How Naads is transforming edible oils production

Uganda’s rural agricultural markets are typically characterised by low farmer productivity.

The primary reasons for this is that farmers have limited access to quality seeds and other inputs as well as inadequate information on how to correctly use them, resulting in lower yields which significantly reduces household income.

In northern Uganda, the low productivity causes farmers to produce low quantities of crops, making it difficult for processors and off-takers to obtain sufficient amounts of raw materials.

Sunflower is one of the main cash crops produced in the region and many farming households grow it within a mixed farming system.

Northern Uganda, which is traditionally a sunflower growing region, has approximately 70 sunflower oil processors, many of them SMEs, with few that can be considered as large-scale.

While the yield of sunflower seed has been consistently low (approx. 500kg per acre) over the last five years, demand for grain has steadily increased.

This is attributed to the growing demand for sunflower cake from animal feed producers in neighbouring Kenya, and a growing market for unrefined vegetable oil in East Africa.

The current price crisis of edible oil shortages is also attributed to the effects of Covid- 19 on agricultural production as well as the effects of the war in Ukraine which has affected vegetable oil imports. The decisions by the other major exporting countries to freeze their exports of vegetable oil has exacerbated the crisis.

“The idea is that we should substitute imports. The President (Museveni) insists that those things we can produce locally do not need to be imported and vegetable oil is one of them. Lango and Acholi are the centres of oilseed production and need to be supported,” Dr Sam Aben, a crop development specialist with Naads, who is the focal person of the intervention says.

The national vegetable oil consumption in Uganda annually is 480 million metric tonnes, of which only 80,000 MT is produced locally with the rest imported. The aim of the intervention is to produce at least 40 million MT of oil per year locally.

Sunflower and soybean are two oil crops with a short production period with a substantial quantity of oil yield while significantly contributing to household incomes. Sunflower has an estimated oil content of about 30 percent with sunflower cake a bi-product. Soybean has an estimated oil content of about 15 percent with soybean cake as the bi-product in addition to a number of other value added products.

“Overall, increased production can help agro processors meet market demands while helping farmers get more incomes from their farm operations,” Khadija Nakakande, the communications manager of Naads, says.

The vegetable oil industry in Uganda has 104 factories with an installed capacity of over 3,000 metric tonnes per day in the country, requiring 1,106,315,000kg of grains at full capacity per year.

Intervention

This is the scenario that attracted an emergency intervention to address the current shortage of vegetable oil in the market. The intervention implemented by the National Agricultural Advisory Development Services (Naads) in the 2022/23 financial year will cost Shs9bn. The intervention aims at the provision of quality subsidised improved seeds of sunflower and soybean.

The intervention came in a little late in the season but a prolonged rain season has made it possible for farmers to be hopeful of a bumper harvest in December and early January.

The objective of the programme is to increase the incomes of poor farmers by stimulating sustainable growth in the oilseed markets by encouraging small farmers to sell in bulk through cooperatives as well as stimulating production with large scale farmers. Naads achieves this by providing seed, expertise and extension services to agribusinesses and farmers.

Working with more than 29 cooperatives, the emergency programme focuses on Acholi and Lango.

Since 1998, the government has partnered with the International Fund for Agriculture Development (Ifad) and developed the oil seeds value chains through the implementation of Vegetable Oil Development Programme (VODP) with the aim of achieving import substitution and improving household income and nutrition.

The sector registered significant achievements including; increased mill capacity utilisation of 56 percent, increased sunflower yield of 1.9 tonnes per acre and soybean yield per hectare increasing to 1.8 tonnes. But the main constraint of lack of quality seeds has curtailed the sub-sector’s ability to operate at its full potential.

Cost sharing

Unlike previous Naads interventions, the farmers shall pay back 30 percent of the costs of the seed recovered through the cooperatives (for the small scale farmers) and directly from the large scale farmers.

Willy Okot, the General Manager of Aber Kamdini Area Cooperative Enterprises in Oyam District, says that co-funding is vital in terms of sustainability.

456 farmers, of which 113 are female, in nine primary cooperatives received 2,345 kilogrammes of sunflower seed. This seed is expected to cover an acreage of 1173 acres. Opio estimates an expected yield of 703 metric tonnes this season with an expected income of Shs703m to the farmers.

With an open market ranging between Shs60,000 and Shs70,000 for a kilogramme of sunflower seed, through the intervention, the seed was sold at Shs21,000 after which the farmer will contribute 30 percent. “If a farmer pays for something, he will value it more,” Okot says.

Dealing with middlemen

Middlemen have long functioned as an important link within the supply chain of the rural agricultural market system.

Once harvested, the farmer sells their produce to the middlemen who then sell these raw materials to off-takers for a profit or a commission.

This is mainly common in remote locations where the farmers are disconnected from the larger buyers/off-takers.

Traders tend to use their bargaining power to push down prices so that they can make a profit. This creates an ineffective and vicious cycle impeding gains for both the traders and farmers.

Sunflower farmers are increasingly organised in groups, in order to access extension services and inputs. Unorganised farmers, however, find it difficult to receive services from NGOs, the private sector or the government, and they increasingly risk being left out of developments.

Naads intervention strategy

Working in collaboration with cooperatives for market penetration, farmers have an opportunity to be organised.

This is not only designed to drive higher productivity at farm level, thereby increasing volumes that can be supplied to the millers. Eddy Okello, the chairperson of Acwec Omio, a large area cooperative in Oyam District says they now have more power in the market.

“Traders still remain at large since they have the power to lend farmers a hand when they face a financial squeeze,” she says.

But there is a great need for value addition. Okello explains that value addition is the simplest way to stabilise prices of their grain production.

A litre of crude sunflower oil in Lira, for instance, is sold at Shs10,000 yet a kilogramme of grain is sold at Shs800. With a farmer needing at least four kilogramme to produce a litre of oil, it makes business sense to invest in small scale oil extraction.