January production of Africa's best coffee beans was slashed by 27 percent last month as a result of a drought that has Kenya's economy suffering the most since 2008, Bloomberg reports.
Kenya's overall agriculture industry has suffered as a result of La Niña, according to domestic meteorologists who say rainfall might slip for the remainder of 2011. The last three months of 2010 also ended up being drier than usual. Consequently, reduced harvesting will continue damaging the national economy.
Reduced crop yield "would have a chain effect on the economy," Peter Mutuku, senior corporate currency trader at Bank of Africa, told Bloomberg. "It would have a direct effect on a huge employment sector. Foreign-exchange reserves would also be affected, bringing pressure to bear on the shilling."
Two top buyers of Kenyan beans – Nestle and Starbucks – suffered since they rely on the East African nation's beans, often considered Africa's best.
Twenty-five percent of Kenya's gross domestic product and half of its exports depend on agriculture. The nation's economy is believed to be East Africa's most vibrant and largest. The country last had low growth three years ago when violence followed a disputed election.
"The worst-case scenario is it could knock 2 percent off of GDP in 2011," Wolfgang Fengler, the World Bank’s chief economist in Kenya, told Bloomberg, noting what would happen if no rain fell in March.
This material is conveyed as a solicitation for entering into a derivatives transaction.
This material has been prepared by a Daniels Trading broker who provides research market commentary and trade recommendations as part of his or her solicitation for accounts and solicitation for trades; however, Daniels Trading does not maintain a research department as defined in CFTC Rule 1.71. Daniels Trading, its principals, brokers and employees may trade in derivatives for their own accounts or for the accounts of others. Due to various factors (such as risk tolerance, margin requirements, trading objectives, short term vs. long term strategies, technical vs. fundamental market analysis, and other factors) such trading may result in the initiation or liquidation of positions that are different from or contrary to the opinions and recommendations contained therein.
Past performance is not necessarily indicative of future performance. The risk of loss in trading futures contracts or commodity options can be substantial, and therefore investors should understand the risks involved in taking leveraged positions and must assume responsibility for the risks associated with such investments and for their results.
You should carefully consider whether such trading is suitable for you in light of your circumstances and financial resources. You should read the "risk disclosure" webpage accessed at www.DanielsTrading.com at the bottom of the homepage. Daniels Trading is not affiliated with nor does it endorse any trading system, newsletter or other similar service. Daniels Trading does not guarantee or verify any performance claims made by such systems or service.