Robust outlook for African crops.

Tangible evidence of an upturn in the global economy--projected by the International Monetary Fund to expand at 4.1% this year--and a weakening US dollar over recent months, have underpinned commodity markets. MOIN SIDDIQI presents a comprehensive view of Africa's main cash crops.

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World commodity prices have increased significantly from the lows of 2001/02. The prices of agricultural raw materials (such as cotton, rubber, and timber) maize, rice, groundnuts, coconut oil, sugar and beverages (coffee, tea, cocoa), have all risen--though less strongly than oil or precious and industrial metals.

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In 2003, the IMF estimated that non-oil commodity prices rose by 5%. That's a marked improvement over the 4% decline in prices recorded in 2001, the year when the industrialised world went into near-recession following the 9/11 terrorist attacks on the US, and their ramifications upon global trade.

For developing regions like Africa, where primary commodities and oil and natural gas account for about two-thirds of merchandise exports, buoyant global economic activity and higher commodity prices are vital for sustainable development and poverty reduction.

The World Bank says: "Multilateral trade negotiations could lead to higher agricultural prices if reforms reduce production subsidies and tariffs in major consuming and producing countries; however, little progress on reforms has thus far been achieved."

COCOA

Last year, cocoa prices averaged $1,763/t-similar to 2002 levels. Total production during the 2002/03 season rose to record highs: 3,102,000t, compared to consumption of 2,996,000t according to the International Cocoa Organisation (ICCO).

A cocoa surplus, the first in three years, was pegged at 75,000t. According to ICCO figures, the end of season stocks, at 1,191,000t, were equivalent to a stock/consumption ratio of 39.8%, or 4.5 months of annual offtake.

Africa, led by Cote d'Ivoire, accounted for almost 70% of the global crop, while Asian and South American contributions were 17% and 13% respectively.

Bumper harvests in major growing regions reflect improved husbandry standards, higher farmgate prices and better use of fertilisers and pesticides.

Forecasts for 2003/04 global crop range between 3,068,000t and 3,300,000t. The Ivorian harvest is expected to be 1,340,000t; with Ghana's 500,000t; Nigeria's 165,000t; and Cameroon's 135,000t contributing to an overall West African output forecast to reach 2,140,000t.

Apart from Africa, the world's two other dominant suppliers are Indonesia, which produces 480,000t, and Brazil's 175,000t.

However, the Ivorian political climate still poses downside risks. Problems of labour shortages, lower beans prices compared to Ghana, and inadequate investment in infrastructure over the past two years can all affect the crop's potential.

ED & F Man Cocoa, the UK trading house, comments: "The greatest risk would appear to be that a much lower farmer price in Cote d'Ivoire acts as a disincentive to the complete harvesting and evacuation of the crop. Were this to happen, the cocoa market would move into deficit once again." Some traders predict a 10% drop in Ivorian crop this year.

Factoring large West African supplies, the ICCO envisages global surpluses until 2006/07, with world output projected well above the 3m/t mark. "This will mean that stocks, and the stocks-to-grindings ratio, will increase over the next three years," the ICCO forecasts. Prices may decline this year and next as supplies continue to increase.

COFFEE:

The International Coffee Organisation (ICO) pegged the 2002/03 world crop at 118.81m bags, of which production of Arabicas and Robustas were 78.84m bags and 39.97m bags. In the past five seasons, the world's total coffee crop has averaged 112.34m bags, underpinned by the world's two biggest harvests from Brazil and Vietnam.

Global exports in 2002/03 reached 88m bags, worth $8.5bn. The ICO puts the African crop at 15.68m bags, 13% of the world's total. The big African producers are Ethiopia with 3.75m bags; Cote d'Ivoire with 3.43m bags; Uganda with 2.8m bags; Cameroon with 1.1m bags; Kenya with 918,000 bags; and Tanzania with 824,000 bags.

Independent sources puts Ugandan production at 3m bags, with parallel trading through neighbouring countries explaining the anomaly. And the same sources say that the Ivorian crop probably fell to 2.5m bags, but because of civil strife it was very difficult for the ICO to make an accurate record of production. During the 1990s, Cote d'Ivoire was, in fact, the world's fifth largest producer, with annual production of over 6m bags.

