The effects of the trade war between the US and China have spilled over into East Africa as Beijing starts looking to the region as one of its alternative soybean sources.
China’s interest has caused a soybean shortage and an increase in prices, with processing companies like African Improved Foods (AIF) in Rwanda, which import the product from Uganda and the Democratic Republic of Congo, operating below capacity.
“We are affected by the acute soybean shortage. We mostly import from Uganda and the DRC but the prices in these countries have shot up. This is affecting our margins,” said AIF country manager Prosper Ndayiragije.
The price of soybean has jumped 25 per cent to $650 per tonne from $520 in a matter of months.
In retaliation to the US’s imposition of punitive tariffs of $34 billion on Chinese goods, Beijing imposed 25 per cent duty on soybean imports from the US in July, causing major shocks in the global market.
These tariffs affected US flows into China, which in 2016-2017 bought 60 per cent of its soybean from the US.
With the tariff war, Beijing has had to look for new soybean sources to sustain its livestock sector. The soybeans are used to extract oil and feed farm animals.
Brazil was the first country China looked to as an alternative soybean source, but over the months its supplies have been found to be negligible compared with Beijing’s demand.
With exporters now looking East, the AIF, which needs an annual supply of 30,000 tonnes of maize and 9,000 tonnes of soybean to produce 45,000 tonnes of fortified foods is finding inputs difficult to come by.
The 9,000 farmers co-operatives involved in soya production across Rwanda produce about 60,000 tonnes annually. The AIF plant alone needs 200 tonnes of soybeans daily to operate within its installed production capacity.