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Wheat Three-Year Low Prices may Terminate in October

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NIRSAL - Jigawa on wheat

CEM REPORT, AGROFOOD | Today in international market, wheat sells at 253.02 USD per ton which translate to 0.25 USD for a kilogram, an increase from closing price of 248.53 USD per ton yesterday. This week price is an increase from 235 USD per ton it sold last week.

The commodity has been on a decline since November last year after the hike that was triggered by the heavy disruption as a result of Russian-Ukrainian war. Prices have dropped from 343.69 USD in November last year even hitting as low as 221 USD in September.

Export from Ukraine enabled by the humanitarian corridor deal have had substantial impact in the supply of the product into the market and capacitated the price ease experienced within the period.

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At the Nigerian local market, general inflation has kept prices increasing caused by cost of local distribution due to hike in fuel price and heightened importation cost due to weakened naira. 3kg of wheat sells for 2,500 NGN with a ton selling above 800,000 NGN

Agriculture Market Information System (AMIS) has said in its market monitor that “wheat futures prices remained close to their three-year lows, primarily due to larger-than-expected U.S. supplies and strong Black Sea exports.

It said that nonetheless, “the recent price dip has prompted bargain buying, as international importers recognized that export flows were approaching their limit capacities. The Russian Federation is expected to have slowed its export pace in October due to logistical constraints, while the Ukrainian humanitarian corridor showed its first interruptions, raising concerns about its scalability”.

Prices are likely to upshoot in the international market if the Ukrainian humanitarian corridor interruptions escalate with its possible disruption of export from the Black Sea. Drop in supply poses a threat of returning millers to the level of shortages experienced last year especially in Nigeria.

Nigeria has been one of the major importers of wheat. In 2021, it imported the commodity worth $3.32B. Out of this, $493M worth was imported from Russia while $490M worth came from Ukraine. Lithuania led export to Nigeria that year with $582M followed by Latvia and United States (second and third) which exported wheat worth of $508M and $508M respectively.

In Q2 2023, according to Nigerian Bureau of Statistics, wheat import to Nigeria stood at NGN187.754 billion with Poland having a largest share of N44.801 billion. There was no import from Ukraine due to the war. Countries that led import to Nigeria are Lithuania (NGN41.630b), Canada (NGN39.635b), Latvia         (NGN39.162b) and Russia (NGN22.524b).

There have several efforts to increase local production of the commodity some of which are yielding results. Nigeria’s total local wheat production in 2020 was about 200,000 metric tonnes which was lower than expected mainly due to harsh weather conditions and poor seed varieties available.

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in 2021, Seeds for the Future was launched. It is an initiative of Olam Agri Nigeria in partnership with the Lake Chad Research Institute (LCRI) and the International Center for Agricultural Research in the Dry Areas (ICARDA), Morocco. The initiative is aimed at developing and cultivating wheat seed varieties that suit Nigeria’s difficult growing conditions and to undertake a wider engagement of smallholder farmers and adoption of modern agronomic practices.

The first-year goal of this initiative was achieved last year which is the 10 kilograms of pre-multiplication wheat seed varieties suitable for the west African nation’s unique topography and climate.

In 2022, the AfDB approved a $1.5 billion African Emergency Food Production Facility to help African countries avert a looming food crisis. In a statement, the bank said the $1.5 billion strategy will lead to the production of 11 million tons of wheat.

Nigeria consumed 6.06 million tonnes of wheat in 2022-23. According to the Foreign Agricultural Service of the US Department of Agriculture. Nigeria is projected to produce 160,000 tonnes of wheat, while importing 6.5 million tonnes to meet this demand.

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