Olam Agri stops grain procurement from Nigeria amid soaring food prices

Singapore-based commodity trader Olam Agri has suspended procurement of grains such as maize and sorghum from Nigeria in response to soaring inflation that has put essential food items out of reach of the common man.

Nigerians are facing one of the worst economic crises in years marked by surging inflation and a fall in currency that has seen the naira dip to an all-time low against the dollar, provoking frustration, and protests across the country. According to a statement sent to the NTU-SBF Centre for African Studies, Olam Agri, expressed its concern over the escalating prices and its impact on domestic food security in Nigeria. The decision to suspend procurement is also likely to have been partly driven by the spiralling rise in domestic prices of grains and subsequent drop in local demand. Premier Feed Mills, one of the largest animal feed producers in Nigeria has also announced its temporary suspension of maize and sorghum procurement, citing high prices of grains and the knock-on effects on production costs. The suspension of procurement is expected to ease supply in the domestic market. Following the suspension of procurement of essential grain by agribusiness majors, local media reported, a 10% drop in maize and sorghum prices in major markets across Nigeria.  

Nigeria is experiencing a surge in food prices following the abrupt abolition of a long-standing fuel subsidy and the move to a free-floating exchange rate. This has exacerbated the depreciation of the naira. The reforms, while long overdue and generally welcomed by investors, have fuelled inflation across the board. Food inflation has risen 35.41% year-on-year and many Nigerians are finding it difficult to put a decent square meal on their table.

Olam Agri is involved in the processing and trading of various agricultural commodities in Nigeria. It is a significant producer of animal feed, supplying more than 500,000 tonnes of poultry feed and 100,000 tonnes of aquaculture feed each year. It sources most feed raw materials locally, making it a major buyer of maize and soya bean. Crown Flour Mills, the company’s grains business, is among Nigeria's top wheat millers with three operational facilities. It also produces significant quantities of pasta and semolina for markets across West Africa. In terms of rice, Olam runs a 13,500ha farm that contributes to the production of its Mama’s Pride and Mama’s Choice brands, while the company also engages with thousands of smallholder farmers through its out-grower programme. It maintains several sesame processing facilities, sourcing from a broad network of small- and large-scale farmers, cooperatives, and collectors. Revenue from the food and feed business (includes processing and value add) segment increased by 18.2% to S$4.9bn (US$3.6bn) in 2022 compared with 2021. The revenue increase was primarily due to higher average selling prices for its products. But it was offset, in part, by the decrease in volumes. Sales volumes were down 10.4% from 4.5 million metric tonnes in 2021 to 4.0 million metric tonnes in 2022, primarily due to the impact on the demand for flour and pasta in Nigeria from higher prices. The Group reported earnings before interest and taxes (EBIT) of S$1,485.60m (US$1078.16m) in 2022 – 19.5% higher than the year before.          

 

References

‘Nigeria cost of living: People turn to 'throw-away' rice for food’, BBC, 14 February 2024

‘Nigeria’s currency has fallen to a record low as inflation surges. How did things get so bad?’, AP, 17 February 2024

‘Like Premier Feed Mills, Olam Agri quits offtaking maize, sorghum in Nigeria’, Business Day, 18 February 2024

‘Food crisis: Maize, Sorghum prices drop as major feed producers suspend purchase’, Daily Trust, 19 February 2024

‘Experts differ as food inflation increased by 40% in 8 months under Tinubu in Nigeria’, Zawya, 20 February 2024

‘Flour Mills joins Olam to suspend purchase of maize and sorghum over high prices’, Nairametrics, 20 February 2024

‘Nigeria’, Olam Agri, Accessed 21 February 2024

Olam Agri Annual Report 2022