Strengthening market linkage for soybean producers in Ethiopia

Contributed by Selome Kebede, BENEFIT Senior Communication Officer

BENEFIT held its 4th soybean business platform meeting on May 4, 2018 at Azzeman Hotel Addis Ababa, Ethiopia. The objective of the meeting was to better understand soybean supply and demand profile, share status of collection, supply and challenges of unions and create a networking and trade opportunity. Over 20 participants representing 7 unions, 4 buyers and processors, and BENEFIT project staff attended the meeting. The meeting was a success in highlighting key concerns and challenges that are detrimental to the progress of soybean production and marketing and identify specific areas the platform should focus on.

During the opening remark Auke, Program Advisor at Ethiopian Netherlands Trade for Agricultural Growth (ENTAG) stressed this is a great opportunity for doing direct businesses and encouraged everyone to use the time wisely.

The first presentation focused on supply profile in the country. Soybean was first introduced in Ethiopia in 1950 and has come a long way especially in the last ten years. CSA statistics of 2015/2016 shows the country produced over 80,000 ton on 38 hectares of land by smallholder farmers. Nearly more than this amount is produced by commercial farms, which is often not reported by CSA. The bulk (ca 99%) of soybean is produced in western and southwestern part of the country, mainly in Oromia, and Benshangule Gumuz and Amhara regions, in that order of importance. Key issues in the supply chain listed in the presentation included not reaching an agreement early, market uncertainty, limited market information, no direct link between unions and buyers, limited capacity of unions to collect, subjectivity in quality and non-existing standard and unfair competition between unions and traders.

The participants also looked at soybean market profile from three angles – export, oil processing and feed. In oil processing and feed market alone, seven processing companies require over 47,000 ton of soybean annually. It was noted that the increasing number of processors, the high production potential and the establishment of soybean trading platform to improve market information and linkage are great opportunities we should exploit to move soybean production further.

An overview of Soybean booklet developed by BENEFIT-ISSD was presented.  The booklet includes information on production process, harvesting, processing, research and development, trade and utilization, list of suppliers and processors, nutritional value, fertilizer application etc.

Half of the meeting was devoted for group work where the unions were given an opportunity to talk to one buyer at a time. They discussed on capacity (how much to collect / buy?), payment modalities, time of delivery, quality attributes and who can buy the offer?

Discussion highlights

  • Overall, there is increasing trend both for soybean production and demand. However, there is high level of discouragement among farmers to grow soybean because of limited market opportunity and because home based soybean product consumption is not a well-established practice. In addition to farmers perception that there is no demand, low price offered by buyers, low yield because of disease and lack of capital (cost of production is around 600) are becoming major issues. To change the mind set of farmers, it is important to address issues farmers face on the ground.
  • Next to volume, quality is a big issue for buyers. Sometimes what is available is crushed or bruised, dried up, not fully mature, grain size is too small or it has high moisture content.
  • Timing of collection was an issue that was raised repeatedly. Due to lack of capital and urgent cash need, the farmers want to sell their produce right after harvest, which exposes them to farm gate traders who offer them minimal payment (500-600 quintal vs 1200-1800 being paid for traders at later date). And most of the unions don’t have the resource or capacity to pay the farmers early and store their produce until they get optimal price. Both buyers and unions agreed September to November is best time for collection.
  • Payment is a major issue for the unions. They talked about the possibility of getting advance payment from buyers to resolve their cash flow problem and strengthen the unions and farmers capacity. But what kind of guarantee can the union provide to the buyers? Some are willing to entertain other payment modalities (in kind or cash). The buyers are ready to consider working on contractual agreement (monthly or quarterly) to release payment early but it needs detail discussion and work plan. It was noted that the government is developing contract farming legal guideline manual that might partially address this issue.
  • Price fluctuation is another challenge for both buyers and sellers. Currently, price is determined by traders (middle man). The fact that banks give loans to traders to collect produce early and hold until optimal price at a later data is impacting the bargaining power of both buyers and suppliers. The possibility of having a binding agreement to minimize the impact of price fluctuation was also discussed.
  • Creating a strong market system is not only the producers’ and the processors’ job. We need market experts and need to bring all key stakeholders together. Researchers are needed to identify and promote improved seeds. Banks who are financing middle traders should be here to understand the important role they play in the value chain. The government should be involved to identify policy gaps and take appropriate measures to create an enabling environment. This includes balancing between exports and encouraging processors in the country. The health sector should be included in light of soybean contribution to health.
  • Soybean is not a surplus. Therefore, enough care should be given to balance between export and measures that encourage processors in the country.

Way forward

  • Raise awareness of farmers on the value of growing soybean, for both income generation and nutritional value
  • Strengthen unions through facilitating credit access and building storage facilities
  • Continue using the platform to increase direct linkage between unions and buyers
  • Explore further on creating workable contract agreement – building trust between buyers, unions and farmers
  • Strengthening the platform by bringing all relevant stakeholders together
  • Encourage processors to work with the unions in capacity building and influencing the government

The closing remark was given by Dr. Gezahegn Berecha, CASCAPE Cluster Manager from Jimma University. He emphasized the relevance of coming together to build trust and motivate more farmers to engage in soybean production. He talked about the CASCPAE soybean intervention in Jimma and that BENEFIT should look into its experience working with banks to explore ways to facilitate credit access to soybean producers.

At the end, it was decided for the organizers to evaluate the journey of the platform over the last year and determine the next step forward.

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