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Kenyan coffee is often used as a benchmark in the setting of quality standards. Its processing system of washing its entire crop and the country's excellent Arabica growing conditions gives Kenyan blends an exceptional reputation and value in world markets. Kenya's new season estimates are a harvest of 101m to 107m bags.

The ICO said: "Crop year 2003/04 could bring a break in excess production as significant falls are anticipated in a number of exporting countries." On the demand side, consumption has dropped in recent years, especially of Robustas. "World coffee consumption is stagnant and in some importing markets is falling" the ICO reports. "Poor quality and a switch to other beverages are having a negative effect. The potential for increasing consumption should be explored to reduce the imbalance between supply and demand, thus providing a better basis for sustainable improvement within the coffee industry" it adds.

Despite modest increases in the price of both Arabica and Robusta beans in 2003, coffee prices remain well below the highs of the mid-1990s.

SUGAR

The US's Cropcast Services projects the 2003/04 world production at 139.52m/t, down from the previous season's highs of 143.3m/t. The world's top three producers are Brazil at 24.74m/t; China at 10m/t; and the US at 7.8m/t. Africa, led by South Africa, accounts for 7%--10% of total cane output. This year, the global surplus should fall due to higher consumption and less overproduction. The International Sugar Organisation forecasts a world surplus of 1.37m/t raw value, compared to the massive 6.35m/t recorded in the 2002/03 season.

ED & F Man's figures are higher at 3.66m/t raw value. Last year, sugar prices averaged 16c/kg, steeply down from 27.67c/kg in 1990, according to the World Bank. Near-term outlook is bearish at 15.2c/kg over 2004/05.

TEA

The London-based International Tea Committee puts world output between October 2002 and September 2003 at 1,738,708t, of which Africa's crop was 411,647t--equivalent to one-quarter of the world's harvest. Kenya, the world's second largest tea exporter after Sri Lanka, produced 284,242t; Malawi 41,968t; Uganda 35,111t; Tanzania 29,966t; and Zimbabwe 20,360t.

The Mombasa Auction price for 'best broken pekoes' grade tea averaged $1.94/kg, up from $1.79/kg in 2002. But prices are still below their highs ($2.48/kg) in 2000.

The market has been affected by continued overproduction--especially in India which produced 867,000t, and Vietnam whose crop has doubled since 1990.

Sluggish demand, as well as competition among Western consumers from soft drinks and value-added coffee (cappuccino/espresso) means that average prices may remain low for the foreseeable future. Even by 2015, the price of tea in real terms is likely to be slightly lower than in 2002, according to the World Bank.

In Kenya, some 300,000 tea farmers contribute 25% towards the country's economic activity, and account for 18% of global exports. Kenya aims to become an exporter of branded tea bags to US markets. Ketepa, Kenya's largest blending and packaging company, has formed a joint-venture with AUAAG, a US non-governmental organisation, to brand and market its produce under the name "Tiabi Tea" across the US.

TOBACCO

Zimbabwe, once a major exporter, is no longer ranked amongst the world's top-five producers, which are now China, India, Brazil, the US and Indonesia.

According to the US Department of Agriculture (USDA), global production in 2003 totalled 5,785,000t versus consumption of 6,631,054t. Last year, tobacco prices averaged $2,700/t, down from $2,976/t in 2000.

The USDA figures show that stocks of 6,673,095/t can meet any production shortfalls. China alone holds a stockpile of over 3mt.

The Zimbabwe Tobacco Association--representing commercial farmers--projects a 2004 crop of a paltry 55m/kg valued at $120m--assuming an average price of $2.18/kg. During the 2003 Harare auction sales, 81.4m/kg of leaf was sold for $183m. The industry's peak earnings season was 1996, when farmers grew 201.6m/kg of leaf valued at $593m. Total production has dropped by two-thirds since 2000, costing Zimbabwe over $200m/year in lost exports. Small-scale producers, including newly resettled farmers, lack the funds to buy fertilisers, chemicals and fuel.

Malawi has now overtaken Zimbabwe as Africa's largest producer. The Commercial Bank of Malawi put the 2003 crop at 145.6m/kg, and exports have increased from 101,250t in 2000 to 122,580t last year, according to USDA figures. The tobacco industry is central to Malawi's economy, comprising 10% of its GDP and two-thirds of export earnings.

COTTON

The USDA predicts a 4.7% rise in the world's 2003/04 production, up to 92.14m bales, against usage of 97.69m bales.

