CRAFT Climate & Business Narrative

312 MT of soybean is produced in Central region, 6,403 MT in eastern Uganda and 2,286 MT in western Uganda with a mean yield of 640, 1,560 and 697 kg/acre, respectively. Generally, actual yields are relatively lower than the potential yield. The national average yield according to a survey by prof. Tukamuhabwa (MUK) is 400.68 kg/acre. There is, however, a wide variation in yield levels across regions. Northern Uganda has the highest average yield of about 700 kg/acre. The lowest output is observed in west Nile with an average of only 100 kg/acre.  

The map on the right shows targeted soybean growing counties within the CRAFT project.

Soybean producers in eastern Uganda still have extremely low levels of productivity at only 350kg-450kg per acre instead of an average of 800kg - 1,000kg per acre as attained from demonstration multiplication sites (CRDI, 2015). This is partly attributable to poor agronomic practices, including the use of poor quality seeds, delayed planting and weeding, poor spacing, poor application of fertilizers as well as delayed harvesting and poor post-harvest handling, culminating in post-harvest losses estimated at 30-40% of total production. One of the biggest challenges experienced by soybean producers is labour shortage and high labour costs. Labour shortage limits the profitability of Uganda’s farmers, many of whom are (subsistent) smallholders without access to the advanced equipment and sufficient and adequate finance. Another challenge farmers are facing is poor access to improved drought resilient seeds (varieties Maksoy 1N, 2N and 3N) to copy with climate variability.    

The image on the right shows soybean farm in Uganda (Source: SNV, 20201).

Seed companies and input dealers: All seed companies and input stockists acquire their soybean seed from Makerere University at 5,000 UGX and 10,000 UGX for foundation and breeders’ seed respectively. Many of the seed companies sell soybean seed to buyers (farmers) at prices ranging between 2,500 UGX and 4,000 UGX per kilo. These companies make 2.5%- 30% of annual sales from soybean. Some seed companies have an understanding or contracts with their clients who include input dealers and farmers who are multipliers of improved seeds for example Masindi Seed Company and Masindi District Farmers Association.

The image on the right shows local soybean seed business in Uganda (Source: SNV, 2021).

The main challenges facing the seed companies include; poor seed germination, high cost of foundation and breeder seed that discourage stockists and farmers who may want to multiply the seed. Input dealers experience a decline in sales as a result of climatic hazards, especially droughts. Because of droughts and the resulting reduction in yield, farmers have less money to invest in inputs. 

Traders / aggregators buy produce from the farmers and aggregate the produce before selling to processors. Aggregators sometimes advance cash or seed to farmers in form of an advance loan and check off on farmer deliveries to recover loan advances. They provide knowledge to farmers on good agricultural practices and post-harvest handling issues and ensure farmers produce is of good quality through field inspection, cleaning and drying of grain. They also support farmers to access financial services need before harvesting time. Although, there are high incidences of defaulting.

The image on the right shows soybean bags loaded onto a truck (Source: SNV, 2021).

In Uganda the processing capacity for soybean increased from 300 MT/day in 2009 (Anon, 2010) to over 600 MT/day in 2011 (SNV, 2011). This increase was mainly due to the increased private sector investments. Several processing plants have been established in the last 30 years due to, amongst others, the availability of improved soybean varieties available in Uganda for their out growers’ program. 

At the current production estimate of 180,000 MT, and a retail value of USD 0.5 per kilogram of grain, soybean production is worth over USD 90 million to the country’s economy (Tukamuhabwa and Obua, 2015). Ugachick poultry breeders is the largest processor of soybeans.

The main products of processing are soybean oil, soybean cake/meal, animal feeds (mash & pellets), soy cup, CSB, soy millet, brown butter, soymilk and soy yoghurt. The production of oil results in soy cake, which is sold as animal feed. The varieties Maksoy 1N, 2N and 3N are highly preferred because of the high yield, High oil content, large sized seed and the high protein content (44-46%) (Tukamuhabwa et al. 2016).

