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ABSTRACT
The study analysed market integration and pricing efficiency of soyabeans in Benue and Enugu States, Nigeria. Low household demand for soyabeans makes its production and marketing less popular amongst farmers and marketers which leads to marketing inefficiency. A two-stage sampling technique was used to select 207 respondents. Secondary data comprising monthly retail prices (urban and rural) of soyabeans from 1999 to 2013 was also collected BNARDA and ENADEP. Descriptive statistics, regression, Herfindal Hirschman Index, Gini Coeffiient, Johansen Co-integration, Spatial price model, t-test and correlation analysis were the analytical techniques used. It was found that soyabeans marketing was dominated by married (80%), literate (91.3%) males (63.3%), with a mean annual income of N474,370. The factors that determine the volume of soyabeans marketed include price of soyabeans (-1.515), transfer and handling costs (0.345), education (0.157) and quantity of loan (0.035). Although, soyabeans market was characterized by many buyers and sellers with no barriers to entry and exit, the high value of HHI got for wholesalers and retailers (2,017.18 and 1,081.97) indicated high concentration of soyabeans in the hands of few marketers. This was further supported by high inequalities in the distribution of sales among wholesalers and retailers respectively as evident in the values (0.84 and 0.81) of gini coefficients. Whereas few marketers (6.8%) had negative marketing margins, their mean was 20.40%. Average net margin for Benue and Enugu soyabeans marketers were calculated as N405.79 and N786.26, respectively which represented about 6.24% and 10% of the cost price.
CHAPTER ONE
INTRODUCTION
1.1 Background of the Study
The potential contribution of agricultural marketing towards improved rural incomes in developing countries can not be over-emphasized. Agricultural marketing assumes greater importance in the Nigeria economy because excess production from the farm must be disposed off in order to earn some income with which farmers can purchase goods and services not produced by them (Adekanye, 1988). Olayemi (1982) observed that food marketing was very important but rather neglected aspect of agricultural development. More emphasis is usually placed by government on policies that increase food production with little or no consideration on how to distribute the food produced efficiently and in a manner that will enhance productivity. The Nigerian government in recent years has provided incentives to the rural farmers which have tremendously increased the grain production output per hectare in the rural areas. Grain production in Nigeria rose in recent years as farmers expanded planted area and beneficial rainfall patterns improved yields. For instance, a study by Sanni, Onah and Njiforti (2007) revealed that output of grains like rice, maize, sorghum and soyabeans in Nigeria had been on the increase. This means that hunger in Nigeria is not entirely the problem of production. Rather, it has to do with the accessibility vis a-vis affordability components of the concept of food security. Similarly, Ladele and Ayoola (1997), in their study on food marketing and its role in food security in Nigeria, concluded that an efficient food marketing system would reduce post-harvest losses, ensure adequate returns to farmers’ investment and stimulate expansion in food production thereby enhancing the level of food security in Nigeria.
A good and efficient marketing system accelerates the pace of economic development by encouraging specializations which leads to increase in output. Moreso, a good and well-coordinated national food marketing system can affect food production and household’s food security in two ways. One, it can stimulate increased commercial activities that could generate more funds for plough back investments in both agricultural and agro-allied industrial sectors. The resultant increased agricultural production will lead to increased food production and increased food output. Secondly, it can lead to employment generation for both food distributors and rural farmers. The involvement of rural people in food marketing could uplift the rural populace’s standard of living and increase their personal income thereby enhancing the prospect of food security at the household, local and national levels.
Furthermore, FAO (1997) stated that if available food could be evenly distributed (through efficient national and international markets), each person would be assured of 2,700 calories a day, which is the recommended daily calorie intake. However, since available food is not evenly distributed (due to marketing inefficiencies and other problems), there are shortages of food in some regions but excess in some other regions. Therefore, the issue of how much food gets to the households, which is fundamental in household’s food security, is a function of food production level, food marketing efficiency and the households’ income level (Ladele and Ayoola, 1997).
Soyabean (Glycine max), a herbaceous annual food legume, is an important food, feed, oil and cash crop in the world. It has been the dominant oilseed produced since the 1960s and is used as human food, livestock feed, and for various industrial purposes (Myaka, Kirenga & Malema, 2005). Described as a ‘miracle bean’ or ‘golden bean’ because of its cheap protein-rich grain, it is obvious that soyabeans is a commodity of interest and warrants special attention for several reasons. First, it plays an important role in Nigeria as staple and food supplement in many homes and a prominent role in livestock industry especially in the manufacture of poultry feed; and secondly, the structure and conduct of soyabeans marketing can affect the economy of the people and nation’s economy in significant ways (Onu & Iliyasu, 2008). Its industrial uses range from the manufacture of edible oil, infant food supplements, pharmaceutical, paints, cosmetics, soap-making to animal feeds (Singh, Rachie & Dashiell, 1987). Available research has shown that greater demand for soyabeans comes from livestock industry for the manufacture of livestock feeds (Omotayo, Olowe, Fabusoro, Babajide, Ojo & Adegbite, 2007).
