I saw posts like rice now selling for N54,000, N60,000; down from a dizzy height of N98,000, all within just three months. That's quite wild and all the figures need to be carefully approached.
First, the economy was writhing in agony and that N98k, (as representative of the pricing trend for several other goods and services) was akin to a fever diagnosis temperature. The fever was induced by the combined effect of the twin policy of fuel subsidy removal and naira floating both hitting simultaneously plus the activities of dealers hiding under those to gouge on prices. There is some stability now and suppliers are getting more realistic.
But when I heard about N54k rice, I got a bit worried. That swing is too large for a commodity with a long shelf life. It indicates something severe, if true.
1. It could indicate farmers or middlemen are dumping . If farmers are dumping, expect them to flee the crop next planing season, which means high rice prices within the next four months.
2. If it is the warehouses that are dumping, that will be a good thing, generally. It means nobody will hold Kare inventories soon and the market will be in flow and in freedom with little possibility for surprises.
3. Are buyers turning to alternatives, creating more supply than demand by default?
4. Are more people cultivating the crop and overloading the supply?
These are all dynamics that agricultural planners take seriously and follow in details to keep the economic sector safe from disasters and provide data for agricultural lenders.
Imagine a farmer has taken out N3 billion to open up a virgin land by a river and has acquired irrigation facilities to do 700 ha of rice with a projection of farm gate price of N62,550 and a rate of 9.2% without a moratorium. What is he to do when he hears about a market price of N54k? Of course the eaters of rice are happy and they ignore the farmer's pains, but that's just for now. It isn't only the farmer that will pay - everybody will pay later because the farmer will try to maneuver and pivot to something else after taking blows from rice. He will try corn or whatever crop could fit into his land and equipment readiness.
The cries of his agony will be heard from miles away and many other farmers and would be farmers will go into hiding. Consumers will be smiling, but their turn will come next season. Boom! Rice scarcity will hit and consumers will be crying to the the government to open the borders for rice importation - something that government cannot do because it is struggling to defend the local currency and prevent a worse problem.
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This is why three things are necessary in agricultural planning.
1. There must be price stability - a stability flowing from sociopolitical stability. Prices themselves are not what they seem. They are not basic factors but are results/indicators of basic sociopolitical, cultural and natural environment stability. We cannot control much of nature, but sociopolitical factors are mostly within our control. The head of that is the government at its various level and stability at that level is critical for appropriate price determination. Government must not be schizophrenic or act irrationally. Politics must be stable and predictable to avoid extent. There must not be jailbreaking or madman justices or criminals receiving the backing of constituted power in reality of perception. All these affect economic realities like pricing.
·Ogunlela, an agricultural scientist and consultant, lives in Abuja
