Support to Business Organisations and their Access to Markets (BOAM)

Value Chain - Edible Oil and Oil Seeds

 Economic Background [top]                                                                                               

Oilseeds are important agricultural commodities widely grown in Ethiopia. Major oilseeds are sesame seed, groundnuts, soy beans (partly used for oil extraction), rapeseed, Gomenzer, Noug or Niger seeds, linseed, sunflower, cottonseed and others. Oil seeds are partly used for domestic oil extraction and partly exported to international markets for animal feeds and oil extraction. Most of the sesame production is for export to Middle East countries. The by-product of oil extraction (oil cake) is sold as animal feed.

According to FAO approx. 0.5 million hectares are presently cultivated with oil crops. The bulk of the harvest (more than 50%), especially Niger seed and sesame are exported. According to ITC statistics the exports of oilseeds from Ethiopia is expanding and total exports are performing better in the growing world market. Next to hides and skins oil seeds are the best-performing commodities in Ethiopian exports. The share in world market (excluding peanuts) is in the range of 5 %.  

In the past four years the export earnings from oil crops ranges between 32 and 90 million USD. The average annual price per ton was between 436 and 829 USD.

                Source: EEPA and authors calculation

The domestic market for oil crops is partly developed and backed- up by an oil extracting industry, which additionally used maize and cotton lint as an additional source of oil. According to a very recent study carried out by CIDR there are approximate 130 registered oil extraction companies of which are registered micro-companies. The number of big oil extraction companies operating in a large scale is not significant.

Commercial farms and small-scale farms are involved in the production of oil crops. Harvesting requires a fairly high demand of labour force, if not harvested with combines. Although prices are fluctuating there is a growing interest by farmers in planting and selling oil crops. Often oil crops represent the only marketable cash crop.

At processors levels companies complain about high levels of competition with oil coming into the country through food aid. The introduction of VAT, back ward technology of filtering and extracting residuals, packaging and impurities of intake as traders are regularly mixing and supplying inferior qualities are contributing against oil extractors.

All installed processing capacity is under utilised due to the above-mentioned reasons.

At trade levels, the seasonal purchasing capacity appears to be a major constraint.

The Ethiopian Oil Seed, Pulses and Spices Exporters Association describes the present situation as follows:

• Quality problem, market fluctuation and holding back of produce during the good market season, check point taxes, VAT, duties and custom procedures, lack of supply in produce, lack of trade ethics in the sector, lack of supply, foreign, and domestic trade information.

• Price dictation by the brokers in some oil seeds such as sesame, for instance this year there has been very good sesame price on international market about 930 USD/tone, however, due to holding back of produce by regional enterprises during peak season, we fail to export sesame. Value adding process capacity is very limited in this business.

 Constraints [top]                                                                                                                 

Unsustainable poor quality oil seed supply with too much impurity needs more labour cost for cleaning and get ready for oil extraction. The technology of the oil mill cannot make complete extraction of oil some portion of the edible oil is disposed with the oil cake. The oil cake is with 3% oil which is not comfortable for animal feed and a loss for the company. Oil filtration process needs efficient technology and quality of work at this point of activity seems unhealthy. There is no packing of the edible oil with standard packing materials except collecting with big metal tankers.  No technology that helps to check standard and quality inspection in the process.

 Intervention Points [top]                                                                                                   

The oil crop exporters association and the women business association plus several agro-investors showed strong interests in the promotion of oil seed crops. The commodity group of oil crops are offering very promising development potentials both in cultivation and extraction. Improvement at production level of oil crops has the linkage that determines the quality of oil in the milling process. Intervention by focusing either in cultivation or extraction doesn’t help much the program should cover the process from the farm to the oil extraction process. However the oil crops should be specified to one or two otherwise interventions in all types of oil crops cultural practice and in every corresponding oil extraction techniques might be difficult to handle. Because of the agro ecological requirement difference and the nature of the crops it is not possible to cultivate all types of oil seeds at a given locality or blend them together for processing. Each oil crop has its own oil character and the extraction technological differences doesn’t allow making every thing with a single oil mill company. On the other hand the oil mills have their own speciality and focus on specific oil crops.