The source of the soybean is mainly within the country, northern and eastern regions being the main suppliers. Some processers obtain soybeans from district farmers’ associations and cooperative societies. A few of the companies cited DR Congo as another source of soybean.

The plant capacity per day to process soybeans and other products is generally very high. All processers, however, are operating at very low capacity because they cannot obtain enough of the crop. For instance, a study in 2016 (Tukamuhabwa et al. 2016) revealed that A.K oils had an operational capacity of 200 metric tons per day, but its actual daily production was less than 60 tons. Climate change and variability reinforce this challenging situation. 

The image on the right shows soybean processing in Uganda (Source: SNV, 2021).

Processors are relatively heavily impacted by climate change, especially those that are entirely dependent on soybean. If there is a drought and the crop fail, their production will be very low and they would not be able to meet their targets and/or their agreements with buyers. So far, the processors do not really take such risks into account in their business plans. Often, they lack knowledge on the impact of weather events on their production. 

Soybean is mostly a cash crop in central and northern Uganda. The majority of the households growing the crop do not eat it at home; but households (especially in urban areas) consume soybean in form of soy-corn or soy-millet/sorghum blends which is prepared as porridge for lactating mothers and infants below 5 years of age. Other consumers include poultry and livestock farmers that buy soy cake for the animals.

The image on the right shows soybean dishes with traditional Uganda flavor and ingredients (Source:  Penn State University, 2013 ).

The soybean market in Uganda is highly competitive. The main market channels for Soybean include: (1) Farm gate/home, (2) local stores or aggregators and (3) the urban market. The prices received by farmers for the crop varies between UGX 1200 and 1500/kg depending on the market and period the crop is sold. Most of the farmers sell their harvest to local traders at farm gate, these are mainly agents of large aggregators (SME’s or Cooperatives) in the community. These traders own small stores in the villages and connect rural farmers in remote areas to the larger value chain. Once they have accumulated a large enough quantity, they bulk the product together and transport it to the stores of the larger aggregators. The aggregators then sell the soybean grains to millers in urban areas for processing. The production of oil results in soy cake, which is sold as animal feed in the domestic market to feed processors while some is exported to Kenya and Rwanda.

The map on the right shows regional trade flows of soybean in East Africa.

The millers pay a price between 1,600 to 1,800 UGX/kg, though the traders may take a margin of UGX 50 to 100 UGX per kg. Some farmers sell directly to traders at the local store or sell through their cooperative but doing so means that the farmers must cover the cost of transportation.

Generally, there is a growing demand for soybean-based products like the animal seed or soy cake, soybean oil and infant formula products processed in Uganda. Specifically, the edible oils industry in Uganda has over 100 processors/millers producing various oils. Competitive rivalry is very high since all these millers are competing for a limited amount of soybean. To address the problem of insufficient supply, many processors are interested in contract farming and leveraging farmer structures already present such as cooperatives to secure raw material supply.

Uganda’s soybean export volumes have dropped by 50 per cent from 2,613 tonnes in 2012 to 1,388 tonnes in 2014, there is growth in exports, indicating a 130 per cent increase when it stood at 10,599 tonnes in 2016. China is the biggest importer of this commodity, importing soybeans worth $37.9 billion (Shs98.5 trillion). Uganda exports of soybeans to China was US$160.01 thousand in 2016, soybean exports to Rwanda was US$676.78 Thousand during 2018, while exports of soy cake to Kenya was US$5.25 Million during 2018.

Discussions with actors of the soybean value chain showed that they perceive a large set of strengths, weaknesses, opportunities and threats (Source: Adapted CRAFT 2019).

The table on the right shows strengths, weaknesses, opportunities and threats as perceived by the value chain actors.

Before describing how the climate is likely to change in future, let’s first have a look at an example that shows how the climate has already changed over the last decade.

To develop insight into the future climate in the soybean growing areas in Uganda, climate projection work has been carried out. Projections were carried out for 2030 and 2050, and focused on seasonal rainfall, onset, cessation and length of the growing seasons, length of dry spells and temperature.  

