News and knowhow for farmers

How Kenyan farmers can cushion themselves from negative impacts of global price fluctuations

avocado for export

Kenyan farmers and traders can increase the value of their foreign exchange earnings and protect themselves from fluctuations that can potentially reduce their earnings and increase their input costs by the adoption of foreign currency management strategies.

According to ABC Bank, foreign exchange markets have become volatile due to various reasons among them the trade war between the US and China, Brexit and oil price fluctuations due to rising tensions between America and Iran among other factors.

At a past forex training for farmers, traders and other customers, ABC Bank’s forex department said that the trade war between the US and China, Brexit and oil price fluctuations due to rising tensions between America and Iran have the potential to cause fluctuations of major currencies.

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These fluctuations can potentially result in farmers losing earnings from export proceeds or increasing costs incurred when importing farming equipment, fertilizers and other inputs.

“Depending on how these scenarios play out there is a risk of hurting earnings and increasing input costs. Spot contracts, Forward contracts, currency swaps and options are some of the tools farmers, traders and other professionals who have exposure to foreign currencies can deploy to reduce the risk eroding their earnings when exchanging US Dollars or Euros and other foreign currencies for the Kenyan Shilling,” said Philip Wambua, ABC Bank General Manager Treasury and Financial Institutions.

Other key considerations that recipients and buyers of foreign exchange should consider are:   Efficient remittance channels of their foreign currencies, shopping for the best exchange conversion rates and opening of foreign currency accounts to hold some of their receivables to meet their import needs.

ABC Bank is hosting foreign exchange trainings for customers across the country as part of the lender’s efforts to educate its customers on how to get the best value in foreign exchange dealings.

Data from the Economic Survey 2019 shows that the agriculture sector was amongst the leading sources of export earnings with tea coming tops by posting Ksh138.8 billion, horticulture (Ksh124.3 billion), coffee (Ksh23 billion) and tobacco (Ksh13.99 billion).

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