It’s a profit-taking season for producers, investors and processors of agricultural commodities as the total volume traded on the AFEX Commodities Exchange netted N773 million in value at the end of this year’s first quarter.
This means smallholder farmers producing in rural areas would experience increased flow in funding available for their activities; processors would see better price discovery and investors guaranteed liquidity and return on investment, according to Obianuju Okafor, AFEX communication manager.
In line with the Exchange’s bullish projection for H1 premised on the results of the 2018 wet-season farming and high demand for certain commodities experiencing supply shortfall, the platform recorded 7,812 metric tonnes of commodities traded.
This marks an uptick from the 5,249.24 metric tonnes volume traded in Q1 2018 valued at N590.7 million and a drop from the 11,481.90 metric tonnes traded in Q4 2018 valued at N1 billion.
Some of the drivers of the increase from Q1 2018 to Q1 2019 included the Exchange’s scale up of some of its programs, which expanded its access to grains available for trading and consequently increased the volume traded.
AFEX for instance invested more in public understanding and awareness of the Exchange’s activities, leading to more players.
The major players on the Exchange are producers, buyers or processors who need access to quality assured commodities of specific quantity and investors or financiers looking to expand their portfolios.
The value brought by these three players serve as a central role within the agriculture value chain, but the interaction is often fragmented with the absence of points of convergence. AFEX uses its platform to solve that problem and in that way, maximizing the returns for them in the agriculture.
The forecast of AFEX, an e-trading platform for agricultural commodities at the beginning of the year was that prices of staple and export crops would remain stable within the first half on high output recorded in 2018. It also expected it would be sustained by prevailing stability in the international market.
The commodities prices began 2018 in the lower region and dropped further in the second half, with crops such as maize and soybeans had trimmed by 18.9 percent to N82.59 and 30.8 percent, respectively.
“The start of the year kept with the trend with the uncertainty of the elections leading a lot of people to buy and store commodities, which led to an increase in demand. Logistic costs were also high in the period contributing to price increases and fluctuations,” Ayodeji Balogun, AFEX Country Manager said speaking on the Q1 report
The market which has now settled in stable region for most commodities, with light fluctuations arising mostly from logistic issues is expected to sustain the decorum in the interim.
In its further projection for 2019, AFEX expects yields of small holder farmers to increase by 1.5 percent and returns on investment of 25 percent and above. On the exchange, it looks forward to an increase in retail participation as well as the introduction of key products targeted at increasing participation of key stakeholders.
To increase the commodities traded on the exchange, AFEX would be focusing on farmer engagement, using its outreach structure to get more farmers to take advantage of the Exchange’s offerings from input financing to storage and grading services.
The Exchange is also making a lot of investment in technology to help automate some of our processes and make for easier data capturing and analysis, Balogun said.
The Exchange is also tinkering creating new products that will make investing in commodities accessible for all investors, some of which will include trainings and interaction that will foster understanding of the products.
Hence, investors are advised to monitor the trends in the market like price movements, external factors that can influence demand and supply like weather conditions, and consider trends internationally as in most other investment undertakings.
