Analysts at AFEX have predicted a decline in grain production in Africa’s most populous country in 2023 over the continuous surge in production costs and erratic climate conditions.
They also forecasted that food inflation could further worsen in 2023, and household misery increase, as the production outlook of paddy rice, maize, sesame, and cocoa declined by an average of 11.5 percent in 2022/23 trading season.
The forecast is contained in AFEX’s 2023 Annual Commodity Review and Outlook Report unveiled at a virtual meeting held recently.
“Due to anticipated shortages in supply for some important commodities this season, particularly maize, as well as unfavorable weather conditions and high energy costs, prices may remain high,” the report said.
According to the report, “The impact of the flood, the devaluation of the naira, and the socio-political situation are all predicted to put additional pressure on commodity prices in the country.”
David Ibidapo, AFEX’s head of market data and research, who presented the report, said factors like the reduction in the water level of the Mississippi river that forms a major and cheaper route to transport grains in the US, and the ongoing Russia-Ukraine war would shape the 2023 global commodity market.
He added that the continuous surge in input costs had forced several businesses, particularly in Europe to temporarily shut down their manufacturing facilities.
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On the back of this, he thinks Nigeria will see a supply crunch for key inputs, especially fertilisers, which will in turn affect the country’s production this year.
“Nigeria relies heavily on importation of fertiliser input,” Ibidapo said.
He also said that the US National Oceanic and Atmospheric Administration in its October assessment, predicted that La Nina conditions will probably persist into early 2023 and would likely cause some level of drought in the Horn of Africa and heavy rainfall and flooding in Australia and Southeast Asia.
“We think this already gives us a bleak outlook for supply levels of commodities in major producing regions in the global space,” Ibidapo said.
“We have also seen a number of economies take some protective measures like reducing exports for some of their commodities in a bid to meet local demands for such items,” he added.
He said these risks are believed by AFEX to impact price levels and price movements for a number of commodities in the global space.
There is also a potential price increment on the back of reduced production caused by the devastating floods of 2022, international demand for commodities like soybean, for example, weakening of the naira, and energy prices, among others.
Also, speaking on the commodities outlook for the year, Oluwafunto Olasemo, vice president, AFEX said, “The shift in global commodities supply has greatly influenced the commodity market and exposed the vulnerabilities in our food system.”
“There is a growing imbalance between the food supply and the demand of the growing population, putting upward pressure on prices.
“Developing a holistic approach to mitigate food insecurity and improve the shocks to climatic change, inadequate financing, and low access to efficient markets is a priority. With this report, we seek to provide high-quality, timely, accurate, and accessible.”
The report also alludes to price pressures being exacerbated by the fact that 2023 is an election year.
“Given the general election activities, we anticipate a slowdown in market activity in the first quarter of 2023, as investors are likely to
take a cautious approach,” the report said.
Providing the outlook for the global commodities market, the report predicts that Maize prices will decrease by 8 percent in 2023, while prices for wheat, which were anticipated to rise by 36 percent in 2022, will slightly fall in 2023. Meanwhile, the average price of rice which decreased by 5 percent in 2022 is forecast to remain the same this year.
A key recommendation from the report to pave the way for sustainable solutions is mainstreaming environmental sustainability, and prioritising policies that encourage public and private sector players to work together to improve farmers’ productivity and transform food systems.