Soybean: a transition in process

Pakistan is currently in the process of going from an importer of soybean meal and soybean oil to becoming an importer of soybean seeds and locally producing these essential byproducts. The graph illustrates the enormous surge in soybean seed imports from virtually nothing over the past two years.

Soybean is primarily used for fodder, not for edible oil; the oil extraction from soybean is just 17-18 percent, while the remaining 82-83 percent is used in soybean meal for the poultry and livestock industry. Naturally, solvent extractors were not on board. So, soybean oil has been unavailable locally and needed to be imported by the cooking oil industry.

In order to encourage the local cultivation of soybean (or simply for the purposes of revenue collection), an 11 percent duty was levied on soybean meal imports in FY15, and a further 10 percent was added in FY16. This is when the soybean seed imports first began, as the graph illustrates. Naturally, the import of soybean oil and soybean meal has declined drastically since.

The increase in soybean oil imports in 2015 is anomalous and can be accounted for by an enormous reduction is sunflower and canola seed imports that year; the oilseeds that produce soft oil (sunflower, canola, soybean) are interchangeable.

The reduction in sunflower and canola seed imports thus had to be compensated for by increased soybean oil imports that year.

Becoming self-sufficient in such an essential agricultural commodity is highly desirable whichever way you look at it. The problem, however, is the same as with any industry that is protected by hefty duties and tariffs: the price ends up being higher, and the downstream industry – in this case the cooking oil and poultry industries – see an increase in their costs.