Business Daily (Nairobi)
George Omondi
10 July 2009
Animal feeds and edible oils manufacturers are scouting for options as soya beans supply tightens in the global market, pushing up raw material costs.
This follows poor harvests by major producers of oil seed and the decision by China to build its soya reserve to cushion its industries from an anticipated shortage.
In Kenya, the effect of this supply shock has been felt all the way to the farm gates where livestock feed prices have gone up considerably in the last few weeks in tandem with animal feed price increments.
"Slow supply of Soya from India has suddenly pushed up prices by 40 per cent over the last few weeks. We now have to pay Sh60 to Sh65 per kilogramme of imported soya, up from the Sh34 that we factored into our investment plans for this year," says Mr Lawrence Mukundi a manager at the Unga Group.
The world's production of Soya beans, a legume rich in protein and edible oil, is concentrated in the US, Brazil, Argentina, China and India.
According to Oil World - an independent online Forecasting Service for oilseeds - the reserves from Brazil, Argentina, Paraguay and Uruguay stood at 53.1 million tonnes at the beginning of this month, 20 million tonnes below the July 2008 level.
"We expect US soya reserves to reach a minimum towards the end of August, causing difficulties for future deliveries in the first two to three September weeks," says the forecast.
The drought conditions in Argentina and Brazil in the last sowing season has already led to a downward revision in the crop expectations by an average of 4 million tonnes.
China, alarmed by a looming shortage, has started building her soya bean reserves, mopping up the legume from the international market and pushing up global prices.
Available data indicates that China's total imports hit 6.289 million tonnes at the start of 2009, a 15 per cent jump above last year's levels in a move aimed at protecting her industries from future shortage and well as cushioning farmers from the kind of price decline of nearly 40 per cent witnessed in a 2008 market glut.
Most Kenyan manufacturers however, import their beans from India, the world's fifth largest producer whose poor December harvest has also seen the Asian country revise its crop expectation down to 8.9 million tonnes for 2008/2009 from 10.8 million tonnes.
Local animal feeds manufacturers say soaring soya prices in the international market could not have come at a worse time.
"The fact that we now buy one sack of maize at Sh2,600, up from Sh1,300 last year, means that the prices of poultry feed have risen by the same margin," says Mr Jitesh Shah, the managing director of Goldstar Feeds Limited.
Within the market value chain, dairy farmers say that high feed prices have lowered their profits to an average of Sh3.5 per litre of milk, down from Sh6.5 only two years ago.
Already, many farmers' cooperatives, fearing that a shift to inferior feeds by resource poor farmers could lower productivity levels have resorted to bulk buying of animal feeds along with other inputs which are then advanced to farmers against their deliveries.
On the other hand, feed manufacturers such as Unga Group says they have been forced to cut market prices for high yielding dairy products by 5 to 8 per cent in order to stimulate demand.
When it acquired the Nakuru based Elianto plant four years ago -- raising its daily oil extraction capacity to 70 tonnes -- Bidco Oil Company immediately rolled out a massive farmer recruitment exercise to hook local farmers to soya bean farming to address the local soya shortage.
Several farmers in Western, Rift valley and Nyanza provinces were awarded contracts to grow the crop in a move aimed at reducing reliance on erratic import-based supply.
Mr Dileswar Pradhan, a manager at Bidco, says the firm has recorded enormous success since it started engaging farmers on a contractual basis to grow the crop.
In the Bidco's recruitment drive, the Kenya Agricultural Research Institute provides farmers with new seed varieties while the Ministry of Agriculture acts as an overseer of the contracting process.
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