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The East African : Oct 24th 2015
BEEF MARKET Egyptian firm invests $11m in Uganda’s beef market Page 37 BUSINESS OCTOBER 24-30,2015 GOOD NEWS? By JEFF OTIENO The EastAfrican this year, despite an anticipated drop from last year’s record production. According to the latest update W on global food production by the Food and Agriculture Organisation (FAO), cereal production is projected to reach 2.53 billion tonnes, this year, or one per cent below the 2014 record of around 2.56 billion tonnes. The latest information will be good news to East Africa currently experiencing sluggish economic growth due to falling commodity prices at the international market and weakening local currencies against the dollar. All the five East African states rely on imports to meet their growing food demands. The Kenya shilling has depre- ciated by about 13 per cent this year to around Ksh103 to the dollar. The Uganda shilling has weakened by 22.4 per cent and the Tanzanian currency by 18.6 per cent to the dollar in the same period. As a result, East Africa has been facing difficulties acquiring foreign currency to pay for imported goods like cereals and machinery. Making the situation worse are the declining global prices for coffee and tea — the two top cash crops in the region — due to increased production. The prices of coffee have plunged after Brazil, the world’s biggest producer, recovered from a prolonged drought last year. Tea production in the region has also declined due to the vagaries of weather, denting the region’s foreign exchange earnings. Though the price of Kenya’s top-grade leaf, for example, has continued to increase in the past two months, the country’s output is expected to fall short of last year’s figure. East Africa, however, will be spared high wheat prices on the global market since production of the cereal is expected to increase to 735 million tonnes, almost two million tonnes more than last year, mostly on account of higher output in Australia, China, Morocco, Turkey, Ukraine and the US. Data from the US Depart- ment for Agriculture (USDA) shows that Kenya, Uganda, Tanzania and Rwanda will need to import wheat in the 2015/2016 market year to fill local production gaps. The global production for Freight rates, which are expected to remain below last year’s levels, are also likely to contribute to a year-onyear decline in costs,” FAO report coarse grain is projected to reach 1.3 billion tonnes, about 2 per cent lower than the record of 2014, with much of the decline linked to low maize production in the US and the European Union. Maize accounts for nearly 80 per cent of the world’s coarse grains output. Kenya, the leading maize im- porter in the region, is expected to produce 2.8 million tonnes and buy one million tonnes in the 2015/2016 period, USDA figures show. Rwanda is expected to pro- duce 550,000 metric tonnes and import 100,000 tonnes, while Burundi is forecast to harvest 150,000 tonnes and buy 10,000 tonnes. The latest forecast for rice production, this year, according to FAO, stands at 493 orld cereals production is expected to remain stable Good news for EA: Global cereal output to hit 2.5b tonnes in 2015 The ≥egion has been facing di∞culties acqui≥ing fo≥eign cu≥≥encies to pay fo≥ impo≥ted goods like ce≥eals and machine≥y MANAGER How to get customer’s choices, emotions right Page 41 35 ing at an astonishing rate previously. Cassava output in EastAfrica was smaller due to lower yields. El Niño is thought to have played a part in diminishing harvests in Southeast Asia, particularly where the 2015 crop season has yet to be concluded,” the organisation added. Cassava is one of the crops recommended by agriculture experts as suitable for strengthening the region’s weak food security status, in view of the changing climate due to global warming. FAO says production pros- pects for 2016 also remain uncertain, given the high probability of an intensifying El Niño event, which could cause enormous destruction in farmlands in East Africa and other parts of the world. Apart from farm crops, global meat production is also expected to increase by 0.3 percent to 68.3 million tonnes, prolonging the modest growth trend witnessed in recent years. The UN organisation, howev- er, forecast low meat production in East and Southern Africa due to intermittent seasonal rains during the first part of the year, which affected pastures and feed availability. FAO says the global value of imported foodstuffs is forecast to drop to a five-year low this year, at $1.09 trillion, which is almost 20 per cent, or $262 billion, below the revised level for 2014, which had reached a record high of $1.35 trillion. Several factors have contrib- KEY MARKETS Kenya is expected to produce 420,000 tonnes of wheat this year and import 1.5 million tonnes, the highest in the region. Uganda is forecast to produce 20,000 tonnes and import 320,000 tonnes. million tonnes (in milled terms), about 0.4 per cent less than in 2014. According to USDA, Kenya will need to import 460,000 tonnes of rice in the 2015/2016 market year and is expected to produce 99,000 tonnes of the crop. Uganda is forecast to pro- duce 150,000 tonnes and import 120,000 tonnes, while Tanzania is expected to harvest 1.7 million tonnes and buy 150,000 tonnes to bridge the gap. The UN organisation says world cereal utilisation in the 2015/16 period could approach 2.5 billion tonnes, up 1.2 per cent from 2014/15. Rwanda is expected to produce 65,000 tonnes and import 80,000 tonnes. Tanzania is forecast to harvest 110,000 tonnes and buy 900,000 tonnes from the world market. Agriculture economist, George Mwangi believes the situation would have been worse if world food had prices remained high, given the current economic problems facing the East Africa. Unlike other cereals whose production is on the rise, cassava, a drought resistant crop critical in the region’s food security, has had a bad period, due to adverse weather conditions. “Adverse weather conditions in major growing regions have undermined the 2015 cassava production outcomes, stalling global output that had been ris- uted to the decline in the cost of importing food this year, the main one being the decline in international prices bringing unit costs down. “Freight rates, which are ex- pected to remain below last year’s levels in spite of the rise in recent weeks, are also likely to contribute to a year-on-year decline in costs,” the UN organisation says. The abundance of supply of many commodities in major importing countries has also lowered demand. Imports have also declined due to the weakening of currencies against the US dollar. FAO says the global commodity import bills is set to undergo the largest absolute declines in 2015 are those for cereal-based foodstuff and dairy products, which are likely to fall by around $44 billion (24 per cent) and $40 billion (40 per cent), respectively. “Considerably lower quota- tions compared with last year, especially in the case of dairy, are driving bills of these food groups down,” the organisation adds.
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