Commercial agriculture earnings is likely to exceed Sh500 billion this year largely driven by a growth in the performance of cash crops.
“The growth in commercial agriculture revenue has been uneven between various categories of crops and agricultural products,” ICEA LION Asset Management head of research Judd Murigi said.
The firm’s 4th Quarter 2019 Investor Pulse shows annual earnings from the agriculture sector grew 48.21 per cent over the five-year period to 2018, rising to Sh498 billion compared to Sh336 billion in 2013.
While annual revenues from horticulture grew by 84 per cent in the review period, income from cereals (predominantly maize and wheat) realised a low 18 per cent growth.
According to the report, a 20 per cent drop in market prices has largely driven the slow down in revenue from cereals since 2013.
This signals an excessive reliance on tea and horticulture, which could result in a risk of overreliance on the key revenue earners, dampening production of cereals in the market as farmers move to more lucrative crops.
“There is need to urgently diversify the commercial agriculture base, partly by stimulating domestic consumption,” Murigi said.
He added that diversification in commercial agriculture had dropped over the five-year period, with tea, coffee and horticulture comprising over 75 per cent of the value of marketed agricultural produce in 2018 compared to 67 per cent in 2013
Kenya could already be witnessing the overreliance risk as data by the Kenya National Bureau of Statistics shows the sector grew by 4.1 per cent during the second quarter of 2019, declining from a 6.5 per cent growth recorded over the same period in 2018.
According to KNBS, the slowed growth was mainly attributed to delayed long rains that somewhat curtailed agricultural production.
Data shows the sector’s growth was hampered by an 18.9 per cent drop in tea production as well as marginal declines from fruit and vegetable earnings, which contracted by 0.5 and 2.2 per cent, respectively. A notable drop from the country’s key revenue contributors.
“The proportion of agricultural production that is commercialised dropped steeply between 2013 and 2018 especially in the crops sector,” Murigi said.
This decline, as per the report, was mainly driven by commercial crop revenue which halved from 28 per cent of the market value of crop produced in 2013 to 14 per cent of the market value of crop sector output in 2018.
