and quota-free Economic Partnership Agreements (EPAs) market access. East African Community (EAC) has to conclude an EPA next January or attract a 10 per cent export duty in the EU.
EAC has delayed signing as issues are ironed out by both parties, including conditions for economic and development co-operation, rules of origin export taxes and the most-favoured nation clause are contested.