Africa-led by Mali, Egypt, Burkina Faso and Benin--represents 9% of the global crop producing 8.29m bales. The world's top-three growers are China with 22m bales; the US with 18.2m bales; and India with 12.5m bales. The new season's ending stocks are projected at 31.66m bales, sufficient to cover four months of annual consumption.

Last year, cotton prices staged a strong recovery to 64c/lb--up 39% over 2002's average of 46c/lb. The rich world's $6bn/year subsidies paid to cotton farmers are costing West African countries about $1bn a year in lost exports. Ng'andu P. Magande, Zambian Finance and National Planning Minister, says: "Ten million West African cotton farmers are being pushed out of the world market by subsidies their counterparts receive in developed countries, notably the US." According to Oxfam, the US's $3.3bn annual subsidies paid to its 25,000 cotton growers exceed its Sub-Saharan Africa's aid budget.

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GROUNDNUTS

The world's 2003/04 crop is forecast at a record high of 24.2m/t, up 12.5% on last season's figures of 21.51m/t, according to Oil World report. The top three producers are China with 10.2m/t, India with 5.3m/t and West Africa with 4.5m/t. Last year's strong prices of $974/t, against $753/t in 2002, and good weather conditions, should induce farmers to expand plantings. A bumper crop increases the availability of material for crushing. The crushings of groundnuts are forecast at 2.77m/t, up 1.81m/t from last season. This will underpin production of groundnut oil.

VANILLA

Global vanilla bean prices should drop steeply as supplies from world's biggest producer, Madagascar, return to normal levels this year. The Madagascan crop is expected at 1,500t compared to the cyclone-affected 2003 harvest of only 600t. That led to a supply-deficit and spiralling prices throughout 2003. Arco Ocean Indien, the French trading house, expects the price of Madagascan standard grade vanilla plunging to $100/kg in Europe by late 2004 from recent highs of $550/kg. The northeast coastal town of Antalaha is the main Madagascan growing region.

CLOVE

In northeast Madagascar, where cloves (the dried flower bud of a tropical tree, used as a spice) are reputed to be of highest-quality, the 2003 harvest was reported at between 4,000t-5,000t, down by 10,000t on previous seasons because of poor weather conditions and the crop's three-year growing cycle. Last November, some European traders were quoting Madagascan cloves at $2,000/t. This year, Zanzibar may overtake Madagascar's as the top-exporter of cloves.

MACADAMIA 

The Kenyan 2003 output of Macadamia nuts is pegged at 6,500t from about 8,000 hectares. This year's crop is forecast at 7,150t--up 10%--thanks to improved husbandry and increased plantings by some 100,000 small growers. Some coffee farmers, suffering depressed earnings, have turned to macadamia nut growing. In 2003, the bulk of output was exported in raw form, processed kernels totalling 1,207t, according to the Kenya Nut Company. The latter boasts capacity to process 10,000t nuts/year. South Africa's 2004 crop is expected at 4,000t of kernels, up 400t on previous year; and Australian crop of 8,600t remains the world's largest.

OLIVE OIL 

Tunisian output is poised to surge by 110,000t or 157% to 180,000t during 2003/04 season. Based on official figures, a bumper olive crop of 900,000t is expected reflecting good climatic conditions. Olive groves cover about one-third of the country's arable land. If projections are correct, the 2003/04 olive oil crop would easily exceed the 10-year average of 154,000t. Last year, prices averaged $3,784/t, up from $2,901/t in 2002. Spain is the leading producer. Its 2003/04 crop is forecast at 1.4m/t by the International Olive Oil Council.

GRAIN

Production in Africa's Sahel region comprising Burkina Faso, Cape Verde, Chad, Gambia, Guinea-Bissau, Mali, Mauritania, Niger and Senegal, should increase during 2004, assuming, however, favourable weather conditions. The Interstate Committee to Combat Drought in the Sahel--the main crop projection agency--estimates that production of millet, sorghum, maize and rice, will total between 11.5mt and 13.7mt. This, in turn, will reduce the region's $500m annual grain import bill.

African trade officials have pledged to boost intra-regional trade in order to reduce maize imports from the US and Europe. The Common Market for Eastern and Southern Africa (Comesa) said its 20 member-countries had a combined maize surplus of 6mt each year.