Domestic Prices Remain Sticky Downwards

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Wednesday, May 4, 2016 11:19AM/ FDC

Nigeria, the second largest importer of rice after China, expected to reduce imports as foreign exchange and import bans discourage traders from venturing into rice imports.

Domestic prices have remained sticky downwards while herdmens continue to threaten crop production in southern Nigeria.

Oil prices dipped on prospects of increased OPEC production despite the decline in US rig count.

The attached update is a brief summary that will keep you abreast of world and domestic prices.

Domestic Commodity Prices Stable



Domestic Prices

•Domestic prices have remained sticky

•USDA expects rice imports to fall by 500, 000 tonnes to 2.5 million tonnes in 2016

•Influenced by foreign exchange restrictions & current ban on importation of rice via land borders

•Local rice considered to be of lower quality despite being more nutritive

•Due to the inflated price of a bag of rice, USDA expects consumption to decline by 5% to 5.4mt in 2015/16

•Herdsmen remain a threat to food security

•Initially, herdsmen and farmers maintained symbiotic relationship

•In time past, cattle served as a means of transport and source of manure to fertilize fields while herdsmen obtained grains for their cattle

•However as farming activities expanded, conflict over grazing areas arose due to crop damage

•This may stoke inflation in the months ahead

Stock Market

•Corporate results are influencing the stock market performance

• Imported items and forex restrictions continue to stifle profitability of FMCG’s

• Nestle Q1’16: Revenue up 31% to N36.13bn

• PAT increased by 126.4% to N6.68bn

• Stock price down 29% YTD


 
Oil Price Movement

• Brent crude down 4.80% to $45.83pb

• This time in 2015 was $66.45pb

• WTI decreased by 2.72% to $44.78pb

• Oil prices slipped on Chinese Data and increased OPEC output

• The Chinese PMI fell to 49.4 from 49.7 in April

• This marks the 14th consecutive contraction

• Fears of slowing growth in Chinese oil demand pushed oil prices to 13 year lows earlier this year

• OPEC production is projected to have increased to 32.64mpd in April – Reuters


• Russia’s production in April was 10.84mbpd

• Near the 30 – year high of 10.91mbpd reached in March

• A strengthening of the dollar also weighed on prices

• A stronger dollar makes oil, a dollar denominated commodity, more expensive


Oil Markets Today


Agric Commodities

 
Outlook

Oil

•With oversupply back in focus, oil prices to take a bearish turn

•Recent rally may be self-defeating as it throws a lifeline to US shale producers

•US crude inventories to increase as refineries reduce demand ahead of the maintenance season

Grains

•Benevolent US weather may weigh on grain prices

•US and Argentine corn supplies may reduce the impact of dry weather conditions in Brazil

Soft

Sugar – India may become net importer of sugar as drought parches fields

Cocoa – Bullish outlook for cocoa as supply deficit expected to increase by 23% in 2016

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4.      Commodity: Domestic Prices Sticky Downwards

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