Monday, October 19, 2020 / 2:11 PM / Kainosedge Consulting for AFEX Commodities Exchange / Header Image Credit: Capital Market
A. Market Summary
Local market activity increased the most for soybeans in September while paddy rice experienced its highest price decline in the past 12-months resulting in a double-digit percentage price decline. This was complemented by declining volatility on the Exchange and international markets indicating increasing commodity price stability in the post (COVID period). While the Exchange saw volatility decline across all commodities, prices on the open markets became increasingly unstable most especially for maize and paddy rice.
The open market prices for maize and soybeans increased in response to the termination of the lean season of the crop calendar in the agrarian North which indicates the beginning of harvests from the current planting season which will span Q4, 2020.
The Exchange executed prices for the month under review increased for maize and paddy rice due to the transmission effects from commodity scarcity. However, the Exchange prices were collectively lower than the physical markets for comparative commodity grades being offered on the Exchange. Paddy rice price eased considerably on the international market due to seasonal market liquidity from Asian producers.
B. Market Perspective
This report focuses on the average monthly price, analyzing three key indicators: Price variance analysis, volatility analysis, price seasonality performance analysis for maize, soybeans, and paddy rice across crop endemic zones in Nigeria and the international market.
Commodity prices increased further in September for maize and soybeans while paddy rice prices eased considerably, sustaining the seasons' upward trend which was cumulatively most pronounced for paddy.
The average monthly price experienced a reversal of last month's price decline. The average price tightened by 5.1% M-o-M, a 5.4%- points change in comparison to August 2020. The commodity's cycle is currently mid-season and market liquidity is expected to ease considerably and impact market price with the onset of harvest which would span the month of October and November.
In addition, the seasonality performance for soybean showed a Y-o-Y price increase of 3.3% (W9.8%-points) in comparison to September 2019. The commodity's price has continued to rise as it recorded an 8% volatility in August (&2%-points). The commodity, however, had the lowest price volatility in the group of commodities reflecting soybean's comparative price stability this season.
Maize prices had a unique 4-month run which spanned Q3, 2020 and has been tapered off as it experienced a 1.55% price increase M-o-M (down 13.2%- points), the highest reversal of the commodity's bullish trend.
The seasonality performance for the commodity increased by 128.2% Y-o-Y (up 2.6%-points) in comparison to September 2019. The market demand is set to decline as the lean season is set to be terminated as main harvests come in during Q4, 2020 to replace depleted stocks.
The volatility for the commodity in September was its highest in 3 years as it leapt to 38% (up 31%-points) M-o-M. Comparing the volatility of September 2019 with this current year reveals an increasing market price instability in open market prices for maize.
3. Paddy Rice
Paddy rice prices have mirrored the market tightening of maize market price increase. The commodity returned an increase of 17.7% (up 3.1% points). M-o-M, thereby maintaining a 4-month consistent double-digit percentage price increase from March 2020. The market seasonality performance surged to 111.2% Y-0-Y (up 80.9%-points).
Paddy rice market price experienced a reversal in the single-digit price volatility achieved over the past 3 months. The average volatility was 20% in September (up 13%-point M-o-M), while the seasonality trend revealed a consistent volatility increase over the past three years reflecting increasing market price instability.
AFEX Commodities Exchange
The Exchange experienced relatively lower price points when compared to the open market for maize, soybean and paddy rice (M-S-P) in September 2020. The month-average executed prices on the Exchange were lower than the open market prices for maize, soybeans, and paddy rice by 12.5%, 8.4% and 0.7% respectively.
The M-o-M volatility declined by a considerable margin for the three commodities covered by the index; maize 0% (Â¥7%-points), soybean 2% (W8%-points), and paddy rice 0% (VW 12%-points). The seasonality trend of the volatility revealed a Y-o-Y decline for maize (Â¥7%- points), soybean (W11%-points), and paddy rice (Â¥ 8%-point) in volatility.
Maize and soybean prices increased marginally in September; soybean increased by 7.3%, while maize increased by 4.1% M-o-M. Paddy rice average monthly price also increased, by 2.0% due to seasonal market liquidity from Asian producers.
With the depletion of global stocks of paddy rice, production areas in South-east Asia experience limited water supply for irrigation thereby prompting production revisions causing prices to tighten for the commodity. Furthermore, the global stocks for soybeans have also been impacted by the low production from the USA. Exports from South America and Europe have however bridged the gap but not sufficiently enough to moderate market prices.
M-o-M Volatility dropped in September for maize and paddy rice to 3% (down 2%-points), and 3% (down 1%point). Soybean price volatility was stable M-o-M, at 4%.
Price seasonality (Y-o-Y) performance experienced wide margin changes for maize 11.3% (up 8.3%), soybean 17.3% (up 13.3%) and paddy rice 12.2% (up 47.9%).
C. Composite Price Index Monitor
The AFEX Commodities Index Composite opened at 271.0 points and had a monthly average of 271.0 points, a positive M-o-M performance against August 2020 to close at 271.0 points at the last trading day of the month. The season-to-date! performance of the ACI Composite at the last trading day of the month was positive, closing 106.2points above the index opening at the beginning of the season. The year-on-year (seasonality) performance experienced 106.2points (64.4%) difference against September 2019.
Maize Sub Index
The Maize Sub-Index opened at 350.1 points, and had a month average performance of 350.1 points, representing a positive performance of the Sub-Index against August 2020, closing at a value of 350.1 points.
The Sub-index recorded a positive season-to-date performance on the last trading day of the month closing 176.0 points (101.1%) above the December Index opening while the year-on-year performance experienced a 101.1% increase against September 2019. In September 2020, Maize price on the exchange was significantly higher when compared to August 2019.
The Soybeans Sub-Index opened at 236.3 points, and had a month average performance of 236.3 points, representing a positive M-o-M performance for the sub-Index. It closed with a value of 236.2 points as it recorded a positive season-to-date performance on the last trading day of the month closing 21.0% above the December opening of the index. The year-on-year performance experienced a 41.0 points uptick (21.0%) against September 2019.
In September 2020, Soybeans price on the exchange was relatively lower when compared to September last year.
Paddy Rice Sub-Index
The Paddy rice Sub-Index opened at 222.6 points and had a month average value of 222.6 points, representing a M-o-M positive performance to close at 222.6 points at the end of the month. The Sub-Index recorded a positive season-to-date performance on the last trading day of the month closing 97.6 points (78.1%) above the Sub-Index opening at the start of the season while the year-on-year performance experienced a 78.1% increase against September 2019.
Paddy rice Exchange price was significantly higher in September 2020 compared to September 2019.