In recent years, the use of soyabeans as animal feed has taken another centre stage. The rapidly increasing middle class believe that meat consumption is a sign of affluence which is fueling an alarming increase in demand for animal protein. This results in increased pressure on grain supply. For instance, it takes 8kg of grain to produce 1kg of beef, resulting in vast amount of edible crops previously grown for human beings used to feed livestock (Shaver, 2008). To accomodate this demand, over 760 million tonnes of grains were used in 2008 to feed animals (Shaver, 2008). This competitive demand from livestock sector has tremendous effect on the availability of the crop for human food and most importantly on the price.
Due to the recognition of its importance (food/feed, fertility, medicine, income e.t.c.), efforts have been made to promote soyabeans in some African countries. For instance, there was a successful soyabean promotion in Nigeria (through a project by the International Institute of Tropical Agriculture [IITA] and Canada’s International Development Research Centre (IDRC) between 1987 and 1999, supported by public policy). As a result, between 1988 and 1998, soyabeans production in Nigeria increased by 166% (from 150000T in 1988 to 405000T in 1998) (FAO, 2001) as there was widespread incorporation of soyabeans into maize-based cropping system. Micro statistics of soyabeans growing villages in Benue State, Nigeria confirmed that production increased drastically (Sanginga, Adesina, Manyong, Otite & Dashiell, 1999). The number of farmers cultivating improved soyabeans varieties increased by 228% between 2000 and 2003 (Sanginga, Dashiell, Diels,, Vanlauwe, Lyasse, Carsky, Tarawali, Asafo-Adjei, Menkir, Schulz, Singh, Chikoye, Keatinge, & Rodomiro, 2003).
Nigeria’s domestic production of soyabeans is trending upwards with an increase of 171% between 1990 and 2008 but still lags behind the rapidly growing demand from the poultry industry for soyabean meal and vegetable oil processors. This supply deficit resulted in the increase in the price of soyabean meal within ten months, reaching as high as $670 per tonne (Michael, 2011). According to FAO (1997), Africa spent US$1 billion in 2004 to import soyabeans and soya oil. Of this, US$752 million was for soyabean oil and US$254 million was for soyabeans grains/meal.
In Australia, the main market for soyabeans has been the crushing sector. Up till the late 1990’s, almost 50% of the crop was crushed for meal and oil and a further 25% went into full fat meal for intensive livestock [Australian Oilseeds Federation (AOF), 2012]. According to (AOF, 2012), human consumption market only accounted for around 25-30% and the remaining 5% was retained for planting seed with little or no export. In Canada, soyabeans can be categorized into two quite distinct markets: (1) commodity beans which are generally crushed by domestic processors; and (2) specialty beans which are food grade products, usually exported as whole beans (Erik, 2007). In North America, soyabeans are an unregulated commodity whose prices are determined by free market interaction of supply and demand. Currently, the demand for soyabean meal is declining in North America owing to increased feeding of livestock with distillers dried grain, which is a by-product of ethanol production (Richard, 2010). This substitution will likely continue as ethanol production expands. Declining domestic meal demand along with increasing soyabeans oil demand for bio-diesel may eventually result in soyabeans prices being driven by oil demand rather than meal demand. As a result, soyabeans prices will remain relatively low.
The rapid growth in the poultry sector in the past few years has increased demand for soyabean meal in Nigeria as soyabean meal is the dominant preferred protein ingredient in poultry feed rations. Nigeria currently produces soyabeans worth $85 million in the international market, though most of the nation’s soyabeans is consumed locally, where it is used in the production of soyamilk and specially formulated foods to help malnourished children (Omotayo et al., 2007). The international market for the product according to them is growing and sustainable. Nigeria has been steadily importing soyabeans meal and occasionally soyabeans since 1999, primarily from Argentina and the United States to augument the deficit in supply. For instance, the estimated demand for soyabeans in 2004, as reported by Omotayo et al., (2007), was 634,000 metric tonnes while the domestic supply stood at 386,864 metric tonnes. In addition, soyabeans crushers in Nigeria are operating below capacity and are unable to satisfy the growing demand for soyabean meal and oil. There is a domestic annual supply shortfall of about 100,000 tonnes for soyabeans meal and 300,000 tonnes for vegetable oil (Michael, 2011).
MARKET INTEGRATION AND PRICING EFFICIENCY OF SOYABEANS IN BENUE AND ENUGU STATES, NIGERIA
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