PAKISTAN’S purchase of about 50,000 tonnes of soybeans from the United States for February is being described by trade circles as a move away from canola (rapeseed) for reasons of better profit margins and larger meal yield.

The transactions seen unusual of the commodity in terms of size is expected to also meet some of the country’s growing demand for soymeal for animal feed. So far, the country has met meal requirements mostly from large imports from India.

But, in another development which may be described as a move away from India, Pakistani importers have purchased about 40,000 tonnes of soymeal from the US which are due to arrive any time, and are negotiating for more US supplies for January/February 2015 shipment. In a sense, it is a shift towards the American soybeans.

Pakistan’s soymeal requirements are on the rise owing to expansion in the poultry, dairy and livestock, and aquaculture sectors

The country imports canola from Canada and Australia. In March, Pakistani importers have bought about 60,000 tonnes of rapeseed/canola from Australia. Since the higher meal yield of soybeans make their imports more attractive, traders expect Pakistan to buy 300,000 tonnes of soybeans in 2015. Pakistan’s soybean oil imports, already low, will be further reduced if more beans are imported. Currently, the US provides small quantities of soybean oil to Pakistan in the form of food aid.

It is a sad reflection of the past policies that the country has failed to produce edible oil in adequate quantity over the years to meet its domestic requirements. All efforts made so far to increase local production have been unsuccessful and the gap between production and consumption continues to widen. As such, the country is a net importer of oilseeds and edible oils, as domestic production can hardly meet 25pc of total demand. The local oilseed output consists of cotton seed, sunflower seed and rapeseed. Cottonseed is the major supplier of the domestically produced oil, while rapeseed, mustard (canola included) and sunflower play a minor role.

During July-March 2013-14, according to official statistics,1.719m tonnes of edible oil of the value of Rs148.633bn ($1.245bn) was imported. Local production of edible oil during this period was estimated at 0.606m tonnes. Total availability of edible oil from all sources was estimated at 2.325m tonnes. The production of canola oilseeds was 16,000 tonnes and that of canola oil 6,000 tonnes.

Although the government is laying more emphasis on the use of soybean as an oilseed as well as edible oil, it is also planning to launch an action plan for increasing production of canola oilseed. It is proposed that canola should at least meet one third of the oil seed needs. But the problem is that its area under cultivation is constantly in decline due to farmers’ shift to wheat crop because of government’s better wheat support price.

Pakistan’s soymeal requirements are on the rise owing to expansion in the poultry, dairy and livestock, and aquaculture sectors. The poultry meat production is increasing at a pace of more than 10pc per annum. The layer industry is also developing rapidly and has become a relatively cheap source of protein. During 2013-14, about 160,000 tonnes of soymeal was imported from Argentina rather than India mainly due to latter’s high prices and bad quality.

Similarly, the dairy sector’s feed demand is also increasing because most of the dairy firms rely on high milk yielding animals which, in turn, require quality feeds. This has created vast business opportunities for feed manufacturers. As a result, the demand for soymeal has moved from the traditional 5-7pc to10-15pc. So far, US exporters have not shown much interest in this market but the USDA officials expect the demand to grow to more than a million tonnes over the next five years. The US is likely to become a strong competitor for soymeal exports to Pakistan.

Soybean was introduced as an oilseed crop in Pakistan in 1960s and promoted in 1970s but could not flourish. Currently the area under soybean cultivation is negligible and it has no role in edible oil and soymeal production. Regarding efforts to revive soybean cultivation on a larger scale, Pakistan Agricultural Research Council (PARC) has introduced an innovative technology. Under Oilseeds Research Programme, PARC has planted seed multiplication blocks of soybean varieties on 270 acres and also distributed seeds to different clients. Its scientists are working to reduce the cost of production of soybean in the country and make the crop profitable for farmers.

The USDA staff’s assessment puts Pakistan’s 2014-15 imports of soymeal at a record 800,000 tonnes, 23pc higher from last year’s 650,000 tonnes. During this period Pakistan is likely to import 350,000 tonnes of soymeal from Argentina which is more than double the quantity that was imported in the preceding year.

Published in Dawn, Economic & Business, January 6th, 2015

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