The effect of the international financial and economic crisis on the flower sector in developing countries

The financial and economic crisis has already had a significant negative impact on export levels, profit margins and employment in the flower sector in developing countries.

Regional differences in trade patterns are reinforced by the crisis. Flower exporters from Latin American countries – already heavily dependent on the US market before the crisis – are suffering more severely as the US market faces more serious problems than the EU market. African producers – known for their low prices – face pressure to cut prices even more because of the crisis. All exporters report increased rigour among European buyers in their price and margin negotiations. Moreover, more than 60% of the exporters surveyed are having difficulty obtaining export credits. More than 80% claim to be having difficulties accessing investment capital.

Within the EU, the demand for flowers has declined considerably since December 2008. Demand from the USA was already on the decline before that time. The consequence of this
decline is oversupply, which in turn is leading to lower prices. Importers in The Netherlands indicate that prices have gone down by 15 to 30% since last December. Some flower species are being sold below production cost. Declining order numbers and volumes, together with decreasing prices, have caused a turnover drop among Dutch importers of 0 to 30%, depending on the product range: consumer purchasing behaviour is also shifting, shifting from more expensive and luxurious flowers to cheaper products.

The general expectation among respondents is that these trends will persist in the next 2 to 3 years. According to some respondents, the crisis may also have a positive effect on the sector, causing players to reorient with regard to competitive advantages, innovation and value addition.

Source: CBI sector alert flowers (24 April 2009)