Japan International Research Center for Agricultural Sciences | JIRCAS

Pick Up

15. New Coronavirus Pandemic ― Impact on World Trade and Developing Countries Dependent on Commodity Crop Export

2020-04-12

The Ministry of Agriculture, Forestry and Fisheries (MAFF) started a “Flower-full Project” in March 2020 via its official YouTube channel as an initiative for enjoying spring flowers at home and at work to boost the consumption of flowers amidst a declining demand due to the new coronavirus infection (COVID-19) (BUZZMAFF). The demand for cut flowers, including imported cut flowers such as roses, is supposed to  peak in March for commemorative events such as graduation ceremonies in Japan. Kenya has been among the top exporters in the world  and one of the top suppliers of imported roses in Japan (2015, 44.2%; Tokyo Customs) in recent years, yet the export demand was drastically reduced this year due the closure of auctions in Amsterdam and the suspension of international flights brought about by the lockdown in Europe, which became the epicenter of COVID-19 (Reuters).

As of 2015, domestic cut flowers accounted for about 80% and imports for about 20% at the Japanese cut flower market (Tokyo Customs). Cut flowers are originally produced in the Netherlands in large numbers, but in recent years, the highlands of tropical and subtropical regions, with longer hours of sunshine and large difference in day and night temperatures, which are suitable for flower production, are emerging as big suppliers. In Kenya, located in Africa just below the equator, the horticulture industry has been one of the fastest growing industries. It has become the third largest foreign currency earning industry after tourism and tea, creating more than 150,000 jobs. The establishment of supply chain via daily air freight flights to major destinations such as the Netherlands and the establishment of a large-scale production system in the Great Rift Valley region contributed to the supply of high-quality products throughout the year to export markets (Reuters, Embassy of the Republic of Kenya in Japan). This COVID-19 pandemic is hitting not only Kenya, which relies on the flower industry, but also tropical and subtropical regions, due to the drop in international demand and the suspension of international flights.

The flower and horticulture industry is not the only agricultural sector in developing countries that lost export markets due to the fallout in export demand. In Kenya, whose agricultural exports amounted to $ 3.7 billion in 2018, the largest source of foreign currency was tea ($1.9 billion), compared to $8.15 billion for flowers, especially in 2018 ($1.5 billion), accounting for 20% of the world's export (https://resourcetrade.earth/; Invest in Group). Kenya's tea industry is said to account for 4% of GDP and 26% of export income, and has generated employment across the chain from the production stage such as agricultural work and tea picking to wholesale trade and logistics (Invest in Group). It was then in late March 2020 when the East African Tea Trade Association announced an indefinite suspension of auctions at the Mombasa Tea Exchange, which handles tea from major regional producers such as Kenya, Rwanda and Uganda (The Exchange). It is said that the price fall did not stop as  there was an oversupply due to bumper harvest, while buyers did not show up at the auctions due to the closure of the borders under COVID-19. The closure of the market has forced some 600,000 small-scale farmers and plantation workers in East Africa to suspend their operations for some time (The Exchange).

On April 8, 2020, the World Trade Organization (WTO) predicted that world trade is expected to fall by between 13% and 32% in 2020 as the COVID 19 pandemic disrupts normal economic activity and life around the world. The COVID-19 pandemic can also have devastating effects in developing countries though their links to the global value chain, especially in those countries that strongly rely on commodity exports for foreign currency, GDP and job creation while relying on food imports, so that it is necessary to pay close attention to global developments potentially affecting food security (Pick Up 11, 14).

 

References

Invest in Group. Kenya – Tea Production. Accessed on April 12, 2020.

Reuters. Kenya's flower exports wither as demand drops amid coronavirus pandemic. March 20, 2020.  Accessed on April 12, 2020.

The Exchange. Panic as coronavirus forces Africa’s largest tea auction shut. March 25, 2020. Accessed on April 12, 2020.

WTO. Trade set to plunge as COVID-19 pandemic upends global economy. April 8, 2020. Accessed on April 12, 2020.

Kyodo News Site.  WHO、感染拡大で食料危機懸念 物流寸断や輸出規制に警告 Accessed on April 11, 2020.

BUZZMAFF YouTube Video March 12, 2020 (In Japanese) 

Embassy of Republic of Kenya in Jpan. The Flower Industry in Kenya. Accessed on April 12, 2020.

Japan Customs. https://www.customs.go.jp/tokyo/content/toku2802.pdf (In Japanese) 

Pick Up 11. New Coronavirus Pandemic ― International Trade and Food Security

Pick Up 14. New Coronavirus Pandemic ― World Bank Bulletin: The first recession in Sub-Saharan Africa in 25 years.  

 

Contributor: IIYAMA Miyuki (Research Strategy Office)

Greenhouses for flower and gardening industry @Lake Naivasha, Kenya

Tea plantation@Kericho, Kenya

Tea processing plant@Muranga, Kenya

Tea grading@Muranga, Kenya

Black tea packed for shipping@Muranga, Kenya