NAIROBI - Kenya's flower earnings for 2011 are seen rising thanks to a favourable exchange rate for most of the year, despite earlier warnings they could fall below target due to the euro zone crisis, a senior industry official said on Monday.
Flower exports account for nearly half of the country's horticulture export earnings, which were Kenya's second biggest source of foreign exchange at 78 billion shillings ($932.7 million) in 2010, after tea.
East Africa's biggest economy exported an estimated 109,950 tons of flowers in 2011, down 9.3 percent on a year earlier. Flowers earned the country 30.6 billion shillings ($365.4 million) in 2010.
"Although actual figures on the value have not been released, we expect to see a gain in income from the weakened shilling against the euro," Jane Ngige, chief executive officer of the Kenya Flower Council, told Reuters.
The story was similar for the tea industry. Kenya produced less tea in 2011 from the previous period due to adverse weather but earnings from the crop soared to 109 billion shillings, thanks to high prices and a weaker local currency against the dollar, the government said last month.
Kenya's shilling collapsed last year, losing 25 percent against the dollar before the central bank hiked rates and triggered a rally in the last quarter of the year.
High input costs, soaring lending rates and labour unrest, however, are still expected to have squeezed profit margins for flower growers.
"The high cost of inputs such as fuel and high bank interest rates have put pressure on the industry," said Ngige.
Ngige said last July that Kenya was unlikely to do better last year than in 2010 due to high input costs and the prevailing euro zone crisis.
The county's flower exports in 2010 fell 15 percent from 2009 as the sector suffered from the impact of global financial turmoil on key export markets.
Push for new markets
Ngige said flower growers have made progress in their push into new markets in Asia and eastern Europe to drive growth, diversifying away from their core buyers in western Europe.
"We have managed to break into the Japanese market very well. We already are commanding about 20 percent of their (flower) import market share," Ngige said.
"We have also broken into the Russian market and we are making good strides into other countries in the region."
Kenya's flower industry is centred on the shores of Lake Naivasha in the Rift Valley, where mile-upon-mile of shimmering plastic greenhouses feed Europe's demand for cut-stem flowers.
The run-up to Valentines Day on Feb. 14 is among the farmers' busiest periods of the year. It takes less than 24 hours for a rose to be cut, boxed, shipped and sold at auction in the Netherlands.
As well as exploring new frontiers, Kenya is encouraging growers, in particular small-scale producers, to create and export finished products, such as bouquets, rather than bundles of cut stems, to add value.
Producers were also turning to new varieties of flowers, although roses, the mainstay of Kenya's flower sector, still account for 60 percent of production, Ngige said.
"The industry is evolving to not just sending flowers in a box but also sending out finished products." ($1 = 83.6250 Kenyan shillings) (Editing by Richard Lough and Keiron Henderson)
Source: Reuters