The map on the right shows seasonal rainfall (mm) during the March-April-May season under current climatic conditions (left map) and future climate with very little mitigation intervention in the 2050s (right map). Swipe left or right to see the changes. See legend below.

The expected change in seasonal rainfall due to climate change depends on the rainy season. The rainfall in the first (March-April-May) rainy season is projected to decrease in the eastern soybean growing region in both the 2030s and 2050s under both climate change scenarios. However, rainfall in the second (October-November-December) rainy season is expected to increase by about 20-30% in the eastern region especially in the 2050s. 

The map on the right shows average temperature (°C) during the March-April-May season under current climatic conditions (left map) and future climate with very little mitigation intervention in the 2050s (right map). Swipe left or right to see the changes. See legend below.

For both climate change scenarios, especially the business as usual scenario, temperature is expected to rise in the coming decades. Climate projections show that the expected rate of warming is higher for the first rainy season as compared to the second rainy season. For example, in the the eastern soybean growing area, temperature is likely to rise by about 1.80°C in the first rainy season and by 1.4°C to 1.8°C in the second rainy season by the 2030s. By the 2050s, temperature in these areas is expected to rise by about 2.8°C in the first rainy season and 2.0°C in the second.

The map on the right shows soybean yields during the MAM season under current climatic conditions (left map) and future climate with very little mitigation intervention in the 2050s (right map). Swipe left or right to see the changes. See below for legend.

The effect of climate change on the soybean yield has been assessed for a so called optimum conditions: a situation in which farmers apply improved seeds, fertilizers and pest control. Under such optimum conditions farmers may even obtain more than over 2000 kg/ha. However, in the long rainy season in the 2050s, yields are likely to decrease by up to 800kg/ha in Sironko and Tororo and by up to 1000kg/ha in large parts of Mbale. All these areas are also likely to experience yield decreases as a result of climate change in the short rainy season as well. In the short rainy season, the soybean production in Tororo will be affected the most.

A field survey on climate change and its impact amongst different actors of the soybeans value chain was carried out in April 2019. All actors reported they already experience effects of climate change and climate variability.  

The producers are the most vulnerable to climate change. Droughts and unpredictable rainfall are severely affecting their production, and farmers have insufficient capacity and/or knowledge on how to deal with this. Crop failure because of drought means producers lose their main income source. Farmers use improved drought tolerant soybean varieties to cope with climate change and climate variability. High intensity rainfall events are also harmful for crop production, but at least here farmers can intervene by digging trenches to divert the water from the fields. As in most fields the soil is not covered, which leads to high levels of soil erosion during high intensity rainfall events.

The image on the right shows soybean farm experiencing water stress. (SNV, 2021).

• Over 75 % of all male and female farmers reported a decrease in soybean productivity due to change in weather and climate.
• All interviewed farmers (both male and female) reported an increase in the incidence of pests on their farms (SNV, 2019).

Some input dealers experience a decline in sales as a result of climate hazards, especially droughts. Because of droughts and the resulting reduction or failure of harvest, farmers have less money to invest in inputs. Some input dealers, however, experienced an increase in sales because of the sales of drought resilient seeds. Small input dealers see a sharper decline in their sales compared to the bigger input dealers. As small input dealers sometimes sell inputs on credit, they also face the risk that farmers are not capable to pay back when their harvest fail.

The image on the right shows soybean seed supplier in Uganda (SNV, 2021).

Processors

Processors are also relatively heavily impacted by climate change, especially those that are entirely dependent on one crop. If there is a drought and the crop fail, the processors would not be able to procure the right quality and quantity required for processing or to meet their targets and/or their agreements with buyers in the export market.

At a climate risk assessment workshop on soybeans (24-25 April, 2019), value chain actors further discussed how climate change impacts their business and discussed current coping strategies already in use and new adaptation options to better deal with climate change in future. 

The table on the right describes copying measures already employed by the value chain actors and new adaptation options that would help to mitigate the adverse impact of climate change or address opportunities that may arise from it (Source: SNV 2019).