For oil crop business as export commodity and raw material for edible oil extraction various development options are listed here under for a choice.

• Contract farming with processors

• Contract farming for exporters

• Developing of eco-certified production for e.g.: sesame and Niger seed

• Improvement of processing technology and product handling at a) village levels, b) micro enterprises, c) industrial levels

• Improving the purity of oil seed supplies to oil mills

• Improving the quality of oil in the extraction and purification process

• Improvement in single commodities especially peanut and sunflower

• On-farm productivity improvement

Apparently, a more short-term success will be achieved by expanding the oil crops for exports e.g. in cooperation with associations. The concept of contract growing needs to be further developed.

By strengthening the domestic oil mills the supply of Ethiopian oil to domestic market could be expanded with good potential of exporting well-refined speciality oils (Niger seed). Cooperation with international companies or organisations might be possible e.g. in supplying World Food Programme. Hence the following are recommended.

1. Introduction of improved oil seeds to the farmers

2. Quality improvement techniques in oil extraction and filtration process

3. Introducing packing of edible oil with small and suitable hygienic packages

 Suppliers  [top]                                                                                                                    

Supplier of Cooking oil machinery, Edible oil refinery, India
http://www.vikasagro.com/

Supplier of Cooking oil machinery, Edible oil refinery, India http://www.jagdishexports.com/ENGLISH/index.html

 Markets [top]                                                                                                                       

Alibaba. Buying leads for edible oil
http://importer.alibaba.com/buyeroffers/Edible_Oil.html

 Standards [top]                                                                                                                   

Standards are published and on sale by the Quality and Standards Authority of Ethiopia (QSAE) beside of Imperial Hotel. Contact person: Sisay Assefa Address: P.O.Box 2310, Addis Ababa, Tel. +251- 011-(6460111/6460525), Fax: +251-011-6460880

E-mail: qsae@telecom.net.et, Webpage: http://www.qsae.org/

In the following please find the specifications of oil seeds and edible oils.
 

 Coordination Group of the Value Chain [top]                                                                  

The coordination group including the main stakeholders of each value chain is the leading group for the value chain specific intervention.

Reports and documents on Edible Oil  see under Library-Oil

Value Chain Leader:  Elias Geneti

Name of the association: Ethiopian Pulse, Oil Seed and Spice Processing Exporters Association

Position: Managing Director

Address:  P.O.B 8686, Addis Ababa, Tel: +251- 091(1670040), Fax: +251- 011(5533090)

E-mail:  agroprom@ethionet.et, Website: www.epospea.com
 

Value Chain Facilitator

BCaD-Consulting Management /Business Creation and Development Services

Contact person: Afework Yohannes

Address: P.O.Box 11194, Tel. +251- 0911-242303/011-4655687, Fax: +251-011-4661997

E-mail:  bcad@ethionet.et , Website: www.bds-ethiopia.net/bcad

Coordination Group Members are the following:

• Ministries and implementing agencies:

  • Ministry of Trade and Industry

  • Oromia Bureau of Finance and Economic Development

  • Oromia Cooperative Promotion Commission

• National Support Institutions:

  • Quality and Standards Authority of Ethiopia

  • Volunteers in Overseas Cooperative Assistance (VOCA/Ethiopia)

  • Oromia Micro and Small Enterprise Development Agency

• Private Firms and Producers:

  • Didaa Farmers Cooperatives Union

  • Ambo Farmers Cooperatives Union

• Associations:

  • Ethiopian Pulse, Oil Seed and Spice Processing Exporters Association

  • Addis Ababa Oil Processing Mill Owners Association

  • Adama Oil Processing Mill Owners' Association

• NGOs and Projects:

  • Growing Ethiopian Market (GEM)

• Finance:

  • Awash International Bank

• Consultancy:

  • Agonafir Consult Accessible Business Technology (ACABT)

  • Day Star Consult

 Achievements [top]                                                                                                             

Edible Oil and Oil Seeds  [top]

• Main activity in the oil seed value chain and in the context of diversification (part of result 5) and in the process of value development, the value chain members took initiatives for the development of new products like safflower petal. This development initiative could have a great impact to generate income for the farmers and benefit all actors in the value chain.

