Kenyan flower growers find themselves in a challenging situation at the moment. Many suffer from the change of regulations, with freight now being calculated in volume instead of kilos. Also, a shortage of fertilizer raised the cost of production. On top of that, the auction prices have been low. It is that combination of factors that makes the situation particularly challenging. “In my 24 years of experience in the flower industry, I have never seen a year as bad as this year”, says Sachin Appachu, general manager of Kenyan rose farm Bliss Flora Ltd.
“In early June it started off with the introduction of volumetric weight for freight instead of weight by kilos, which is much more expensive, particularly for the high altitude farms that supply the big-headed roses." In previously years, during low season freight charges were reduced to cater for the low seasons but this year it was the same high freight prices all year round. That was biting the cherry twice.”
Low auction prices
Since June, the prices have been very low, this combined with the increased freight costs, made discarding flowers sometimes an even better option than sending them for Auction, Sachin says. Unfortunately those kinds of decisions came too late. "By the time we make such a correction, often several shipments have already left the farm."
Shortage of fertilizers
Since October, the high prices of fertilizers also started to play a major role in this challenging situation. The prices have been very high as a result of new and stringent measures on local inspection of all fertilizers introduced by Kenya Bureau of Standards. "Imports stopped, so prices increased drastically; almost twice the cost."
How is the situation now?
Now, a few weeks before Christmas, the situation still has not changed, according to Sachin. "Auction prices, freight costs and the shortage of fertilizers do not interrelate. So, even when the flower prices start to increase in the run-up to Christmas, the other two challenges mentioned still remain an issue."
And when talking about the current auction prices, so far, the prices are not showing an indication of increase except the Red Roses, which they should show during this time of the year. "I expect and hope that they will increase when Christmas nears."
Regarding the freight that is now calculated in volume, Sachin sees that most of the growers are adapting to it. "Most growers changed the type and way of packaging." However, for the higher altitude farms it remains a challenge, due to the larger head size of the roses. “The low altitude farms grow smaller heads, so they can pack more.”
However, freight calculations will not change to Kilos for sure, with regard to production, "Prices need to go up a bit to compensate, but it is tricky. With the auction, we don’t have a say in the prices, and as they have been low for so long, more and more growers are looking for direct sales. Then, they can ship FOB as well.” Sachin supplies 70 percent of its production to the auction and 30 percent direct. “If I can get any opportunities for direct sales, I will definitely consider doing so.”