AFEX Unveils Annual Commodity Outlook, Predicts Elevated Price Levels In 2024

AFEX, a leading commodities player in Africa, has unveiled its 2024 commodities outlook in a hybrid event hosted at their Lagos office on January 24, 2024.

The annual commodities outlook is a key literature that analyses critical socio-economic factors shaping the demand and supply dynamics of commodities, with a view to highlight challenges and opportunities inherent in the market while providing an accurate forecast that potentially steers price and volumes for the 2024.

AFEX, in a statement sent to LEADERSHIP, which hinted that globally, the commodities market was marked by turbulence, owing to global shocks across energy scarcity, geopolitical tensions, financial crises and more, however, noted that despite the challenges, the global market witnessed a 24% decline from their peaks in 2022.

The Nigerian commodities market on the other hand faced trickled down effects of inflation, and economic reforms, which pegged the growth in the first three quarters of 2023 at 0.63%, a sharp decline from 1.90% in the same period of 2022.

The statement revealed that agriculture commodities witnessed price surges with the greatest factor responsible being supply shortage due to low production and increased international demand.

While maintaining that of all tracked commodities, maize exhibited the highest volatility at 24%, resulting in a peak price of N550,000/mt by the end of Q3, and closing the year at N480,000/mt.

This increase is a consequence of decreased input usage, a still-felt effect of the Russia-Ukraine crisis impacting fertilizer prices.

Also predictions for 2024 global commodity prices suggests a downward trend due to factors such as improved supplies and the expiration of certain trade policies, however, the direction of this trend can be significantly influenced by numerous factors, each capable of either posing a downside or upside risk to commodity prices. Energy prices are expected to drop by 5% in 2024 and then further decrease by 0.7% in 2025, while agriculture commodities are projected to decrease by 2% in 2024 and 3% in 2025, provided that the Middle East conflict de-escalates.

On the flip side, the report forecasts that domestic commodity prices are expected to rise consistently throughout 2024. Key export commodities like Cocoa and Sorghum are projected to rise by 50% and 20% respectively, underpinned by declined production, while key consumption commodities like Maize and Paddy Rice are projected to rise by 25% and 40% respectively, despite a 4% increase projection on production of Paddy Rice.

Speaking at the event, Vice President, Financial Markets, Oluwafunto Olasemo, noted that, “The outlook is an indispensable component of the commodities market, dictating trading flows and movement across the physical market and secondary market players.

“This year, the commodities market will see a complex balance amidst geopolitical, economic, and environmental factors, which will on one hand demand continual monitoring and strategic adaptation, and on the other spur vigilance on the part of market stakeholders and policy makers.”

He added that in managing the complexity of the factors, there was a pressing need to enhance domestic agricultural production, streamline trade policies, and establish strategic reserves to cushion against market volatility and ensure food security.

“Similarly, there perhaps isn’t a better time to look to alternative investments as a hedge against potential windfalls than now,” he added.

A key recommendation of the report for boosting agriculture productivity is pivoting from traditional food production systems and adopting sustainable farming practices such as diversified crop rotation, which serves to optimize soil capacity and increase productivity, which in turn has been seen to boost farming income by 21%.