Flower farmers held back by dollar's rise

A worker arranges roses for export to the European market at the Maridadi flowers' warehouse in Naivasha on April 19, 2010. The slump of European currencies against the dollar is eroding earnings from horticulture and cut flower farmers in Kenya. PHOTO | THOMAS MUKOYA |  REUTERS

In Summary

• Kenyan farmers receive their payments in euros and pounds while all their procurements except the wage bill are done in dollars.
• “The strong dollar has pushed the cost of business up and the weaker European currencies are eroding profits,” Ms Jane Ngige, Kenya Flowers Council boss told the Nation on phone.
• CfC Stanbic Bank Regional Economist Jibran Qureishi said with Russia reeling from sanctions and economic slowdown and euro and pound depreciating, modest players in the industry may be hit hardest.
• The Kenyan horticulture industry is still recovering from the sharp shilling depreciation as well as wet weather from the El Nino.

By OTIATO GUGUYU
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Slump of European currencies against the dollar is eroding earnings from horticulture and cut flower farmers in Kenya.

The Euro has shed 0.29 per cent year to date against the dollar while the Great Britain Pound (GBP) has shed 3.28 per cent.

And the potential exit of Britain from the European Union called Brexit, has dampened expectations after it touched 1.40 against the dollar being an almost seven-year low.

Kenyan farmers receive their payments in euros and pounds while all their procurements except the wage bill are done in dollars.

(READ: Not a rosy affair, but flowers bloom)

“The strong dollar has pushed the cost of business up and the weaker European currencies are eroding profits,” Ms Jane Ngige, Kenya Flowers Council boss told the Nation on phone.

CfC Stanbic Bank Regional Economist Jibran Qureishi said with Russia reeling from sanctions and economic slowdown and euro and pound depreciating, modest players in the industry may be hit hardest.

“If you are not big enough to whether the storm you might end up cutting inventory because Russia was one of the biggest buyers,” he said.

EL NINO EFFECT

The Kenyan horticulture industry is still recovering from the sharp shilling depreciation as well as wet weather from the El Nino.

Ms Ngige said the damp weather has pushed up costs even further as farmers had to pay attention to pest control which is an expensive exercise.

The Central Bank of Kenya (CBK) boss Patrick Njoroge is, however, upbeat of a better performance in the horticulture and cut flowers this year on the back of a resolution with European market over minimum residual levels on exports.

In 2014 the EU gave Kenya an ultimatum to ensure all produce meant for the market should not contain more than 2 per cent of chemicals or herbicide sprayed on the crop or lose the Sh100 billion market.

Kenya Plant Health Inspectorate Service analytical chemistry laboratory was recently re-accredited by the South African National Accreditation Service to test produce destined for European markets.

“Cut flowers are seasonal but this quarter with events such as Valentine’s Day and Mother’s Day, there will be rise in demand,” Dr Njoroge said.

He added that with Columbia, Kenya’s major competitor in cut flowers facing adverse effects of the El Nino, may mean Kenya will have to export more to Europe.

The government is also in talks to open direct flights to the United States which may open the market to Kenyan horticultural exports.