Uncertainty in the rice market as we move closer to the festive period.
Sep 8, 2020
When pandemic struck, the government locked down everywhere out of the fear of the unknown, no one actually knew how the virus works and how potent it could be in terms of wiping out populations.
The nations that have successfully managed the spread and combated the virus gave our nation the hope to start the reopening process, so as to salvage whatever is left of the dwindling economy.
As I write this, international flight is about to resume in 24 hours time while the curfew period has been reduced to between 12am to 4am but my focus is on the deeds that have been done during lock-down.
Apart from the distribution lines that have been fragmented, food production at the primary level have been bottlenecked as farmers now face more threats to their lives, extortion and climate unreliability.
In lay man terms, what it simply means is that; WE ARE PRODUCING LESS FOOD!. To be more specific, rice has been shared during palliatives while the government allegedly went a step ahead to borrow grains from ECOWAS, but the farmers who are to help repay this debts have not been able to plant rice up to expected capacity.
We are left with deficit in reserve and shortage in expected supply, what this translates into is that, paddy that will be harvested for sales will have high demand for it, meaning the price will naturally obey the law of demand and supply.
Increase in price of paddy will be felt by the final consumer, because the millers will simply include cost of production in his calculations towards the sales of the final product.
Do not wait till December to seize the bull by the horn, price of rice is already at peak but that is simply because of season; by the time processing and selling starts, we may experience a bit of reduction in price.
The reasonable way out of this rut is for processors and moneybags in the downstream sector to backward integrate so as to ensure availability of raw materials (paddy) at optimum quantity.
But am guessing, that the government and Nigerians will prefer the wrong choice which will provide instant gratification but not long time solution; Open Borders! (disclaimer: my personal opinion and not the position of the firm).