Soybean Value Chain Report
AuthorCuan Opperman and Niraj Varia
Soybean is a critical crop which makes up 54% of the global oilseed market; its production is dominated by the USA, Brazil and Argentina and demand is dominated by the USA,China and Europe. While much of Southern Africa shares similar agro-climactic conditions to Argentina and Brazil and has a similar amount of land that could be planted with soybean (most of which is currently completely uncultivated), the region produces less than 1% of the total global output, compared with 46% for Brazil and Argentina.
The soybean industry is well established in Southern Africa, with total production of 861k MT in 2010 and demand of 2M MT. Production and demand are dominated by South Africa, though Zambia, Zimbabwe and Malawi are also significant producers. Production is dominated by commercial farmers (who made up 84% of production in 2010), though this varies significantly by country, as smallholder production dominates in Mozambique and Malawi. Demand is dominated by soybean cake for the poultry industry and soybean oil for human consumption. Demand is expected to continue, reaching 3.5M MT by 2020.
Although soybeans are well established in the region, there is significant variation in the industry across the region, and the soybean value chain has a number of weaknesses, which vary across countries:
- Production practices across the region are generally poor (with the exception of commercial farmers in South Africa and Zambia), with low input use (due to high prices, a lack of finance, poor availability and regulations, particularly a ban on GMO seeds outside South Africa), limited irrigation (outside Zambia) and poor agronomic practices (particularly among smallholder farmers).
- The processing industry is rapidly expanding as processors are often backward integrated from animal feed manufacturers (particularly in Zambia and Malawi) or oil processors (particularly in South Africa) who are securing inputs for their core activities; however feed and food safety must be improved.
- Smallholder farmers find it difficult to obtain the right price for their product and often struggle to reach the market or find storage.
- The policy environment is challenging, with trade restrictions, a lack of regional harmonization, support for competing crops, unclear land tenure rules and insufficient investment in infrastructure.
- The finance required to increase the land under cultivation and invest in irrigation systems and new mechanization is difficult to obtain and expensive.
- The support services needed for smallholder production vary significantly across the region, with reasonable support from NGOs in Malawi, Zimbabwe and Mozambique, but poor support in Zambia, South Africa and DRC.
These challenges reduce the profitability of the crop and the land cultivated with soybeans. However, by working to overcome these challenges, the industry could double production by 2020, generating US$217M in increased income and raising the household annual incomes of over 400,000 smallholder farmers by between US$30 (for smallholders who already grow soybeans but who will see an increase in productivity) and US$300 (for smallholders new to soybean production). The industries in South Africa, Zambia and Zimbabwe are expected to generate the majority of additional income as they grow rapidly from a large base. However, smallholders in Malawi will see the most benefit, as they dominate production (with 160,000 smallholders benefiting), followed by Zambia (124,000), Zimbabwe (70,000) and Mozambique (52,000).