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October 19, 2009

East Africa drought cuts farm output, inflates prices

by Helen Nyambura-Mwaura

A drawn out drought in east Africa has reduced output of key commodities and pushed up prices across the region, delighting farmers but also threatening many who rely on the maize staple with starvation.

The onset of a rainy season, which may bring heavier than usual downpours, is expected to improve the performance of coffee, tea and sugar crops but may destroy maize harvests in a vital growing region of Kenya.

Coffee output from Africa's top producers, Ethiopia and Uganda, has taken a beating due to the low rainfall levels, but both countries expect a bumper crop this year.

Ethiopia's annual production is estimated at 330,000 tonnes, but output in 2008/09 (July-June) was expected to drop by more than 14 percent because of the bad weather. The country, however, expects better results in 2009/10.

"An assessment ... reported an expected bumper harvest in all the regions," said Tarekgen Tisgie, head of public relations at Ethiopia's Agriculture Ministry, adding the country expected an increase of 20-30 percent this year.

Uganda's production may have fallen by 200,000 60-kg bags in the year ended September, according to David Muwanga, the head of marketing and production at the National Union of Coffee Agribusinesses and Farming Enterprises.

"The reduced output will certainly have some impact on the local prices but I don't think it will be big because it's the London market that has a great influence on prices," he said. "Our weather forecasters are predicting an El Nino at the end if this year, but coffee farmers should not worry so much since much of coffee is grown in the highlands and they are unlikely to be inundated."

The tea sector may perhaps have been the biggest beneficiary with prices shooting up to record highs since mid-August on fears production in the world's biggest exporter of black tea, Kenya, may fall significantly. A global shortage of about 110 million kg may also keep prices high, producers say. Kenya's output dropped 11 percent in the first seven months of 2009 compared with the same period in the previous year. Prices for the best top grade Broken Pekoes closed at an average $5.02 per kg at last week's auction.

Poor people have been worst hit by the drought as the price of the maize staple has gone up drastically. But even though the rains have finally started, farmers in Kenya's northern Rift, the main growing area, fear the water will destroy their crop.

The Eastern Africa Grain Council (EAGC) expects maize harvests across the region to reach just 60 percent of last year's volumes. Kenya and Tanzania produced 2.25 million and 3.659 million tonnes respectively in 2008.

To prevent shortages, Tanzania banned maize exports earlier in the year and Kenya resorted to imports from South Africa.

Maize trade flows through the region, as captured by EAGC's informal cross-border monitoring system, fell 44 percent in September to 5,598 tonnes from 10,076 tonnes in August.

"Farmers who have started to harvest don't really want rain right now because it can cause the grain to germinate or rot. Another big problem is drying of the crop. There'll be losses if it rains," said Constantine Kandie, EAGC's executive director. She said Kenya's National Cereals Produce Board was buying a 90-kg bag at 2,300 shillings ($30.50). "(It) is still a very, very high price," Kandie said.

Prices in Nairobi have jumped 23 percent to $387 per tonne in September 2009 from $314 during the same month last year.

Kenyans, who like their cup of tea milky and sweet, now pay double what they did at the start of the year for sugar.

Experts say Kenya might manage only 60-70 percent of last year's 517,667 tonnes harvest and because of a global sugar shortage, the country's import sources have dried up.

"We've not seen much sugar from those markets because they themselves have been constrained by internal demand," said Peter Kegode, a consultant in the industry.

Neighbouring Tanzania on the other hand expects a 4 percent increase in output this year to 290,000 tonnes.

"(The drought) has affected our expansion plans. It's not as bad because we have irrigation," Matthew Kombe, director general of state-run Sugar Board of Tanzania.

(U.S.$1=75.40 Kenyan Shilling)

ForexYard

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