28 May 2018

Zimbabwe: Govt, Cooking Oil Firms in Talks

Oil processing companies are in negotiations with Government for them to buy soya beans at import parity price of $400 per tonne in a bid to maintain the price of cooking oil and other related products at levels affordable to consumers.

This comes after Government increased soya bean producer price to $780 per tonne from $610, a move some analysts see as a catalyst for price increase in the cooking oil sub-sector.

Essentially, oil producers expect the price to ramp up soya bean production, which has gone done drastically over the years. Oil manufacturers are looking forward to have a similar arrangement to that of Grain Millers Association of Zimbabwe (GMAZ) of buying maize from Government at subsidised prices. Though the Government pushed soya beans price further to $780 per tonne from the proposed $610 to promote production, Oil Expressers of Zimbabwe (OEAZ) members, are willing to pay the import parity price of $400 per tonne. The OEAZ president Busisa Moyo, told The Herald Business that the newly gazetted price will help to improve soya bean production in the country and will enable them to get readily available crude oil for cooking oil production.

"Though we are very happy with the latest Government's efforts to improve soya bean production in the country by motivating farmers with such a fascinating price of $780 per tonne, we also ensure that there are no unnecessary price increases in cooking oil and the entire value chain.

"Currently, we are negotiating with Government on the price issue and there is high likelihood of buying at import parity price. After we have finished these discussions, we expect to have the final figure soon. We don't know if they accept our proposal of having the same arrangement like the millers who buy maize for a bit less than the price the farmer is being offered," said Mr Moyo.

Soya bean is a critical raw material in the production of edible oil and soya cake for cattle feeding and is expected to be grown both under Presidential Input Scheme and Command Agriculture Scheme.

Oil expressers have the annual demand of 150 000 tonnes, while the country needs 300 000 tonnes annually to cater for other needs such as cake soya and chicken feed. Most farmers were said to be preferring to grow maize to soya beans as they felt the former has high returns per hectare. The upward price review comes at a time when the Government is moving towards revival of soya beans production in the country.

Need for contract farming

Pure Oil Industries (Pvt) Ltd, which manufactures ZimGold cooking oil, has invested $6 million in new projects as it seeks to consolidate its grip on the local market in the wake of growing local demand. Over the past three years, the company has grown from producing 1,4 million litres per month to seven million litres.

In order to copy with the demand Pure Oil industry has invested $6 million into contract farming to get its own resources for cooking oil.

Pure Oil's head of operations Rod Musiyiwa, told The Herald Business that the move by Government is good to encourage investing in contract farming in order to ensure there is an adequate supply.

"We are very happy with the current soya prices though we believe that contract farming can enable oil processors to get their raw materials straight from farmers they may be shortages here and there but contract farming enables steady supply of soya beans. Next year we will expand contract farming as it has timely intervened in times of crisis," said Mr Musiyiwa.

Government is mobilising $200 million to grow soya beans under Command Agriculture programme next summer cropping season and of that amount Sakunda Holdings has already committed $47, 8 million towards the facility.

Oil producers are also mobilising $100 million worth of inputs, irrigation infrastructure to grow 100 000 hectares of soya beans in the next summer season.

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