Anticipating the evolution of African oilseed markets Will Africa fill the gap??

Ferdi Meyer

Bureau for Food and Agricultural Policy (BFAP)

29 July 2018, Vancouver, Canada

• How much more growth can we anticipate – Will Africa fill the gap?

• Comparative advantage & The Law of One Price

• Policies and the implications for investment and regional trade

Overview

How much more growth can we anticipate?Underlying market and policy dynamics

Income & Population growth in SSA

0

1

2

3

4

5

6

7

8

9

10

2000 2003 2006 2009 2012 2015 2018 2021

Pe

rce

nta

ge

Real GDP Growth: SSA

0

100

200

300

400

500

600

Mill

ion

pe

op

le

Population

East Africa Rural East Africa Urban

Southern Africa Rural Southern Africa Urban

Western Africa Rural Western Africa Urban

Central Africa Rural Central Africa Urban

SSA imports are rising rapidly

Source: ITC, 2017

0

10

20

30

40

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Bill

ion

US

Do

llars

Preperations of vegetables, fruits and nuts Preperations of cereals, flour, starch or milk

Sugars and sugar confectionary Animal or vegetable fats and oils

Zambian net trade in soya complex

Some countries are starting to fill the gap……

-40

-20

0

20

40

60

80

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Tho

usa

nd

to

nn

es

Soybean Oil

Soybean meal

Soybeans

Zambian area under production

….but only picking the low hanging fruits!!

-

100

200

300

400

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

20

17

Ind

ex

Zambia area planted index

Maize Wheat Soyabeans

Growth in chicken demand: 2000 - 2017

0

10

20

30

40

50

60

70

2013-2015 2025 2013-2015 2025 2013-2015 2025

Malawi Zambia Mozambique

THO

USA

ND

TO

NN

ES Production Net Imports

37%

24%

82%

0

500

1000

1500

2000

25002

00

7

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

20

17

20

18

20

19

20

20

20

21

20

22

20

23

20

24

20

25

20

26

20

27

Tho

usa

nd

to

nn

es

Soybean full fatSoybean crushSoya crush capacity (80% utilisation)Soya and dual crush capacity (80% utilisation)

Benchmark crush capacity (2.06 Million tonnes)(80% Utilisation of dedicated soya and dual capacity)

Benchmark crush capacity (1.40 Million tonnes)(80% Utilisation of dedicated soya capacity

• Soya meal imports - 500 000 tons of soyabeanequivalent imported in 2017

South African soybean processing

Crushing margins will determine utilization

0,00

0,20

0,40

0,60

0,80

1,00

1,20

1,40

1,60

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

20

17

Soyabean - soya meal price ratio

SA- SB/SM

US- SB/SM

Zambia= 1.15

Zambia= 0.86

Comparative advantage & The Law of One Price – Revisiting the principles

Comparative advantage & Law of one price

Import parity price Domestic price Export parity price

AUTARKY:

IMPORT PARITY:

EXPORT PARITY

REGIONAL (e.g. Lusaka – JHB: $180/ton)

DEEP SEA (e.g. Lusaka – Durban: $210/ton)

DEEP SEA

REGIONAL

LUSAKA spot: $415/ton

Overlaying GIS and Tradeflow

Moving RatesBeira –> Lusaka: USD 145

Lusaka -> Harare: USD 85

Lilongwe -> Harare: USD 85

Randfontein -> Harare: USD 135

Beira -> Harare: USD 110

Durban -> Harare: USD 135

Source: BFAP (2015), FAO-IIASA (2015), World Bank (2011)

-200

0

200

400

600

800

1000

1200

1400

1600

1800

2000

2200

2400

0

1000

2000

3000

4000

5000

6000

7000

8000

9000

10000

2007 2009 2011 2013 2015 2017 2019 2021 2023 2025 2027

Tho

usa

nd

to

nn

es

Ran

d p

er t

on

ne

Production Domestic use Net imports Import parity - Randfontein SAFEX Export parity - deep sea

SA price complex

Zambian price complex

0

100

200

300

400

500

600

700

800

900

2009 2010 2011 2012 2013 2014 2015 2016 2017

USD

/ t

on

Domestic Soybean Price Zambia Soybean Import Parity

Soybean Export Parity (Cross Border) Soybean Export Parity (Deep Sea)

• Policy choice driving future investments -Risk versus Returns:

• Risk: • Can I hedge my

prices? Market integration and price transmission key

• Return: • What are the

margins?

Soyabean products – not only meal and oil

• Potential premium markets in Asia for surpluses of non-GMO soya products

• Human consumption markets

Can Africa bend the curve on imports?

• Some countries are……!!!• Policies will shape future investment and

growth in the region – nothing new!• Most countries have NAIPS….but:

• How realistic and focused are these plans?

• In most cases plans exceed available budget and focus remains on productivity.

• Prioritization to be shaped by market led, inclusive transformation principles.

Concluding remarks

• Quick win – inflexion points where African countries move from import to export parity

• Regional and global market integration is rising in markets where ad hoc policy interventions are absent

• Transportation costs, non-tariff trade barrier major implications for further growth to occur

• For policy prioritisation more specific analysis and interventions are required

Acknowledgement

In country training and capacity building on partial equilibrium modelling and market analyses funded

by Feed the Future Innovation Lab