The current price of soya beans is trading at $540 per tonne, which is a 1.9% drop from the previous month. Despite the decrease, the price is still 10% lower than the same period last year. This decline in price is a result of a well-supplied market with limited large parcel trades. Additionally, the current pricing is in line with the crop’s cultivation cycle, which is currently in the growth phase. Harvest, like maize, is expected between March and April.
The prices of soya beans have experienced a tumultuous period since early 2021. The prices increased at a faster rate than had been seen in the previous two years, mainly due to external factors. Zambian beans found export markets in India and China, which drove up the demand and prices. This demand has since subsided, but prices have remained trading at levels higher than the previous long-term peak of $460 per ton.
The elevated market prices have incentivized growers, particularly small-holder farmers, to include soya beans in their growing programs. This increased the cultivation area, which was the key contributor to Zambia breaching the 400k MT production mark. However, the volume of production mirrored against price movements between 2019 – 2022 suggests that, at the current price of $540, soya beans is trading at a premium, assuming no consistent exports are in place.
The willingness of small-holder farmers to accept below break-even prices will translate into a lower overall market price, with markets evenly split between commercial and small-holder beans. The former commands a premium price, while small-holder farmers are willing to take slightly lower prices. Commercial farmers would welcome the continuation of the trend of prices above $500, but this negates the increasing stock on the market due to new participants coming in at an accelerated rate since 2021. They would rather expect prices in the range of $430 – $460 in the near term.
Commercial beans hold a comparative advantage over the small-holder crop because they can provide supplementary irrigation, while small-holder farmers grow exclusively rainfed crops. In the event of an in-season dry spell or drought, the 40% contribution to national production comes under threat from reduced output.
The pink square shaded area in figure 1 represents premium prices brought about by various reasons, but they do not represent long-term factors to justify the elevated price levels. The square peak prices reach $720 per ton, an outlier, and the lower end settles at $550 per ton. The circular shaded area represents where the long-term median price resides when drawn across the years 2019-2022, ranging between $441 – $450 per ton. The expectation of price correction to the $450 – $475 might delay in terms of onset but will mostly like come in this season’s expected harvest or be pushed to 2024 or further. Nonetheless, market fundamentals point to a likely occurrence in the medium to long term.
Overall, the situation outlined above represents contrasting fortunes for consumers, primarily the edible oil industry, who will welcome increased stock availability because they stand to benefit from downward pressure on prices. Millers and crushers can buy relatively cheap beans. For farmers, particularly those growing beans at a premium, they face a dilemma of reduced margins because of lower-than-expected prices.
FNB Zambia Agribusiness Report