Gain Report: Nigeria - Soybeans and products

Report Highlights: Nigeria's domestic production of soybeans is trending upwards, but still lags behind the rapidly growing demand from the poultry industry for soy meal and vegetable oil processors. This supply deficit resulted in the increase in the price of soybean meal within ten months, reaching a high $670 per ton last September 2011. Imports of crude vegetable oil are liberalized and local processors now look to imports to fill the supply deficit. Market opportunities exist in Nigeria for exporters of soybeans, soybean meal, crude vegetable oil and value added soy-based food products.

Executive Summary:

Nigeria’s soybean production is rising steadily spurred by favorable grower prices and sustained high demand for soy meal by the poultry sector over the past five years. Growth in domestic production lags behind rapid growth in demand by the poultry sector, averaging about 25 percent per annum the last five years. As a result, the price of soybeans has almost doubled to the current $670 in the last 10 months. Soybean meal remains a vital and preferred source of protein in compound feed by the Nigerian poultry industry.

Soybean crushers in the country are operating below capacity and are unable to satisfy the growing demand for soybean meal and oil. There is a domestic annual supply shortfall of about 100,000 tons for soybean meal and 300,000 tons for vegetable oil. In September 2008 the Government of Nigeria (GON) removed the import ban on crude vegetable oil. Nigeria offers growing market opportunities for exporters of soybeans, soybean meal, crude soybean oil and value-added soy products and soy-based ingredients.

Production:

Nigeria’s soybean output is forecast to increase to 510,000 MT in 2011/12, up from 480,000 MT in 2010/11. The increase in output is attributed to favorable weather in Nigeria’s soybeans production belt. Compared to the erratic pattern in 2010, rainfall was favorable both in terms of volume and distribution in 2011. Also, acreage increased because of the prevailing attractive prices. The estimates are based on available government data and field visits to Nigeria’s soybeans production belt. (Note that production estimates used in this report include output used at farmer’s household level).

Despite this steady increase, domestic output continues to lag behind rising demand. Higher production is constrained by low yield levels resulting from the high cost of seeds and scarcity of superphosphate fertilizers. Average yield levels are approximately 1.2 MT/ha. Soybeans are produced on smallholder farms averaging no more than one hectare or 2.47 acres; as a result it is non-mechanized. In Nigeria soybean cultivation starts in May/June with land clearing, and harvesting normally occurs in late October through November every year. The crop is harvested 3 - 4 months after planting, depending on the time of sowing and seed variety. Benue State is the dominant soybean producing area but several other states, such as Kaduna, Plateau, and Nassarawa are increasing production.

Malnutrition is endemic in Nigeria and soybeans are a near-perfect crop to address the problem. Soybeans are affordable as they cost only one-fifth of the price of beef and poultry yet carry twice the protein as these animal products and also offer essential amino acids. Soybeans are also good for the environment because they require fewer insecticide sprays. They also fix atmospheric nitrogen and thus reduce fertilizer used by farmers.

Consumption:

Crush: Nigeria’s installed annual soybean crushing capacity is estimated at approximately 600,000 MT. An estimated 255,000 tons of soybeans were crushed in MY2010/11, representing only 42 percent of installed processing capacity. Eight large processors account for nearly 60 percent of Nigeria’s soybean crushing industry. Industry sources forecast crushing to rise to 271,000 tons in MY2011/12 on account of the anticipated increased soybeans production. Soybeans are crushed to obtain oil (for industrial and refined for food use) and soybean meal/cake for animal feed. At present, soybean oil is a major complement to palm oil in the domestic supply equation for edible vegetable oils and the major producers have reported a rise in demand for soybean oil as Nigerians became more familiar with the higher quality and health benefits of soybean oil. Although palm and soybean oil are produced in Nigeria, domestic production of these vegetable oils has not kept pace with rising demand. There is an annual shortfall of approximately 300,000 tons. Beginning in September 2008, the Government of Nigeria (GON) removed the import ban on crude vegetable oil and imports are trending upwards. Note that imports of all vegetable oil in retail packs remain banned. Field visits to the soybean production belt revealed that a few new small scale crushing facilities have been established in the last two years.

Soybean meal is the dominant and preferred protein ingredient in poultry feed rations. Prices of soybean meal surged to a high of $775 a ton in 2011, up from $485 last year. In ideal situations, poultry producers would prefer soybean meal inclusion rate of 30 percent in compound their feed, but the scarcity and high cost of the product have forced them to reformulate in favor of low quality substitutes such as peanut cake, cottonseed, and palm kernel meal.

Industrial Use:

Leading infant food manufacturers in the country use soybeans because of its high nutritional value. Soybeans are also processed into flour and soybean oil is used in the local paint, cosmetics, and soap making industries.

Household:

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. Beginning in the early 1990s, the International Institute of Tropical Agriculture (IITA) promoted the use of protein-rich soybeans in everyday foods to curb malnutrition. IITA estimates the cost of protein, when purchased as soybeans, to be only about 10 - 20% of the cost of protein from meat, eggs, fish or milk. Soybeans are now widely consumed and are readily used in the production of soymilk, soy cake, soy yogurt and the fortification of local carbohydrate-based Nigerian food staples. Dawadawa, a local food seasoning, is also produced from soybeans. Government sources estimate that about 41 percent of Nigeria’s domestic production is consumed directly in rural areas as human food. (Note that residuals of disappearances not accounted for in industrial use are included here).

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Prices

The price of soybean meal increased to a high $775 per ton in October 2011, up from $484 per ton the same time last year (see table below). The increase in price is attributed to excess demand over domestic output….

Prepared By: Michael David, Agricultural Specialist

Approved By: Russ Nicely, Regional Agricultural Counselor