Impact of High Soybean Prices on Poultry Production in Zambia and Malawi

This article discusses the significant challenges facing soybean production in Zambia and Malawi, affecting poultry costs. It highlights the role of market concentration and climate change in driving high prices, threatening food security. Small-scale producers are particularly vulnerable due to their dependence on open markets.

Poultry serves as one of the most affordable protein sources for the growing populations in East and Southern Africa, which underscores the vital role of soybeans as they constitute a significant component of chicken feed. However, the soybean market in Zambia and Malawi is facing critical challenges, with high prices threatening poultry production due to escalating feed costs that can account for 60%-70% of overall production expenses. Small-scale producers particularly suffer, as they depend on open market feed purchases without the leverage to influence prices, unlike larger producers who can source feed internally.

Zambia and Malawi are recognized as primary soybean producers in the region. However, climate change-related impacts and market dynamics have severely affected their production levels. Zambia experienced a substantial 74% decline in soybean production for 2024 due to inadequate rainfall and low prior pricing creating disincentives for farmers. Although Malawi also saw a 20% decrease in output, its soybean prices surged by 48% between May and November 2024, exceeding the prices in Zambia despite its sufficient production capacity for export.

The African Market Observatory has conducted research to analyze and monitor the staple food price dynamics in the region. The findings highlight that concentrated market structures and the pricing power of major buyers have primarily driven the spike in soybean prices. Additionally, adverse weather conditions linked to climate change serve as an exacerbating factor in this situation. Dominant buyers in Zambia offered prices significantly below US$400/ton in 2023, leading to reduced planting in subsequent years, while Malawi faced the adverse impact of the worst drought in a century, further limiting production.

As poultry remains one of the most environmentally sustainable proteins, a well-functioning value chain from feed production to chicken farming is crucial. It is essential to bolster this resilience against climate extremes. Given the projected fourfold increase in poultry demand in sub-Saharan Africa by 2050, affordable feed will be paramount for producers, especially those who rely on competitive markets, while many have already reported negative margins due to rising feed and chick prices.

From 2020 to 2023, Zambia’s soybean production saw a significant increase before plummeting to just 170,000 tonnes in 2024, primarily because of poor price offers from buyers. With most farmers being smallholders, they are forced to sell shortly after harvest, giving processors substantial market power to dictate pricing. The El Niño phenomenon has compounded these production issues, leading to droughts across Southern Africa while neighboring countries experienced above-average rainfall.

Despite high prices, Malawi’s soybean market continues to show concentrations that raise concerns over competition. Prices escalated to an alarming US$900/ton by the end of 2024, driven by market dynamics even amid governmental export restrictions. In contrast, Zambia’s prices began to stabilize due to sufficient imports and increased soymeal stock from previous surpluses.

These developments compel a reassessment of competition in the agricultural sector, as improper market dynamics can undermine small producers’ competitive edge. While Zambia conducts a poultry market inquiry, addressing the regional market and anti-competitive practices is essential for fostering resilient poultry production.

In conclusion, the challenges faced by the soybean markets in Zambia and Malawi underscore the critical interplay between climate change and market competition in food production. Heightened soybean prices, driven by market concentration, have significantly impacted poultry production costs, threatening the competitiveness of small-scale producers. A comprehensive regional strategy to address competition and enhance market resilience is essential to meet the growing demand for poultry in sub-Saharan Africa and ensure food security.

Original Source: theconversation.com