Weather-caused EU horticultural demand wreaks producer havoc in Kenya

Kenya's horticulture industry authority has threatened to blacklist agents and marketers who engage in "poaching" produce grown for other buyers, as strong demand for fresh, foreign produce has thrown the local industry into a procurement spin.

Traditionally, the onset of summer in Europe in June spelt lower sales for Kenyan horticultural exporters as EU growers ramped up their own production. But this year, unstable weather patterns that are being pinned on global climate change has set back horticultural production in markets such as the UK, and that has meant a stronger than usual demand for imports from countries like Kenya.

"The EU market demand has been unexpectedly high, catching local producers unawares," said Jotham Ouko, a manager at the Horticultural Crops Development Authority (HCDA). "Worse still, unusual heavy rains early this year destroyed a lot of the crop here."

The situation of high demand, normally a boon to local growers and exporters, has hit crisis levels as traders have started deviating from established contractual supply chains to meet the lucrative European market, Ouko said. "Some exporters are pushing farmers even to disregard the existing production contracts signed with certain schemes," he said. "The unscrupulous exporters send out agents who dangle lucrative payment rates and take up produce at the expense of the legitimate contract bearers."

In response, the HCDA, the body tasked with regulation, co-ordination and facilitation in the sector, has threatened to revoke export licences of traders found buying from producers whose contracts lie elsewhere. "The practice endangers the future prospects of the industry, whose markets are sharply driven by quality," Ouko said. "Traceability is key in the main markets but this would not be achieved in the current situation where raw material is source from anywhere by everyone."

In the short term, farmers have emerged as winners, as processors battle for their produce and pay higher-than-normal prices. But critics have warned the industry could lose out in the long term as producers who break contracts with exporters, might be shunned in times of less imbalance in demand and supply.

Contracting of out-growers by large exporting firms has become common practice in the horticulture industry, as companies strive to cut costs through divesting themselves of land-holdings and other fixed assets. Big players enter contracts with many smaller out-growers, and provide the farmers with extension services and farm inputs.

Many in the industry see the arrangement as stabilising the supply of produce and making farmers incomes more reliable and regular. It also provides room for better planning of production and marketing to export markets such as the EU.

The Agriculture Act demands that all production contracts entered into be registered with HCDA to help counter market cannibalism, as well as provide an arbitration facility. The law also forbids export dealers from appointing middle men or brokers to either collect or deliver produce on their behalf. A crisis meeting between stakeholders and HCDA held earlier this month in Meru resolved to rein in brokers and agents to check the poaching phenomenon.

According to the government's Economic Survey for 2007, Kenya earned Sh43 billion ($643 million) last year largely driven by increased exports of value-added vegetables. Vegetables alone accounted for Sh3.9 billion ($60 million) out of the Sh4.3 billion ($64 million) increase in export values during the year.

Business Daily