Français1. Project and Context of Cooking Oils Market in Senegal
Shelter For Life International (SFL) is a faith-based international relief and development organization with its offices in Minneapolis, MN. With funding provided by the United States Department of Agriculture (USDA) through its Food for Progress (FFPr) program, SFL will implement a six-year program with a goal to develop and upgrade value chain linkages necessary to support an integrated regional trade network for the cashew value chain. This project is made possible by the sale of 33,500 MT of crude degummed soybean oil (CDSO). The commodity will be delivered in six tranches over the course of 3 or more years.
SFL contracted with REFT Africa to carry out a Post-Monetization Assessment to document the effects of monetization in Senegal, to determine whether monetization sales caused any positive or adverse market impacts. The study would examine the impact of monetization on the local market for crude soybean oil and other cooking oils. It would also determine: to what extent did monetization affect local production and consumption in the short- (few months after monetization), medium- (marketing year 1 after monetization), and long-term (subsequent marketing year).
The study was carried out throughout various regions of Senegal, between June 2018 to June 2019 and in collaboration with several governmental institutions, small scale oil producers, industrial oil producers, and traders.
2. Key Findings
Baseline findings
Prices of cooking oils in Senegal (peanut, soybean, and sunflower) are regulated by the Government of Senegal (GOS) through ministerial orders of the Ministry of Commerce (MoC). Prices for other cooking oils (palm, cotton, olive, cashew, shea, etc.) are not controlled by the GOS. Cooking oils can be imported into Senegal or exported to other countries (Mali, The Gambia, Guinea-Bissau, Guinea Conakry, and Ivory Coast) due to the free movement of goods and people in the ECOWAS region.
The main companies processing, importing or exporting cooking oils are:
- Société Nationale de Commercialisation des Oléagineux du Sénégal (SONACOS),
- Compagnie d’exploitation des oléagineux (COPEOL-OLEOSEN), and
- Complexe Agro Industriel de Touba (CAIT).
The national production capacity of cooking oil, contrary to a monthly demand of 15,000 MT, is 6,000 MT per month of which SONACOS produces 4,000 MT. The resulting deficit of 9,000 MT of cooking oil must therefore be imported. The most imported cooking oil is palm olein.
The cooking oils are sold in Senegal in urban, rural markets and stores by wholesalers, sub-wholesalers, retailers, and producers.
Consumers cannot differentiate between the nutritional contents of the types of cooking oils, particularly palm olein (saturated fatty acid) vs. e.g soybean and sunflower (unsaturated fatty acid). However, they prefer to buy small packages of cooking oil ranging from 250 ml to 5 liters.
Commercialization of the locally produced peanut oil by SONACOS and Government Regulations on Oil Markets
The volume of peanut oil produced for local consumption compared to the total volume of cooking oil consumed, is about 5% (SONACOS has a production capacity of 7,500 MT per month). However, this oil is more expensive compared to other available cooking oils (palm olein, soybean, sunflower, palm, etc.), which are more abundant in the market and lower priced, compared to the local peanut oil.
According to SONACOS, the company had an unsold stock of peanut oil (12 billion XOF or $20.72 million) as of May 23, 2019. The GOS restricted the sale of small packages of refined peanut oil (250 ml to 5 liters), for SONACOS, to protect locally produced peanut oil.
Impact of monetization:
The two first deliveries (6,000 MT and 5,000 MT) of USDA/SFL CDSO bought by COPEOL-OLEOSEN have been entirely refined in batches of 1,000 MT and marketed under the trademark of JAARA.
Evolution of Markets and prices
In May 2019, the cooking oils most available were based on palm olein (34%), sunflower (25%) and soybean (22%) The supply of peanut oil increased between December 2018 and March 2019 (from 5% to 10% following the GOS protection measures) but dropped to 8% in May 2019. These three types of cooking oils represented 90% of the market; the balance was crude palm oil (5%), refined palm oil (4%), and safflower oil (1%).
Informal discussions with COPEOL-OLEOSEN indicate that palm olein represented 95% of the cooking oils in the market, but our baseline survey revealed only 36.3%. This may be explained by the fact that some importers replaced labels for palm olein with labels for soybean and sunflower oils. For example, the CEO for the company ABC was arrested in July 2018 for substituting ETITA (sunflower oil) for J’ADORE (palm olein).
