One of the major challenges that are affecting agro-commodity business in Nigeria is price fluctuation after logistics (transportation). Unlike many countries with stable price or slightly price movement, Nigeria market tend to change within short period of time making it difficult for agropreneur to forecast price. This is one of the problems agropreneur faces recently, apart from not been able to forecast price due to this fluctuations, other countries that produces similar commodity with stable exchange rate attracts most buyers than Nigeria.
As the government is trying to work out a stable economy, agropreneur needs to be careful also. It’s difficult now to quote price on a long-term contract so you have to find a way to clause your contracts term and let the price be reviewed at some interval of time to cushion the effect of price movement.
It’s not advisable for agropreneur to stock goods at the moment because of unstable foreign exchange in the country and while quoting price for your international buyer, explain under mutual agreement the condition of your economy because, if the naira gain more strength against dollar you have to communicate with them to review it.
And if your business is on export, watch out for your bank exchange rate on LC because of NXP. If you base your calculation on high exchange rate, the CBN will end up bringing out a deadly policies that will make your bank change their exchange rate not in your favor.
Hint** You can always plan your trade by targeting a profit margin like #22,000/Ton, so putting your mind on this margin, you can end up gaining more or less. This will really help you to calculate your risk during price fluctuation.
Always remember that if a buyer contacts you, they also contact many countries and many sellers in your own country; so given a very low price, they may be suspicious of you trying to entice them with good price and if your price is too high, they might think you don’t really know what you are dealing on or probably you are not in business but pretending to be. A good relationship with the farmers to get up to date farm gate price update is very important.
Recently, I was told by a buyer to quote price for a commodity, my contact from Yola Adamawa state gave me 130,000/ton while another contact from Kaduna, Kaduna state gave me 185,000/ton. Meanwhile 130,000/ton was the actual normal price while 185,000 was over inflated. As a young agropreneur that depends on a source for price update, you will end up quoting high price which will not allow people to contact you often.
Most people lost money to price movement while others gain. The simple trick is that when the season of any commodity is just starting, try as much as you can to buy the quantity of interest and when the harvest is going to the peak of the season, sell off because as the harvest is going toward the peak, two things is likely bound to happen, either the price moves up due to demand or price moves down due to excess supply, “ if the price moves up, it will surely gets to a point where the price will crash due to excess supply” and if the price moves down due to excess supply, it will get to a point where the price moves sharply after mopping up the whole commodity in the circulation.
Hint****Understanding this logic about price fluctuation will help you to know more about calculating your risk.
NOTE: it is not always advisable to get price from an agent, they always inflate prices which is normal for them but not normal/ good for a young agropreneur/starter. The simple way to overcome these challenges is to travel to one or two markets and have a cordial relationship with someone who can be feeding you with daily price without inflation or contact sehgatehub team for daily farm gate price service. It’s free…..