The Challenge of Substituting Sunflower Oil for Imported Palm Oil: Evidence from TanzaniaDOWNLOAD FILE
June 8, 2018 - Author: Michael Olabisi, David L. Tschirley, David Nyange, and Titus Awokuse
Michael Olabisi, David L. Tschirley, David Nyange, and Titus Awokuse, 2018. The Challenge of Substituting Sunflower Oil for Imported Palm Oil: Evidence from Tanzania. Feed the Future Innovation Lab for Food Security Policy Research Paper 99. East Lansing: Michigan State University.
Edible oil imports to Africa grew over 10% per year from 2006 to 2015, and accounted for 34% of the continent’s total growth in food imports over this period—the highest share of any food group. In the same period, several African countries experienced a boom in the local production and processing of oil-seeds. The combination of import growth and domestic production booms reveals a gap in the literature on the characteristics of edible oil demand in Africa. We begin to fill this gap by estimating own-price, cross-price, and expenditure elasticities of demand for palm, sunflower, and other edible oils in Tanzania. We apply a QUAIDS model to detailed household level data-focusing on palm and sunflower oil, because for the most part, palm oil is imported and sunflower is domestically produced. Our main finding is a surprisingly low level of substitution between the domestic and imported edible oils. Simulated budget shares from our estimates suggest that a 10% tariff increase on palm oil leads to less than a 0.06% change in the budget share of domestically produced sunflower oil. We identify other potential policy implications from our findings and highlight steps for further research.