At all market levels (wholesale, sub-wholesale, and retail), peanut oil was the most expensive cooking oil, followed by sunflower oil and soybean oil. Sunflower oil prices were similar to soybean oil prices and were between 1,000 XOF ($1.68) to 1,300 XOF ($2.19) per liter. Prices for palm olein were fixed, based on the origin of the oil, the importer and speculations. Even if the palm olein is bought in the international market at lower prices (less than 500 XOF ($0.84)), it is sold in the local market at the same prices as other cooking oils.
The analysis of regional market data indicates that the main factors that impact the peanut oil market were not the CDSO but rather:
- fraudulent oils from Mauritania, The Gambia, and other countries;
- comparatively higher price of the locally refined peanut oil;
- cheaper price of palm olein, which is the most supplied cooking oil on the market;
- new production of palm oil in the southern regions;
- lack of consumer knowledge about the type and quality of cooking oils.
The complexity of the cooking oil markets is reflected by the web of actors and activities, which go across country boundaries. Each region has its specificity regarding access to and use of cooking oils, which depend on price.
Effects of the monetization
The study shows the monetization of CDSO has had no effect on production of peanut oil, transportation (same network used by COPEOL-OLEOSEN), in-country storage, prices (fixed by GOS), and international markets.
The GOS is aware of the competitive effect of imported cooking oils such as palm olein and palm oil on the economy (i.e., peanut production and peanut oil industries). Since small packages of cooking oil are preferred by consumers, the GOS has concluded that imported oils are creating barriers to the locally produced peanut oil being sold at the retail level. This situation will eventually jeopardize the viability of the local peanut oil industry. The locally produced peanut oil, which cannot fulfill the national needs, is the most expensive cooking oil. Despite these concerns, the study has found that the CDSO has had a positive impact on helping the COPEOL-OLEOSEN industry to function, safe-guarding employment, and providing Senegalese consumers’ access to cooking oil of good quality. Findings from our surveys indicate that the CDSO does not negatively impact the local production of peanut oil.
3. Conclusions and Recommendations
Conclusions
Effect of CDSO on Senegalese Oil Production and Market
- C1. The CDSO does not negatively impact the local production of peanut oil.
- C2. Major factors that negatively impact the marketing of local peanut oil are: fraudulent importation of cooking oils from Mauritania, The Gambia, and other countries; high price of the locally refined peanut oil; cheaper prices of palm olein (mostly supplied cooking oil on the market); increase in supply of palm oil in the southern regions; and, lack of consumer knowledge about the type and quality of cooking oils.
- C3. Measures taken by the GOS to protect the local production of peanut oil by limiting the sale of 250 ml to 5-liter packages improved the sales of peanut oil by 10% at the expense of reducing the sale of palm olein (from 41% to 34%). There is no perceived change in market share for sunflower (24% to 25%) and soybean (24% to 22%).
- C4. The monetization has not influenced the prices of cooking oils, which are actually fixed by the GOS.
Effect of CDSO on Industries, In-Country Storage, and Transportation
- C5. The timing and volume of the sale of the CDSO was appropriate until it was suspended by USDA. The suspension of deliveries of CDSO created a shortage of refined soybean oil at the factory level (COPEOL-OLEOSEN). This in turn caused a shortage of oil (JAARA-soybean) in markets and the closure of the factory for a certain period. In the medium- and long-term, the soybean oil production factory will be obliged to import crude soybean oil from other suppliers.
- C6. COPEOL-OLEOSEN used its own storage facilities for the JAARA soybean oil. Therefore, no effect on the in-country storage was noticed.
- C7. COPEOL-OLEOSEN distributed JAARA (CDSO) using the regular means of transportation. As such, no effect on transportation was noticed.
Recommendations
R1. It is recommended that the suspension of CDSO by USDA be lifted for the following reasons: National Authority for Biosecurity for Senegal (Autorité Nationale de Biosécurité and its Steering Committee are not functional; most of the goods and products that Senegal imports from Europe and the United States, such as maize, wheat, oilcakes or cattle-cakes, and other types of cooking oil are genetically modified and are fully authorized by the Government and not blocked by the Customs Service; and, the GOS already approved the import of the CDSO to COPEOL-OLEOSEN.
R2. Given the diversity of cooking oils in the Senegalese market and the lack of knowledge by consumers of their nutritional benefits, studies should be carried out to inform the population on improved choices for cooking oils.
