Kenyan horticulture exporters expect a full bloom
The pandemic saw a decrease in the volumes of Kenyan horticultural produce as a result of the massive reduction in demand for flowers in Europe which led to a near closure of the flower auctions.
The pandemic saw a decrease in the volumes of Kenyan horticultural produce as a result of the massive reduction in demand for flowers in Europe which led to a near closure of the flower auctions. The horticulture sector foresees a shift in production mainly from flowers to diversify into production of a variety of other horticultural produce to protect the farmers from reliance on one produce. As the markets open up, the industry is expected to rebound, though at a slow pace. The stakeholders are building packaging solutions, adding freight capacity to meet the growing demand for the upcoming peak season.
Europeans have discovered that their favourite roses and passion fruits are hard to find in stores as it closed borders and economy in March, which snapped the lifeline of horticulture exporters in Kenya. By April, the horticulture industry was losing about $3.5 million a day, according to the Fresh Produce Exporters Association of Kenya. Thus, the East African economy's small and large commercial farmers have been hit due to the global lockdown.
At the beginning of the lockdown, the air freight capacity nosedived from 5,000 tonnes to 1,300 tonnes per week, gradually picking up to 2,800 tonnes by June - showing signs of recovery. Commenting on the current capacity, Art Wright, head of perishable Kenya and East Africa, DB Schenker, says, "Currently, we are moving over 3,000 tonnes per week. We expect the demand to recover to 5,000 tonnes due to the upcoming high season. Such a hike is likely to stretch systems and processes. With the help of market intelligence and customer forecasts, we are planning ahead of time to secure more freighter and pax freighter flights to ensure that client's requirements are met."
As various countries lessened Covid-19 restrictions, Kenya's exports and imports rose significantly in July. According to Kenya National Bureau of Statistics (KNBS) data released in September, the export of horticultural produce rose during July with 10,449 tonnes of cut flowers, 9,658 tonnes of fruits and 4,191 tonnes of vegetables.
Peterson Kimeu, head of cargo services, Swissport Kenya, states, "Capacity has risen to circa 3,000 tonnes per week, with increased freighter frequencies and resumption of passenger flights in August 2020. Most passenger carriers have downgraded their equipment types in addition to the reduction in frequencies, hence reducing belly capacity available in the market. We foresee a business model shift to rely on freighter movement and not combination-carrier models since the former has a more sustainable value proposition of predictability on agro-perishables supply chains. This means that more freighter movements are expected during the peak season September to April 2021."
The cancellation of passenger flights meant total loss of belly capacity which accounted for 20 percent of the total volumes. This impacted on Swissport business in general and saw a decline in volumes by the same margin. With the resumption of passenger flights, although very slow, it is projected that volumes will increase by an additional 6 to 8 percent in the next few months, Kimeu believes.
Ivin George, managing director, DHL Global Forwarding East Africa, observes, "The airfreight capacity has eased somewhat from the constraints of the lockdown. However, the carriers which account for reasonable capacity for perishables have yet to operate at pre-lockdown levels resulting in continued pressure on the export of fresh produce such as flowers. Despite the scarcity in airfreight capacity, we have worked with our customers and provided innovative solutions including charters/part charters to get their shipments out through our vast carrier network. We are not just considering air freight but when needed, use alternative modes, such as rail, ocean, and road freight to keep the goods moving."
Indeed the sudden drop of passenger flights had a huge impact on the Kenyan capacity and the possibility for the growers to ensure their flowers and produce were duly uplifted. This has been mitigated with the introduction of several passengers and cargo flights of which, Air France KLM Martinair Cargo, has contributed 240 flights till the end of August, i.e., added 8,400 tonnes for the market.
Pier-Luigi Vigada, director Eastern & Southern Africa, Air France KLM Martinair Cargo, notes, "With the resumption of passenger flights, we have seen a reduction of these operations, thus, not increasing the overall capacity. The market has been extremely strong despite the low season and the demand related to produce has been increasing constantly. We do foresee a shortage of capacity for the period to come, in the range of around 1,700 tonnes every week versus 2019 which represent around 38 percent reduction. This is still based on passenger operations which are inserted in the systems, yet, we think some of this capacity will vanish as passengers' load factors are far from being able to sustain all these flights."
"We do foresee a shortage of capacity for the period to come, in the range of around 1,700 tonnes every week versus 2019 which represent around 38 percent reduction"
Pier-Luigi Vigada, Air France KLM Martinair Cargo
On the other hand, Astral Aviation has been busy during the pandemic and has not stopped flying since March due to the high demand in the air cargo sector to and within Africa. The airline increased scheduled network and acquired additional freighters to meet the increase in demand and ordered the B767-200F which is expected to arrive in October.
Sanjeev Gadhia, founder & CEO of Astral Aviation, observes, "The demand for fresh produce from Kenya to Europe has remained high in July although the reduction in cut-flower exports has increased vegetable exports to Europe. While July to September is perceived to be low season for fresh produce, we have noticed a similar demand as high season, as consumer trends have changed significantly during the Covid period. Astral operates 2 B747-400Fs from its Nairobi hub to UK and Europe, four times a week, which is projected to increase in October by an additional frequency."
To support the Kenyan exporters and ensure compliance to European Union (EU) standards, the government is planning to build a fumigation facility at Jomo Kenyatta International Airport (JKIA), which is expected to be operational by Q1 2021.
Wright notes, "The facility will enhance current supply chains, particularly in Japan and Australia. It should reduce the associated costs currently seen in these countries. Additionally, a faster transition on-arrival should also give better lead times to the destinations' final buyers."
