Oilseeds business opportunities in Ethiopia 2009

Abstract

This study explores business opportunities in the Ethiopian oilseeds sector, both for domestic and European companies. Business opportunities range from import substitution of edible oils to export of high value seeds and oil. Ethiopia has an attractive portfolio of oilseeds for export markets. One third of the Ethiopian oilseed production is sesame seed and 13% is linseed. Ethiopia is the fifth world producer in linseed and the sixth in sesame seed. Sesame is a high value oilseed. In addition, Ethiopia grows specialty Seeds like safflower seed and castor beans. Ethiopia is the third world exporter of sesame seed after India and Sudan and an important exporter of noug (niger seed). The Ethiopian share in other oilseeds is negligible. Sesame seed has the highest value per ton of Ethiopian oilseeds, more than twice the value of linseed. World sesame and olive oil import prices are the highest: 3 to 4 times the price of almost all other edible oils. The main oilseed commodities in international trade are soybean and in edible oil, palm and soybean oil. Oilseeds are the second biggest export earner of Ethiopia. Production growth and quality improvement of oilseeds can substantially contribute to the economic development at national, regional and at family level. The Ethiopian government considers oilseeds as high value export products. The government enhances foreign investments in the oilseeds sector by incentives: e.g. duty and tax income exemptions from 2 to 8 years for foreign investments directed at export. Ethiopia imports large quantities of soybean and palm oil. The value of imported edible oil is 40 to 50 % of the export earnings of oilseeds. Increased domestic edible oil production can substitute these imports and improve the trade balance. Many smallholders and a limited number of large farms grow oilseeds. Oilseeds are cash crops on subsistence farms. Production is characterized as labor intensive, low-input, and rain fed. The potentials to increase the production are huge. Only 20% of the total available agricultural land, mainly in the highlands, is used, of which only 7% for oilseeds. Productivity per ha can be doubled with higher input levels like fertilizer and improved seeds. Area expansion by virgin and fertile lands offers good opportunities for organic oilseeds production. Higher production levels are required, as the Ethiopian food demand will increase at least one third until 2020 due to population and income growth. The oilseeds value chain has many actors at production and collection levels. Oilseed crushers produce around 2 0% of the domestic consumption of edible oil: 80% is imported mainly as palm oil and soybean oil. Idle capacity for oilseed crushing and refining enables a larger production quantity. Agricultural research is on an adequate level and impact oriented. Ethiopia’s infrastructure is improving rapidly enabling faster transport of cargo. In addition, the Ethiopian Commodity Exchange (ECX) may enhance the market efficiency in oilseeds, by standard setting, market clearing and payment certainty; though it could jeopardize specialty trade. The fatty acid composition of Ethiopian oilseeds does not differ from oilseeds produced in other countries: in this respect, they are not special. Opportunities for oilseeds export are not fully exploited yet because of inefficient marketing, insufficient knowledge of the export market requirements, and insufficient knowledge of the oilseed composition, improper cleaning, and at times poor contract discipline.