In a previous post, I referred to a research conducted in 2019 by the CBI (The European Union body charged with promoting exports to Europe from the developing world). This is another installment in a series of posts that are going to take a critical look at this research and the opportunities and queries that arise therefrom. Let us consider two findings of the report in this post. One is that 90-95% of the macadamia produced in Kenya is for export. Second, that Germany and the Netherlands accounted for 98% of Kenya’s macadamia exports into the European Union.
All Eggs in One Basket (Image By Morguefiles.com)
Diminished Chances for Value Addition
Having seen the fate of Kenyan kernel in Germany, it is only left to imagination what could be happening now that this critical market segment is having an issue with the Kenyan product. Perhaps what is interesting is that while Germany is loud in its doubt for the kernel from Kenya, the Netherlands has not voiced such concern. Chances are that Kenyan kernel still finds its way to the German market through the Netherlands; given that the latter is a major re-exporter of kernel to the European Union. Exported kernel from Kenya is almost exclusively raw, with no more value addition after primary processing. However lucrative the export of processed kernel to the European Union would be, it is something that would present a host of stumbling blocks to the Kenyan exporter. The European Union model of contracting with the retail chain is complicated and the Kenyan processor might not have the necessary know-how, connections, financial muscle and infrastructure to see it through. Due to this, it is more imperative to trade with European companies which engage the retail outlets in the final presentation of the product to the consumer. Other practices such as front package labeling, color coding in accordance with the nutrient-score and other content of food products being retailed in the European Union also contribute to the complications that the Kenyan exporter would face if the European retail market would be the primary target. Obviously, it would call for higher investment before the product could get to the market. Another reason is the smart move by the European market to protect their jobs in areas such as roasting. Furthermore, why would they have to procure roasted nuts when they have top notch facilities for roasting in locations such as the Netherlands?
Labeling is part of the game. (Image By Morguefile.com)
Challenging Future
The aforementioned research findings reveal a number of vulnerabilities facing the macadamia market in Kenya. Competition among exporters in Africa is set to increase in the coming few years. There is a rallying of the new producers such as Malawi. Anecdotal reports also indicate that some farmers are intent on establishing multi-million seedling farms in non-traditional macadamia sources such as Congo Brazaville; contributing to the general projection of doubling of global macadamia volumes on the world market in the next nine years. To the processor, this could herald the plummeting in prices, and the party could be over in regard to the current high prices being fetched. Will it be business as usual with all heads turned towards the global market giants of Europe, U.S and Japan to jostle for the supposedly dwindling fortunes there? Even at a cursory glance, the need for a paradigm shift is imperative. In a different post, we shall address product diversification. Increased volumes should partly make a case for diversification. Rather than endeavor to entertain the idea in the coming future, even in the current dispensation, the market is still not optimally exploited, and it critically calls for a serious consideration of taking the product to new markets.
The Ten Years of Boom. (Image By Morguefile.com)
Awareness Creation
Europe, America and the other lands across the oceans present the glamour of strong currencies that translate to something substantial when they hit our shores. Considered objectively, the good and bad of this dependency play out in a way that should jolt the macadamia market towards thinking more deeply about the available possibilities. One of the issues noted with macadamia as a product on the current principal market is that the low levels of information concerning macadamia. If this is the case in the places where the nut is being mainly consumed, then knowledge about the same is highly lacking in Africa. Reports from elsewhere indicate that Uganda exports some of its groundnuts to Kenya . This is in spite of Kenya also growing her own peanuts. In regard to macadamia, Uganda features nowhere on the landscape. Why Kenya would not offload some of its kernel to Uganda and other neighbors such as Tanzania, Rwanda and Ethiopia could be attributed to the lack of knowledge about the product. Market and product awareness creation should be priority issues to the macadamia industry.
So Much Available But Do You Know? (Image By Morguefile.com)
Narrow Market Niche
Market dynamics in the macadamia sub sector are an interesting phenomenon to observe. In addition to the almost exclusive orientation to export to Europe and America, price dynamics also have consequences on the quality of the given season’s crop. Take the year 2019 for example. This was the year of jubilee for the Kenyan farmer. Then, farm gate prices almost shot through the skies. Averaging at almost two and a half US dollars per kilogram of in-shell kernel, the players who operate between the farm and the processors were in for a kill. The down side to such a development was that unscrupulous farmers and thieves could harvest premature nuts and sell them to make the kill. Eventually, the processors ended up with a lot of premature nuts procured at an expensive price. Europe and America wouldn’t take such. Come 2020 and Covid-19 went on a rampage the world over. Markets suffered and many players were left with little purchasing power to go back to the field for nuts which could possibly be blended with the better crop (another unscrupulous practice in the processing industry) in order to mitigate the disaster of the previous year.
Where Do Broken Nuts Go? (Image By Morguefile.com)
The Good and the Ugly
With fewer processors in the field, two scenarios played out: better quality nuts were procured because there was no hurry harvesting. On the flip side, conservative estimates surmise that the farmers were left with a whooping 100,000 tons of nuts that could be taken nowhere. Thus, because Europe and America were not on the list of options, the Kenyan farmer and processor had nowhere else to go. If there was an established alternative African domestic and regional market for these nuts, the losses suffered by the farmer and processor would be mitigated. In terms of quality in the season following such a debacle, it is said that just as pruning does a lot of good in improving the quality of the nuts, harvesting is also an important practice. The protracted presence of the nuts on the trees only saps the nutrients that would have been used by the next crop of nuts. Therefore, the quality becomes compromised.
Nuts On Tree. (Image By Morguefile.com)
Covid is Loud; Is It Clear?
Lessons learned from the Covid-19 experience should sound a wake-up call especially to the processors to invest also in creating awareness of macadamia as one of the merchandise for the local, and various regional markets around Africa; and other non-traditional markets around the world. Someone say yeah!?
Written By Amadi Kwaa Atsiaya