This month, Kenya's ministry of agriculture has launched Visualizing Insights on Fertilizer for African Agriculture (VIFAA) Kenya dashboard, an online portal to guide farmers on the best crop and region-specific inputs to buy in a drive to improve food production. It publishes information on fertiliser retail prices, recommended fertiliser usage per hectare as well as real-time information on when to apply specific products on targeted plantations to ensure higher yields.
Kenya is facing the issue of minimum residue levels (MRLs) and currently given two months to meet the EU standards. The EU legislation on MRL is aimed at protecting the consumer by imposing strict adherence to the standards. New MRL limits have been set at 0.01 milligrammes per kilogramme (mg/kg) against the international standard that sets an MRL level of 2 mg/kg. Improvements in postharvest care and international cold chain logistics have presented Kenya with improvement platforms that it must comply with to maintain its exports market.
Along the similar lines, Pier-Luigi states, "The limited chemical spraying has an impact in the industry, yet, it has brought the farmers to deeply look at the topic and change the way they were protecting their products. In the years the integrated pest management (IPM) via biological means (insects) of the pests has gained wide consensus. The stricter rules applied by the EU have not had a major impact in our export volumes, yet, it has triggered some hefty discussion with the industry as, unfortunately, it seems there's an inconformity on the way these rules are applied at the different point of entry in Europe."
As the supply and demand ratio determines the freight rates, the pandemic forced the rates to surge. Pier-Luigi says, "Our operations are expensive and we need to ensure this market duly understands the importance of our capacity deployment. Dialogue is a key and through several platforms, we ensure we look at different ways of reducing the costs for the customers. Better packaging will ensure the same volume will carry more weight. This will have a rate impact and, especially, a lower CO2 impact as more weight is carried on the same plane. Rates are and will be higher than pre-Covid, yet, they are at levels that were normal around 10 years ago. The downward spiral we have seen in the years has proven to be counterproductive for the industry the moment better-paying markets and products showed up. We cannot dictate what the prices will be, but we do sincerely hope the industry has learnt the lesson."
To develop the right solutions for flower importers and to contribute towards sustainable shipping solutions, Amsterdam Airport Schiphol has partnered with the Circular Alliance. With flowers accounting for more than 35 percent of import cargo, the airport is looking at better ways to treat this delicate cargo, which needs special protection and efficient shipping.
Roos Bakker, director of business development for cargo at Amsterdam Airport Schiphol observes, "The foldable efficient circular transport (FECT) is currently in a test phase. The FECT will last for at least seven years, while cardboard is used once. After the summer, we will slowly roll out FECT. Circular Plastics creates demand for sustainable solutions. The auctions are already using the foil, in Kenya, we will start with the rollout and create support."
Throughout the crisis, the Netherlands and Kenya have managed to honour their relationship, with partners such as KLM and others. The volumes from Kenya to Amsterdam have barely declined and at the moment everything is back to the old level. Only in April Amsterdam Airport saw a dip, because prices per dollar in Asia were very good that some airlines opted for other routes.
Commenting on the demand of Kenyan produce to Amsterdam after the lifting of lockdown, Bakker explains that the demand for volume from Kenya to Schiphol is the same as before and even more capacity for the freight carriers is there at the moment.
While Wright says, "Amsterdam is an essential marketplace for Kenyan export, with close to 68 percent of all production from Kenya arriving in Amsterdam and exported outside the Netherlands. KLM and Cargolux have been essential to this trade, and without them, I fear more farms would have hit the wall and ceased to exist."
The two major freighter carriers handled by Swissport Kenya, Turkish Cargo and Etihad Cargo, continued to operate during the Covid period and experienced no flight cancellations. Even though these were not a direct flight to Amsterdam, they provided reliable connections. These carriers additionally took up the capacity left by passenger flights who had cancelled their flights by also operating %u2018Ghost flights', thus supporting the market as well as the Swissport business.
Swissport Kenya attained IATA CEIV Pharma certification in Dec 2019 becoming the first air cargo handler to receive the certification for a facility in Africa. The company has set the ground for the CEIV Fresh certification following the upgrade of its Perishable Centre which comprises of an 800 square metres climate controlled handling facility.
Both Air France and KLM have restored a global network from our Paris and Amsterdam hubs. It is serving all European destinations via refrigerated trucking services. North America destinations are daily accessed through its network by cuttings and succulent customers from Kenya. The airlines have developed regular flowers shipments into Japan and, lately, into Reunion. China is growing and some smaller quantities are sent even to Ecuador.
Pier-Luigi concludes, "We have maintained our full freighters operations (by Martinair Cargo) to continue sustaining a market and an industry, where we have been present for decades. Other products like fish export from Lake Victoria and avocados from Kenya, Uganda and Tanzania, have been suffering from the reduced capacity and increased freight rates. We are finalising our high season's network and capacity agreements to ensure our customers will continue benefiting from our capacity and recognise quality of service."
With the arrival of the B767F, Astral offers 100 tonnes of weekly capacity for fresh-produce to the UAE, Oman and Saudi Arabia. The demand for sea-food to China is being evaluated with the views of offering new solutions to the exporters from Mozambique via the Nairobi hub.
The pandemic saw a decrease in the volumes of horticultural produce as a result of the massive reduction in demand for flowers in Europe which led to a near closure of the flower auctions. Based on market economics, the horticulture sector foresees a shift in production mainly from flowers to diversify into production of a variety of other horticultural produce required in the markets and protect the farmers from reliance on one produce.
As the world continues to manage the Covid pandemic and markets open up, the horticulture industry is expected to rebound though at a slow pace. The effects of the pandemic will be felt for a long time but the industry must come up with a coping mechanism and work together as stakeholders to create solutions for the industry.