To cope with the changing weather, some farmers plant their crops earlier to deal with occurrence of drought and unpredictable rainfall. Only very few farmers apply climate-smart farming practices, and many don’t use fertilizers. More general coping strategies include borrowing money from Village Savings and Loan Associations (VSLAs) or banks and getting casual jobs from off farm activities.

Small input dealers sometimes sell inputs on credit when farmers are not capable to pay back due to harvest fail. Big input dealers however are much better capable to manage such risks. First, they hardly directly deal with individual smallholder farmers. Since they have direct linkages with seed and input producers/wholesalers, it is easier for them to get access to different types of inputs, such as improved seed varieties that are more resilient to drought. Also, their position and relations make it easier to get access to information on climate change, and how to cope with it. As a result, many big input dealers offer products such as drought/heat tolerant seed, early maturing varieties, and organic fertilizers. Along with their products, they provide trainings, demos and workshops on the use and benefits of these (improved) inputs.

Aggregators, agents and rural traders face high transaction costs in assembling soybean surpluses from scattered farmers. This situation is worsened by the bad roads that are characteristic of rural areas and the long distances to urban areas in Uganda. To cope with the climate risk, rural traders or aggregators pass on these high transaction costs to urban traders and processors in form of higher prices or commissions. However, with attractive prices for soybean grain, processors in the urban areas are forced to engage more in oil milling for export of soy oil.

So far, the processors do not really take climate related risks into account in their business plans. Often, they lack knowledge, but also lack basic data on the exact impact of weather events on their production. There are however efforts emerging to bring down climate risks by various processors through enhancing access to more resilient seed varieties for farmers through linkages with local seed producers or seed companies and promoting use of post-harvest handling equipment.

The financial service providers show very little incentive in helping farmers to better cope with climate change. Even though they realise climate change also affects them, as farmers often default on loans if their harvest fails as a result of drought. They do not have any strategies in place that accounts for such risks. Only sometimes they reschedule loans.

Actors in the soybean value chain already experience climate-related risks to their business. The CRAFT project helps these actors to understand and manage the impacts of climate change on the value chain. In particular, CRAFT supports Acila Enterprises in becoming a climate smart agribusiness providing services that increase the resilience of the entire value chain. 

Acila Enterprises Limited (Acila) is a registered limited liability company that started operations in 1996 as a grain stocking centre for bulking and storage of produce for bulk resale.The company has grown and is now one of the leading SMEs in Uganda operating in Teso and Karamoja sub-region (Eastern Uganda). Soybean producers in Eastern Uganda still achieve extremely low levels of productivity at only 350kg-450kg per acre. This is partly attributable to water stress due to limited rainfall and high temperatures as well as poor agronomic practices.

The image on the right shows one of the offices of Acila Ltd. ( Acila, 2021). 

Specifically, Acila's business case will:

• Increase resilience of soybean production and productivity among the participating 5000 smallholder farmers in the targeted districts;
• Increase the volume of quality soybean purchased, processed and marketed;
• Empower women and youth to improve their livelihoods through development of agro-based enterprises;
• Create awareness and increased adoption of climate smart agriculture practices and technologies (e.g. improved seed, PHH technologies) among smallholder farmers. 

Acila seeks to achieve its goals through the following interventions;

• Identify and engage local seed businesses (seed producers) to multiply seed and produce quality declared seed;
• Training seed producers in seed production with support from ISSD;
• Training 167 ToT’s in climate smart agricultural (CSA) practices and technologies and how to facilitate the farmer field schools;
• Training 5000 farmers in climate smart agricultural practices and technologies through the farmer field school approach;
• Identification of demo hosts and sites and establishment of 100 demo sites and farmer learning site;
• Training farmers in post-harvest handling practices, grain quality management and Village Savings and Loan Association (VSLA);
• Training women and youth entrepreneurs in business management skills;
• Provision of soil testing services;
• Provision of weather information services.