Soybean demand shortfall presents huge investment opportunity

Though soybean is an exportable commodity that can earn Nigeria foreign exchange, the country is currently not exporting because domestic supply still falls far short of demand.

The demand is driven by growing utilisation of soybean meal and oil in the human food and animal (poultry, fish, goat, etc) feed industries. The growth in the poultry industry in particular in the last five years has contributed the most to soybean demand.

The insurgency in the Northern part of the country has also aggravated the demand-supply gap creating a shortfall in supply worth about N225 billion, Sotonye Anga, coordinator, Community of Agricultural Stakeholders of Nigeria (CASON), recently, said in Lagos, that “demand for soybeans in Nigeria is about N300 billion.”

According to Novus Agro Commodity report, a ton of soybean currently goes for N95,000 to N180,000, depending on the location of the market. The price per ton it is sold for in Lagos is N135,000, and this is the average price for the different prices in the six geopolitical zones. Dividing the N300 billion market worth with N135,000 puts annual demand for soybean at about 2.2 million metric tons.

The result of this computation is in line with the Central Bank of Nigeria (CBN) report on Grains Demand and Commodity Prices in 2013, which puts industrial demand for soybean seed at a total of 2,270,700 tons.

Anga also confirms the Global Alliance on Improved Nutrition (GAIN) report which puts Nigeria’s current annual production of soyabeans at about 500,000 metric tons (10 million bags of 50kg). Therefore, domestic supply gap of about 1.5 million metric tons of soyabeans (30 million bags of 50kg) exists. This indicates that only 25 percent of the total annual soybean demand of the country is currently being met by domestic production, leaving a gap of about 75 percent.

Apart from industrial usage, the insurgency in the Northern states has contributed to the huge shortfall in domestic supply as many farmers in these areas who survived the terrorists’ attacks have fled from their base and abandoned their farms.

According to industry watchers, Buni Yadi in Yobe State is one of the towns that produces very large quantities of soybeans in Northern Nigeria, and it has come under heavy terror attacks in recent times with the farmlands being abandoned.

Nnamdi Anakwe, chief executive, Foraminifera Market Research, also says that soybean has very huge market potential due to some of its uses as a food condiment and seasoning. Soybean consists of more than 36 percent protein, 30 percent carbohydrates, and excellent amounts of dietary fibre, vitamins, and minerals. It also consists of 20 percent oil, which makes it the most important crop for producing edible oil.

According to various food researchers, soybean is the only available crop that provides an inexpensive and high quality source of protein comparable to meat, poultry and eggs. A by-product from the oil production (soybean cake) is used as a high-protein animal feed in many countries. Soybean is also used in rejuvenating the soil as it improves soil fertility by adding nitrogen from the atmosphere.

This, according to researchers, is a major benefit in African farming systems, where soils have become exhausted by the need to produce more food for increasing populations, and where fertilisers are hardly available and are expensive for farmers. Seyi Gbadamosi, agribusiness investor/researcher, affirms that there is an all-year-round demand for soyabean, saying “after sorghum, soyabeans is the most profitable grains to invest in, whether the investor wants to grow it or trade in it. Processing or reprocessing it for the industrial market is also highly profitable. In fact, the profit from processed soyabeans is higher.”

The International Institute of Tropical Agriculture (IITA) in one of its reports says leading infant food manufacturers in the country use soybeans because of its high nutritional value. Soybean is also processed into flour and soybean oil is used in the local paint, cosmetics, and soap making industries. The IITA reports also states that direct human consumption of soybeans is significant in Nigeria, especially among rural low-income groups that cannot really afford animal protein sources such as meat, fish and eggs.

Companies such as Nigeria-based Karma Foods Limited that has established a multi-billion naira factory seeks locally produced soybeans for the manufacturing of its products.

But due to the shortfall in supply, some individuals and/or organisations have been importing soyabeans in recent years. Though there is no effective ban on soyabean importation, many importers realise the moral burden of importing raw materials that the country has the capacity to produce in very large quantities. As a result, most of the importation is done through the backdoor.

The international market price for soyabeans is $392 per ton, which is just about N80,000 and therefore it is more lucrative for local producers to sell their soyabeans, which goes for N95 to N200,000 per ton, in the country than export. The challenge though is that it is also more lucrative to import but heavy importation poses huge threat to the local producers who incessantly call on government to check the excesses of importers.

Pricing of soybeans and other soya-based forms is usually dictated by market forces of demand and supply which in turn is a function of time, level of production, distance from the point of delivery, quality and the quantity demanded.

OLUYINKA ALAWODE