November 20, 2019 / 9:12 AM/ AFEX Nigeria / Header Image Credit: Beautiful Nigeria
Insights on the commodity markets in Nigeria are critical as we enter into the 2019/2020 season. All key crops traded on AFEX Commodities Exchange are being considered in view of the demand and supply dynamics as well as a look into possible proactive measures that investors can take. Read below for the AFEX Ginger outlook for the 2019/2020 season in Nigeria.
Ginger Outlook Supply-Side Dynamics
Ginger cultivation was good with sufficient rainfall and many of the farmers increasing their farm holdings due to favourable prices in the preceding season.
Harvest is yet to commence due to persisting rains, however, it is hoped that the rains will halt within the coming weeks and the farmers can commence harvesting. The volume of rains had a good impact on cultivation, but could potentially have a negative effect on the yield if it continues to fall, meaning that the farmers will be unable to harvest, split and dry.
The likely consequence would be high crop rot in the ground since all of the post-harvest activities are carried out manually, especially drying which requires direct sunlight.
There is no old season harvest in the market for trade, however, a few fresh roots have been traded by farmers pressed to fulfil some financial commitment. The fresh roots are trading at approximately NGN 4,000 per 40kg bag with a conversion rate of 3:1 into dry- split product.
Prices rose to around NGN 600,000 per MT in the peak of the last season and we expect a significant drop with the new season crop. The new season output (dry- split) is open to a lot of speculation and this is heavily consequent on the volumes and quality of the product when it comes out.
Supply is expected to commence mid - end November/ early December and quick price appreciation is likely to characterize this season.
Ginger Outlook Demand Side Dynamics
There has been a huge influx of buyers into the Nigerian ginger market. A number of the large aggregators have set up warehouses and collection centres in close proximity to the farmer communities.
Demand is expected to be higher than supply with attendant flight of prices within a short period.
Strategy to Adopt
We recommend an aggressive aggregation strategy commencing in mid-November when moisture levels are within the acceptable range. An aggregation strategy backed by liquidity for immediate cash settlement to famers will yield positive results.
Utilization of AFEX supply chain network will reduce cost of aggregation as well as provide comfort to the buyers by assuring quality and quantity of products.