• The Oromia Cooperative Promotion Commission {OCPC} bureau has been visited on July 3, 4 & 6 2006 on quality and quantity of the oil seeds production awareness creation to Ambo farmers’ cooperative  & Didea farmers’ cooperative representatives.

• EPOSPEA visited CDS in July 2006 and got advice on the implementation strategy of the oil seeds market information updating and dissemination mechanism to its member companies. Operating management information system was set in place for EPOSPEA

• Two companies (Addis Alem, Hadia) requested fund from SNV-BOAM to conduct “Feasibility Study and Business plan for Processing Plant” and the study is under way.

• A contractual agreement signed on August 15 - 06 between Agro Prom International PLC and SNV Ethiopia to conduct study on “Feasibility Study & Business plan for Sesame Seeds Cleaning & Hulling Plant”. The study is completed.

• A contractual agreement signed on Oct.31-06 between Addis Edible Oil Producers Association and SNV Ethiopia to conduct study on “Feasibility study of Edible Oil Refining Plant and the study is started.

• Eight Oilseeds and Edible Oil Consortium meetings have been assisted in their activities; the setting of an implementation planning timeframe was facilitated

• Commenced (and near completion) a mini-study into the “Viability of an Ethiopian Edible Oil Industry” – this was mandated by the CG due to reporting from BACTEC that the industry may be unfeasible (also reported by several edible oil owners that are now out of business and also by the millers association). This study is a value chain development activity, as the answers will guide the next CG discussion as to whether the value chain will be just “Oilseeds” as we found that conceptually this chain is really two chains. The study will be presented at the next CG meeting

• Oromia Cooperative Commission Promotion Bureau, Addis Edible Oil Producers Association (AEOPA), Oilseeds Exporters and Edible Oil Producers Consortium, Oromia Cooperative Commission Promotion Bureau & QSAE were visited by the facilitator to discuss which support is needed  & follow-up implementation of project proposals.

• Ambo Farmers cooperative Union and Didaa Farmers Cooperative Unions requested fund from SNV-BOAM to conduct training for their members on “Quality Improvement of Oil Seed Crops” and training is under way.

• Oil seeds purity test and oil content study started (sample is collected and contact is made to make analysis).

Outcome

• Communication and coordination between competing bodies - edible oil processors and oil seed exporters - established (Oil Seeds Consortium)

• Induction of  investments into value-addition (establishment of seed processing plants).

• Direct communication between small safflower producers and private business operators.

• Lobbying started at the government level to improve the conditions for Safflower production and trade.

• International company (BIOSS Rohstoffe,) interested to engage in the business

• Awareness created in Amara and Oromia regions regarding on how to utilize safflower seed and petals swell.

• Market/business opportunity for safflower development is created

Impact Indicators of the Programme Objective (impact according to the oil value chain):

• Impact in terms of increased production capacity and increased turnover and sales: Export opportunities are identified and commcercial relationship with international importers are created. International company (BIOSS Rohstoffe,) interested to engage in the business. If this relationsship comes to a positive end, then production, turnover, sales and income will absolutely increase.

• Impact in terms of better product quality: Partly, they tackled the oilseeds adulteration problem (both exporters and oil millers agreed not to buy poor quality oilseeds from middlemen.

• Impact in terms of minimising costs: Because of the availability of market information, various costs are reduced (salary, transport, allowances etc), efficiency improved (more time close information is lowering transaction costs)

• Impact in terms of increased employment: If the safflower initiative (edible oil value chain) comes into action, then more production capacities and workers will be necessary. Moreover, Agro Prom International PLC is in the process to establish Sesame Seeds Cleaning & Hulling Plant that will crate employment opportunity for 32 workers (17 permanent and 15 semi-permanent employees as indicated in the business plan). Similarly, Bezu Edible Oil Factory  also needs  the same number of employees for his Oil Extraction and  Refinery Plant.

• Impact in terms of networking: Networking activities are functionning on the basis of concrete value chain interventions and bring concrete benefit to the network members.

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