Starting Groundnuts Export BusinessGroundnuts, a staple food for many developing countries, deserves a closer look as an export commodity. Less than 6% of the world groundnut crop is traded internationally, with export sales averaging close to US$ 1 billion dollars per year. There is, therefore, scope for export growth in groundnuts.
Investing in groundnuts is a sustainable way to address the rising needs for both food and foreign exchange. Today’s exporters face two major challenges: ensuring food safety by preventing and controlling mycotoxin contamination of products and adapting groundnut supplies to demand for varieties best suited to specific end-uses.
ITC is focusing its technical assistance activities in the groundnut sector on helping African producers and exporters meet these challenges. Micaela Maftei, an ITC Senior Commodity Officer, reports.
Groundnuts are widely cultivated as staple food in tropical and sub-tropical developing countries, providing a valuable source of proteins, fats, energy and minerals. Most of the world’s groundnuts are produced and consumed in developing countries. Less than 6% of the world production is exported. Most of the edible groundnuts are not cultivated for export purposes. In other words, producers do not usually grow the groundnut varieties best adapted to specific export market uses, such as the manufacture of roasted, salted or coated nuts, snacks, chocolate-based products, or peanut butter.
Major producers
China took advantage of market reforms, as well as increased use of high-yielding seed varieties and agricultural inputs (fertilizers, pesticides, insecticides, mechanization and irrigation), to recently overtake India as the world’s largest groundnuts producer. In China, over 3.6 million hectares are under groundnut cultivation and 6 million tons are produced yearly. India is the second largest producer, with surfaces under the crop exceeding 8 million hectares and outputs averaging 5.6 million tons per year. The United States, Nigeria, Argentina and Indonesia are the following largest producers, with annual outputs varying between 1 and 1.5 million tons per year.
Groundnut production in African countries fluctuated greatly, though it never exceeded 8% of the world output over the last decade. Yields per hectare are low, because of a combination of factors: unreliable rains; mostly non-irrigated cultures; small-scale, traditional farming with little mechanization, outbursts of pests and diseases and use of low-yielding seed varieties; and increased cultivation on marginal land. Political instability and the frequently unsupportive oilseed policies have also played their role.
Yields vary
Yields in producing countries vary significantly, depending on climate, soil, farming systems and seed varieties. The spectrum is wide: over 2 tons per hectare (t/ha) in the United States; 1.8-1.9t/ha in China and Argentina; about one t/ha in Indonesia, Brazil, Thailand, Viet Nam, Mexico, South Africa and Myanmar; and only 0.5-0.7 t/ha in the other African countries and in India (the second largest producer).
Trade is concentrated
Both export and import trade in groundnuts is very concentrated.
Exporters
The seven largest net exporters of groundnuts supplied about 87% of the world export trade in 1997/98: Argentina (245,000 tons); India (240,000 tons); United States (230,000 tons); China (185,000 tons), Viet Nam (98,000 tons); South Africa (40,000 tons) and the Gambia (20,000 tons).
Importers
Similarly, the five largest net importers purchase about three-quarters of current world imports: European Union (42%); Indonesia (13%); Canada (8%); Singapore (5%); Malaysia and the Philippines (3% each).
The positioning of the largest net exporters has shifted considerably during the last six years. China, although it has become the largest producer, lost over half of its shares in the export market of hand-picked selected groundnuts, mainly because of the increase of the domestic consumption. India moved up to second place; Argentina and Viet Nam doubled their shares, while exports from the United States decreased slightly, facing strong competition from Argentina.
World export trade averaged 1.2 million tons of groundnuts, valued at over US$ 948 million per year over the last five years, out of which nearly two-thirds was provided by developing countries. About 80% of exports consisted of edible groundnut varieties, with the remaining 20% of groundnuts used for crushing.
International prices of edible groundnuts fluctuated widely over the last decade, influenced by both market fundamentals and seasonal factors.
Using groundnuts: Global consumption patterns
To maintain or increase market share, exporters need to adapt the type of groundnuts to consumer requirements.
