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Saturday, February 16, 2019 6:30AM /Proshare
Research
Insights for the commodity markets are also critical in the New Year
2019 as this will be a major theatre of trade engagement as traders in primary
export goods will be hemmed in by shrinking global trade relations and slower
Asian growth. Critical points to note include:
- At the start of 2018, we had to contend with the backlash effect from
the 2017 USD crisis and a slump in global commodity prices. Due to those two
major factors, local commodities were significantly higher priced than the
import parity price leading most manufacturers to use imported products, and
making the commodity market effectively bearish.
- The 2018 Wet season cultivation was a good one for most crops across
the country, and the resultant harvest was decent to great. However, most
irrigated Paddy rice farms were flooded, and up to a third of the season's
output was lost due to this. Soybeans remained a deficit crop, with national
supply amounting to less than half of demand, and prices yielding up to 120%
annualized season (harvest in November) to date.
Commodity traders expect the bullish trend in the grains market to
continue through H1 2019. Also, with a gloomy harvest predicted in some Cocoa
producing states, and a likely recovery from the 2017/2018 slump in cashew
prices, traders expect a bullish trend in the export crops sub-sector.
- On the exchange, market operators tend to be scaling the impact of
input programs, for example AFEX, hopes to reach 50,000 farmers in 2019, and
grow from there. They will also launch the first Commodities Index in Africa in
January 2019, as well as other instruments for investors interested in gaining
exposure to commodity backed assets.
- The year 2019 will witness a new strategy for agriculture in Nigeria.
Regardless of the outcome of elections, there are high chances of a
modification of the Green Alternative strategy, and this may attract increased
investment in agriculture or otherwise. Furthermore, the government's recent
embargo on NPK may create shocks in the Fertilizer supply chain, restricting
availability of products and increasing prices. This may affect agricultural
output in the coming season.
- On the part of exports, continued delays at the port coupled with
likely constraints in logistics around the election periods may have a negative
effect, which may also extend to the cost of raw material crops.
Do feel free to share your
opinions/observations and feedback with us vide content@proshareng.com and/or research@proshareng.com
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