‘Domino effect’ continues to unfold with devastating effects on the global flower industry
An update provided by Union Fleurs – International Flower Trade Association
The global flower market situation has continued to wither during weeks 13 and 14 with the UK going into shutdown and an increasing number of countries worldwide implementing measures to combat the spread of COVID-19 and closing in particular all non-essential shops. Supermarkets are at the moment the only viable channel sustaining exports and sales of flowers in most countries around the world, and even there flowers are said to compete for space and exposure with other commodities, in particular from the food section. The Dutch flower auctions report activity down 70% than usual, and prices about 20 % lower. The regulation of supply enforced since mid-March, a temporary and extraordinary emergency measure introduced to keep the destruction of flowers and plants to a minimum and to restore price formation, continues to be in effect and is reviewed on a daily basis to evolve in line with the development of demand per product group on the market.
The massive ‘domino effect’ is continuing to unfold and hitting flower-supplying countries in Africa and South America particularly hard, with a devastating socio-economic impact. With the cancellation of most international passenger flights worldwide, which flower exports usually use extensively to ship to the destination markets, only cargo airfreight is now available for flower exports from African and South American. Given the importance of the flower industry to the economy, industry associations the Kenya Flower Council in Kenya and Asocolflores in Colombia have successfully managed to obtain from their government a continued access of flower trucks and shipments to outbound international airports in their country despite the implementation of curfew measures. But great pressure on airfreight costs and space availability is now being reported: freight rates are estimated to have increased by 25% to 30% and flowers have to compete for space on cargo aircrafts with other commodities and express shipments.
In Kenya, flower farms are reported to lose some 20 million KES every day and have had to send home more than 30,000 temporary workers and put 40,000 permanent staff on annual leave to insulate themselves from further damage. Flower farmers are incurring huge losses as the crisis deepens. Since the Dutch auctions collapsed on 13 march, farmers have been forced to dispose of their flowers while a few of them are still able to export little volume to supermarkets in Europe and to Japan. Meanwhile and until the global market situation gets restored, flower plants need to be kept alive and healthy, otherwise they will die, and the Kenya flower industry will lose its ability to supply flowers when the markets open up. The Kenya Flower Council reports that “Every hectare of rose plants costs 100,000 USD and each plant is expected to last five years. The total area of roses under cultivation is in the region of 2,000ha and this alone represents an investment of 200million USD.” Despite the lack of sales, growers must still water, fertilise and look after the flowers, otherwise, the plant deteriorates and will not deliver flowers in the future. Security must also be maintained to protect the farm infrastructure and people. Labour is still required to perform these tasks so that once the pandemic passes, production and sales can return to expected levels. These ongoing operational costs exceed by a clear margin of the revenue from reduced sales. The Kenya Flower Council continues to urge the Kenya government for urgent support to the flower industry. President Kenyatta has recently issued a directly on VAT refunds and tax breaks ( the Kenya government owes the flower sector an estimated 9 billion KES in refunds which has taken ages to be effected) but a wider range of measures are urgently being called for to help rescue the industry , including tax rebates, cash injections, loans and loan guarantees and zero-rating of all farm inputs . The impact of the global COVID-19 crisis puts in peril one of Kenya’s most successful and internationally acclaimed sector, which earned the country in 2018 113 billion KES , contributing around 1.07 per cent to the country’s GDP and is the fourth largest contributor of foreign exchange after diaspora, tourism and tea.
The COVID-19 crisis is also heavily affecting other African flower exporting countries such as Ethiopia, Uganda and Rwanda. UEFA (Uganda Flowers Export Association) reports that all exporting flower farms have laid off approximately 30 per cent of their workforce due to the inability to sustain salary payments during this pandemic. The floriculture sector has reached a near total collapse, seeing a drop of 90 per cent in the industry’s exports and 50 per cent drop-in price rate. If intervention measures are not taken to mitigate losses, about 10,000 to 15,000 people will lose their job in the flower industry in Uganda, taxes will be affected and foreign currency worth 84.98 million USD incoming to the economy will be lost. Rwanda’s rose-farm Bella Flowers, established in 2016 and a remarkable success story since then, has been heavily hit as well. The farm exports 85% of its production to the Netherlands and has seen its exports completely stopped since 20 March. “One time a week, we can send maybe one pallet to the auction in the Netherlands. But this is just to be there, to keep our farm name in the minds of the buyers.” Currently, the only thing they can do is keeping their crop in good condition so that it will be ready for the times when demand increases. By maintaining it, quality of the product can be kept and be ready when demand will re-start.
To infuse some much-need positivity through these harsh times, a variety of promotional initiatives are currently being taken by the flower industry worldwide to remind people of the importance of flowers and their universal language to show love and friendship, gratitude, support, consolation and hope. The campaigns “Let hope bloom” by the Flower Council of Holland, “Bond with flowers” by Asocolflores in Colombia and “Flowers of Hope” in Kenya have recently been initiated and several videos are largely spread over social media to bring sparks of colour and joy in these turbulent times and ensure that consumers will not forget about buying flowers when the situation stabilises again.