About 48% of the world output is for food uses and 52% is crushed, producing groundnut oil and cake. Consumption patterns vary widely from country to country. In the United States, a fifth of the crop is exported; 10% is crushed for oil; nearly 60% is directly used in the manufacture of food products. Argentina and South Africa, typical export-oriented groundnut producers, export 70-75% of their crop either as edible or oil nuts, or as processed groundnut oil and cake. In Viet Nam, groundnuts are cultivated in order to improve soil fertility, to break rice monoculture and to provide additional income to farmers through exports.
Asian countries, particularly Indonesia, consume large amounts of groundnuts as sauces (satay) and gravies. In the United States and Europe, groundnuts are most frequently used as salted, dry-roasted and speciality nuts (such as honey roasted, hickory smoked or chilli-flavoured), snacks, or for the manufacture of peanut butter, confectionery and chocolate-based products.
Matching export groundnut varieties and end-uses
Different varieties of groundnuts are used for different food products. The largest – red-skinned Virginia kernels – are used for cocktail and salted nuts. The medium-sized Runner and the small Spanish varieties are best for peanut butter, oil and candies. Valencia variety, with long shells containing three-four kernels each, are in demand for roasting in shell.
New breeding technologies have produced a range of improved varieties, adapted for particular end-uses or to specific growing conditions. Groundnuts with good shelling yields, high oil or protein content, or particular kernel shapes and sizes have been developed for specific end-uses. High-yield varieties have been developed for specific locations, with characteristics such as early maturation; resistance to drought, diseases and pests; suitability for mechanized harvesting; adaptation to particular types of soils or farming requirements.
ITC helps the groundnut sector to improve exports
ITC has taken several steps to build awareness among local business communities on how to improve groundnut exports. As part of this process, ITC has carried out market research and disseminated technical information that can help groundnut exporters to better reach consumer markets. Last year, ITC published a market survey on export opportunities for edible groundnuts in selected European markets, HPS Groundnuts: A survey of selected European markets. The publication also addresses aflatoxin contamination issues, which are the root cause impeding export development of groundnuts from developing countries.
Awareness campaign targets African business communities
This research was followed up by a series of workshops in five African countries – the Gambia, Mali, Senegal, South Africa and Zimbabwe – selected because they already produce groundnuts, and/or have potential to increase their exports. Cooperative farmers and small land holders, seed producers and distributors, groundnut processors and traders, agricultural credit banks, as well as government officials in charge of agricultural and trade development were brought together for two-day events, to discuss practical ways to improve the quantity and quality of their groundnuts products, and to adapt exports to increasingly stringent import market requirements. Participants realized the benefits in taking a series of coordinated actions to improve groundnuts production and check its quality.
Common needs emerging from the meetings included:
• developing national and regional groundnut sectoral and seed strategies that lead to increasing exports of edible groundnuts matching end-user needs;
• implementing integrated aflatoxin management programmes, covering all contamination-related issues, including mould formation and spreading, detoxifying the product and routine monitoring;
• encouraging regulatory measures to control the flow of contaminated shipments in national and international trade, and technical information and training in aflatoxin control and prevention;
• establishing certified national quality control laboratories, in charge of issuing export quality certificates;
• promoting exports through market prospecting and generic promotion of national products.
Micaela Maftei is ITC Senior Commodity Officer. She can be reached by at e-mail, or by fax at +4122 730 0446.
Adding value to African exports
In line with technical assistance needs identified through these seminars, ITC formulated a project aimed at improving income levels of groundnut producers and exporters in the Gambia, Malawi, Mali and Zimbabwe, by encouraging business communities to become more efficient and focus on edible groundnut production for export. The project foresees the following technical assistance activities:
• market development and promotion missions in target import markets and the participation in specialized trade fairs;
• training in export quality control, management and certification;
• development of export labelling and generic promotion campaigns for products with specific origins;
• technical support to selected enterprises in quality assessment, quality and yield payment systems adapted to specific local conditions, forecast of output and efficient HPS groundnut selection.
ITC welcomes readers’ views on both the technical cooperation activities foreseen by the project and interest of firms or national governments in participating in this project.
