Vegetable oils: a slippery slope to success?
MetadataShow full item record
CTA. 1998. Vegetable oils: a slippery slope to success? . Spore 73. CTA, Wageningen, The Netherlands.
Permanent link to this item: http://hdl.handle.net/10568/48962
Internet URL: http://spore.cta.int/images/stories/pdf/old/spore73.pdf
Vegetable oils: a slippery slope to success?The world market for vegetable oils is one of the most speculative at the present time, reflecting the importance of these protein rich oils not only in human diet, but also as a major ingredient of...
The world market for vegetable oils is one of the most speculative at the present time, reflecting the importance of these protein rich oils not only in human diet, but also as a major ingredient of livestock feed. Globalization has meant that financial markets and the markets for commodities such as vegetable oils are now more closely linked than ever before. The result has been a series of major price fluctuations which are often difficult to predict. The global picture Global production of vegetable oils has risen by 30% in the last ten years but is still failing to meet a demand boosted by the increasing number of people living in towns and cities. The major palm oil and soya oil exporting countries, Malaysia and Brazil respectively, are using a larger part of their own production for home consumption, thereby reducing the amount available for export. China, also a major producer, is nevertheless expected to import 5 million tonnes in the year 2000. When this is compared with the 1.5 million tonnes imported in 1993, the figures show how significantly demand is increasing. These forecasts, which relate particularly to palm oil, have influenced prices on the futures market. These have now stabilized at around the price of soya oil, its principal competitor. Soya oil represents 20% of the world market compared to 17% for palm oil. Palm oil not only exceeds by eight times the yield per hectare of soya but it also has many technical advantages which are of interest to the food processing and the 'fast food' industry. These qualities include stability at high temperatures, a semi-solid texture and a high level of natural antioxidants. Africa's share In the 1960s Africa supplied 65% of global production of palm oil. Nigeria and Zaire were the principal producers. However, the current situation is not favourable for the long term investment that cultivation of this perennial crop requires. Approximately US$2,500 per hectare is needed to establish a plantation, which will not reach full production until ten years later. The majority of African companies are not able to finance such investment from their own resources. Local commercial banks tend to be wary of lending money on a long term basis to enterprises they judge to be risky. At a time when the State is withdrawing from financial involvement in the agriculture sector, and when agricultural credit is hard or impossible to obtain, room for manoeuvre is limited. Robert Hirsch of the Caisse Française de Développement says that new ways of providing credit are urgently needed if this major constraint is to be eliminated. Despite the growing need for vegetable oils, Africa's share of world production is less than 4%. With the exception of Côte d'Ivoire and Cameroon this does not even meet the needs of local consumption. Groundnut oil is the second largest source of vegetable oil on the continent after palm oil. Lagging far behind these in quantity are cotton and sunflower oil which are produced mainly in South Africa, and olive oil which is produced mainly in North Africa. Although the world export market for groundnut oil is dominated by China and the United States, Africa retains a relatively high percentage share (on average 30%) despite major annual fluctuations. This is due, in part, to Senegal which continues to export groundnut oil to the European Union. Nevertheless, the countries of the Conseil Africain de l'Arachide have lost ground and, as Ousmane Badiane, a Senegalese economist with the International Food Policy Research Institute in Washington, has stated, it is not solely the effect of the international market which is responsible for the decline in African groundnut production, 'National policies have had a negative effect on the sector which has been weakened not only by serious droughts but also by heavy direct taxation.' (See Table 1). Processing It is often more profitable to export a product that has been processed and processing has the added advantage of creating employment. This is also the case with vegetable oil processing. In fact the price of oilseed cake, which is used in the feed industry and is the by-product of the oil extraction process, is currently higher than that of the oil itself. This is because the huge increase in world livestock production has been coupled with an increase in the price of cereals (See Table 2), and encouraged feed mills to buy more oilseed cake. It is therefore in the interests of producer countries to undertake such processing themselves, particularly as it can be done with small units requiring only low levels of investment which are therefore relatively easy to obtain. This is how Argentina, the world's third largest producer of soya, has been able to achieve a comfortable profit margin on its production. This has encouraged local and multinational processors, to reinvest in new processing plant. The demand for vegetable oils will undoubtedly continue to expand. Not only is there an enormous market in China but India, with its huge population, is currently unable to meet its own internal demand. The demographic explosion and the need to meet the food needs of an increasingly urbanized population will effectively guarantee the future of this sector. Urban and more affluent people eat more livestock products and this in turn has an impact on the demand for oilseeds. Furthermore, there is also an industrial demand for vegetable oils which are increasingly important to the production of plastics and as biofuels. There is no reason why some of the ACP countries should not work towards developing this line of production provided they can attract investors who are prepared to risk capital over a relatively long term in regions which are politically unstable. Association africaine pour le développement du palmier à huile (ADPH) 15 BP341 - Abidjan 15 - COTE D'IVOIRE