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Flower Price falls 40% as the world economy continues nose diving

By Elias Meseret

Capital

It was recently reported that the flower sector in Ethiopia was witnessing a 15 to 20 percent price reduction on the international market. Now, owing to the ever increasing effect the global economic crisis is having in the 'flamboyant' export sector of the country, the price has dropped 40 percent.
"The decline is going at a very dramatic pace. We are trying to cope with the problem in every way we can but we don't know what will come out of it in the future," Tsegaye Abebe, President of the Ethiopian Flower Producers and Exporters Association (EFPEA) told Capital.
Tsegaye, however, downplayed some reports that the industry is currently in total loss. He said that while there are times when it is difficult to cover all expenses due to the international price fall and the seasonal nature of the product, such as peak production times, it is not a picture that represents the industry's everyday performance and also the current position of all flower growers and exporters in the country.
In the global flower market, Ethiopian flower exports have increased five-fold between 2006 and 2008. However, due to the current set back the industry is witnessing, it is hard to abide by previous forcasts that flower exports will catch up with coffee exports in five years period.
According to Tsegaye, flowers being a luxury product and hence a vulnerable commodity in times of recession, there is a significant impact of the credit crunch on the horticultural sector.
One of the compannies affected by the price decline disclosed to Capital that the company has responded to the price decline by reducing the amount of exports it used to have, concentrating in high price fetching flower types and forfeiting the expansion plan it had for this year.
"We used to export from 300 to 400 boxes of flowers daily before the problem began to be felt. But now we have reduced it to 100 boxes every two to three days," the company explained. It also added that they are looking for other markets in the Middle East and other closer areas so as to mitigate the air freight expense.
While flower exporters have already sought the support of the government to deal with the problem, State Minister of Agriculture and Rural Development (MoARD), Abera Deressa, told Capital that the exporters themselves should also work on the low productivity of the sector.
"Most flower exporters are not in par with the global standard of high productivity in a given area of land. Besides, their packaging, processing and other value chain processes need to be enhanced so as to benefit more from the international market," Abera said. "Our experts trained abroad have begun preparations to disseminate best practices. We are now studying each flower exporting company's working procedure and will soon begin providing our expertise."
Reflecting Tsegaye's tone, Flora Holland Financial Director Erik Leeuwaarden advises the business community in the sector not to panic. "Though a lot of growers and other stakeholders are facing difficult times, there is no reason to panic. A too negative approach, like speaking in terms of disaster, would be exaggerated because people are still buying flowers though at a reduced level," he says.
This problem is not unique to Ethiopia, though. It has also been reported in Uganda where the flower industry is facing problems because of some European buyers going bankrupt. Juliet Mosoke, Executive Director of the Ugandan Flower Exporters Association, (UFEA) states in one of the country's local newspaper, "Some of our buyers have closed down due to insolvency while others have not expressed interest in signing up new contracts. The prices have also dropped to very low levels that some growers find it unnecessary to ship because the prices offered do not even cover freight charges."
Companies currently feeling the pinch are now covering some of their costs from other business operations.