Nut farmers crack profits as local demand soars

Kenyan nut farmers are a happy lot. The growing demand for the precious nuts in the international market has jumped to unprecedented levels. But local demand driven by health conscious consumers is equally rising living the farmers spoilt for choice.

Processors and dealers with huge capacities and resources have been scrambling for the few available quantities from farmers in a bid to cash on the nuts used in high end products - including chocolate. "The industry has become very competitive. The demand is so high while production is low and we are not able to satisfy orders," said Mr Simon Mwangi from Farm Nut a macadamia processing and exporting firm.

Demand for the nuts in China, the US, Europe and Australia has been steadily rising over the last few years while local consumption of the nuts has also been on an upward trend. Farmers have greatly benefited from the development with on-farm prices rising to a record Sh100 per kilogram in June, from as low as Sh20 experienced in 2008. Currently the nuts are being bought at Sh80 per kilogram.

Experts have been forecasting even better times for the hardy nuts leading farmers to ramp up production in anticipation of better prices. Entry of Chinese middlemen who work through brokers has further heated up issues in the industry.

The brokers have been accused of exploiting poor farmers by buying their nuts for as low as Sh30 per kilogram. Unlike processors who buy nuts in bulk, the middlemen can buy very small quantities and usually go to the extent of harvesting nuts from the trees. This race has in the past led to harvesting of immature nuts by brokers, leading to the rejection of Kenyan nuts from Japanese, Indian and Chinese markets.

Premature nuts or "shrivelled" nuts are rejected for poor quality and have low oil and high sugar content. They are usually deformed and may be wrinkled, spongy, or discoloured and are usually discarded during processing.
The rejection earned Kenyan nuts a bad name in the market forcing their prices downwards.

Unscrupulous brokers have also been accused of illegally exporting in-shell nuts despite a ban on exportation of uncracked nuts. This denies the country millions in revenue that would have been derived from value addition. Raw nuts from Kenya support large industries that employ thousands and generate millions of dollars in revenue in countries such as China, India and Japan.

Export of raw nuts also threatens the existence of local processors such as Farm Nut and Kenya Nut.
The Chinese government also offers subsidies for the Chinese merchants to sell their nuts at highly competitive prices, giving them an edge over local processors. To fight the middlemen and strengthen their position, local macadamia processors have formed the National Processors Association of Kenya (Nut Pak).

The processors have also shifted their strategy and are now working at solidifying their relationships with farmers. According to Mr Mwangi, this will be possible through providing farmers with free extension services to help them improve their harvests. "We are educating farmers through field days, shows and barazas," he said.

Processors are also encouraging farmers to forms associations through which they can engage in contract farming.
"We are working with the Ministry of Agriculture and the Horticulture Development Authority to engage farmers in contract farming," said Mr Mwangi. Contract farming will enable processors to provide farmers with increased support through provision of seedlings, fertilisers, sprays and crop advances.

Despite challenges, contract farming has been successful with coffee millers, tea processors and cut flower outgrowers. Pushed by stringent quality requirements in export markets, Mr Mwangi says the processors have fully professionalised their operations by employing qualified personnel.

To improve on revenue generation, they have also engaged in value addition which was initially directed at the domestic market. Value addition starts with cracking of the shell to remove kernels, roasting, salting and honey coating the nuts, before packaging for consumption.

Processors have also been pushing government to enact legislation governing macadamia and other nuts, to provide checks and controls such as in the tea, coffee, and sugar industries which are all governed by parliamentary Acts. Low production of macadamia in the country has mainly been caused by poor rains which affect flowering.

According to Mr Mwangi, flowering is only achieved in 55 per cent of the country's crop. Poor husbandry has also been cited as another major cause for the low production. Farmers are however being taught how to improve quality of their crop, pest control, fertiliser application, and weeding.

The current crop was planted in the 60's and 70's, and has overstayed the 20-year lifespan, a factor that has resulted in poor harvests. The old crop was introduced by Kenya Nut Company which pioneered macadamia farming in the country.

Due to aging, the crop is said to be of poor quality and is susceptible to diseases such as Fusaraium rot and pests.
Farmers have been urged to plant newer macadamia varieties which mature fast, have better yield and quality and are less susceptible to disease and pests. The newer hybrid varieties have been developed by the Kenya Agricultural Research Institute and large stocks are available for farmers to plant.

The Kenya Horticultural Development Program has initiated a partnership with macadamia farmers to help renew the crop by grafting the new variety on to the old crop. The grafted varieties take only three years to start producing harvests while non-grafted varieties take seven years.

And the beautiful returns have now seen stakeholders in the Macadamia Industry planning to increase annual production of nuts in the country from 15,000 tonnes to 40,000 tonnes in 10 years time. To achieve this, they plan to increase quantity of produce by ensuring farmers produce high quality nuts and get satisfied with the returns.

According to the secretary, Nuts Processors Association of Kenya (NUTPAK), Patrick Wainaina, the association has started subsidizing seedlings to farmers to a tune of Sh50 per seedling and offering free transportation. Speaking to macadamia farmers and middlemen in Embu Wainaina said they plan to reach the highest standards of quality by reigning on smugglers in the sector.

Most of the smuggled macadamia ends up to the East especially china, denying the government revenue from taxation while the smugglers are not interested in the quality of their export.
Wainaina said they have put in place a strategy to dislodge countries that have overtaken Kenya in macadamia business since the country initially used to lead in exportation but has now moved down to number five.
Embu is the biggest macadamia producer in the country, followed by Nyeri, Kiambu and Kirinyaga.