ETHIOPIA – Ethiopian edible oil processors have raised an eyebrow at soybean exporters, blaming them for bidding up prices and depleting local supply.
This comes as processors are grappling with a surging soybean market to 4,400 Br (US$889) for a quintal (1 quintal =0.1 tonnes) which processors say that in two weeks, a quintal rose to almost 1,000 Br.
The tension has prompted action by the Ethiopian Edible Oil Manufacturing Industries’ Association, which is now pleading for a temporary ban on soybean export in hopes of keeping the edible oil manufacturing sector humming along at its optimal capacity.
Mohammed Yusuf, the chairman of the association verified the motives of processors, who buy soybeans primarily as an input, as opposed to those of exporters, who buy to generate foreign currency even at a loss.
According to him, the processors and exporters are playing different ballgames arguing that while the country has a limited number of soybean oil processors, the scale they operate is expansive.
He added that the underlying concern is broader than the recent soybean price fluctuations. Citing the recent central bank’s adjustment in the ratio of forex surrender by exporters, he said that the motive by exporters is viewed with suspicion.
“This move might entice exporters to sell more soybeans internationally, causing a further uptick in prices,” he said.
According to the association, despite the country’s efforts in soybean cultivation which sow the production area reportedly increased from 1.8 million to 7.9 million hectares this year, it has not translated to better availability for edible oil manufacturing businesses coupled with a price upswing.
In line with these concerns, the Ethiopian Edible Oil Manufacturers Association last year requested the Ministry of Trade & Regional Integration to place a ban on the exports of soya beans, which they believed is one of the causes of the recent shortage of edible oil in the market.
The state still reluctant to association’s plea
Meanwhile, nearly 85% of Ethiopia’s forex earnings hinge on agricultural products, compelling the authorities to be reluctant to support domestic producers over exports unless they first drive their outputs for the export market.
In his comment, Tarekegn Bululta, the state minister for Industry, said that doing so “Isn’t feasible.”
However, for many industry insiders, it is a complex conundrum. The soybean plight, amidst a backdrop of geopolitical tensions, reflects the intricate economic hop between domestic needs and global demands.
Alemayhu Geda, a distinguished economics professor at Addis Abeba University, also links the current turmoil to geopolitical strife.
“Many of these soybeans are cultivated in conflict-ridden zones,” he said. “This turmoil is a grim reminder of the cascading economic implications of instability.”
Alemaheyu contradicted the recurring cycle of soybean exports for foreign currency and called on the government to prioritize manufacturers’ needs
However, Yosef Kefyalew’s firm, a soybean exporter while acknowledging the recent geopolitical tensions influencing prices, emphasized global demand as the primary driver of export prices looking at the processors’ plea with scepticism.
“We, too, aim to bolster our country’s forex reserves,” Yosef argued.
On his part, Sisay Amare, the head of Ethiopian Pulses, Oilseeds & Spices Processor, Exporters Association, believes several factors, including the recent violent conflicts causing logistical challenges, were behind the price surge rather than merely exporters offloading their inventory.
According to Amare, the global market received over 130,000tn of soybeans, from Ethiopia in the last fiscal year, valued at 86 million dollars.
However, Amare highlighted that while Central Statistics Service data puts national production at 1.77 million quintals, the lion’s share originates from the Amhara Regional State, where militarized conflicts between armed forces battling federal troops flared over the past few weeks.