Nigerian Grain Production Drop Leads to Higher Food Prices

UNCLAS LAGOS 000736

SIPDIS

SIPDIS

STATE FOR AF/W
STATE FOR INR/AA
STATE PASS OPIC FOR ZHAN, MSTUCKART
STATE PASS TDA FOR EEBONG, PDAVIS
STATE PASS EXIM FOR JRICHTER
DOE FOR GPERSON, CGAY
USDA/FAS FOR RVERDONK, ARIFFKIN

E.O. 12958: N/A
TAGS: EAGR SOCI NI
SUBJECT: Nigerian Grain Production Drop Leads to Higher Food Prices



1. Summary: With the drop in Nigeria's grain production from
reduced acreage and late season dryness, the price of grain has
risen and with it animal feed, leading to higher prices for eggs,
poultry, and meats to consumers. These price increases come at a
time when the price of bread, which is eaten by all segments of
Nigerian society, is rising due to the high cost of international
wheat. Nonetheless, the rise does not seem to be either
sufficiently steep or precipitous enough to threaten social
stability. End Summary.

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Drop in Production Drives Up Grain Prices
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2. In 2006, Nigeria produced bumper crops of corn and other grains.
In addition, the impact of avian influenza on the poultry industry
led to a drop in demand for feed. As the result of these two
influences, farmers got poor returns on their crops, and many
shifted out of grains and into the production of soybeans, rice and
cotton in 2007. High fertilizer costs also influenced farmers'
decisions to shift away from corn.


3. Erratic rainfall in the 2007 growing season reduced yields of
corn and other major grains, including sorghum, of which Nigeria is
the world's second largest producer, and millet. After early rains,
a long dry spell caused farmers to plant and in some cases replant.
Another spell of good rain ended three weeks early, severely
affecting corn yields, especially in northern states such as Kano,
Katsina, Zamfara and Sokoto. These influences drove up the price
of grains used by farmers as feed and by millers and other food
processing concerns.

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Exports & Import Ban Also Boosts Grain Prices
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4. Neighboring countries, such as Niger, were also affected by the
lack of rain and have increased their imports of Nigerian grains.
This pressure also added to the domestic price increases for
Nigerian grains. The Nigerian government's ban on corn imports
from the United States, further exacerbates the scarcity and drives
up price. (Note: The cost of landed U.S. corn into southern ports
is approximately USD 300 per ton, as compared with the price of
domestic corn, USD 400 per ton. End Note.)

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Poultry, Egg & Meat Prices Jump
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5. Higher prices for grains resulted in higher costs of feeding
poultry and livestock. The high cost of international wheat
prevents feed millers from substituting wheat for corn in feeds.
Increases in costs are squeezing poultry producers as they are
trying to expand their flocks after avian influenza outbreaks in

2006. As a result, the cost of poultry, meat and eggs on the
Nigerian market has risen; the cost of a crate of 30 eggs has risen
from naira 550 (USD 4.6) to naira 600 (USD 5).


6. Comment: The increased costs of chicken, eggs and corn comes at
the same time as the high international price of wheat is driving up
the price of bread, a staple food eaten by Nigerians of every class
on an almost daily basis. Nonetheless, the increase in prices does
not seem to be sufficiently steep or precipitous enough to threaten
social stability. The Foreign Agricultural Service compiled this
information in GAIN Report 17028, dated 11/2/2007. End Comment.

HUTCHINSON