EOP-LED CASSAVA PRICING SYSTEM, A VERITABLE APPROACH TO ACHIEVE SUSTAINABLE GROWTH IN ANNUAL PRODUCTION

Until when the EOP-led pricing approach is widely embraced is Cassava tuber trading, the sector will continue to face the challenges of periodic inadequate supplies. It may even get worse, as the industrial sector has muscled up to strive for the limited annual production with producers of domestic foods like fufu and Garri, who have dominated the cassava usage in the country for many years back. As it is, the total annual demand for cassava tubers in Nigeria will keep increasing, and thus the participation in its cultivation needs to be encouraged so as to keep increasing the primary production with the industrial and domestic demands.

I have always stand with the position that the abnormal pricing of N150,000 to N170,000 per ton experienced within first and second quarter of year 2024, though gave cassava farmers; who have in the past seriously suffered the ugly fate of bad pricing, opportunity to cash out big time, is not the best for the industry. Rather, such sporadic will keep upsetting the participation in the primary cassava production unnecessarily. In a season like this, so many new entrants, many of who are not experienced would rush into cassava production, without even minding their expenses due to the prevailing high cost, and when the price eventually fall the following harvest season due to huge availability, many of these inexperience entrants would again run out due to frustration, which will consequently cause low supply in the following year. This ugly price cycle has always been the cause of irregular production and supply, year in, year out. Needless to over-emphasize there is no costing of Cassava farm expenses of 2023 that can justify the over 150% profitability cassava farmers made during this period. It is just too much and we are all felt the heat one way or the other.

Between June and July 2024, the price of one ton of cassava tuber has dropped by almost 30%, and many of the new entrant farmers are already shivering uncontrollably, because of the cost expended, earlier concurred to because of the going mouth-watery price of cassava tubers, which many had even anticipated to become higher by the time of next harvest. You may call the price drop momentary because of the current heavy rainfall and its associated heavy harvest to avoid losing the lot to rottenness. But the truth of the matter is that the price of Cassava tubers will eventually drop to as low as N70,000 per ton or even less by the time we are harvesting this year planting. Of course, It will not definitely get low to the usual N25,000 per ton that had made farmers cried of non-profitability of the business in the past, but the N150,000 experienced earlier this year is now a mirage. The truth is that, even if farmers had been selling at N50,000 per ton, they would still make a considerable profit, based on their expenditure at the period of planting in 2023.

What this tells us is that we should all be mindful of expenses on Cassava cultivation. Apart from the high-cost of inputs, many of farm labourers are presently charging base on the current selling price of Cassava tubers, and the uninformed farmers accept these charges with the mindset of the current price and the anticipatory higher price by 2025 harvest. And when this price inevitably drops by that time, frustration would set in, and many of them will eventually abandon the business. Another thing is that farmers need to be determinant and consciously work towards having a sizeable yield of 25 tons per hectare even at minimum. They can even do better if the right Cultivation protocol is followed. If these are achieved, there is no way a farmer will not still profit up to 30% from his investment, which I think is considerate enough.

I have once made a post on Economics of Production (EOP) for cultivating a hectare of Cassava farm. And in the same post, shared how same can be juxtaposed with current demand/supply pricing trend, to arrive at mutually beneficial prices for Cassava farmers and processors.  Aside the four-year cycle of cassava scarcity, when the cassava trading environment becomes sellers’ market, it is only those cassava farmers that are able to output as much as 20-25 tons per hectare that can beat their chest that the business is worthwhile. If any farmer is still harvesting 15 tons or below from hectare during usual glut season, with the inputs and other costs in cassava production, I bet that the mathematics would eventually be at a loss.

During the 2-3 years in-between the scarcity season; when the farmers are not favoured with the selling price of tubers, the fate of Processors is also neither here nor there, as the market prices also often rise and fall in the same trend with the going prices of cassava tuber. We need to now ask ourselves if the Market Forces; which does not consistently favour neither the farmer nor processors should be allowed to continuously determine the market price of tubers or the Economic of Production. Ability to arrive at a balance between these two factors will not only relieve the farmers and processors of stress of unpredictable prices and operations, the market stability that is eminent from its achievement will give room to long term planning and projections in the business.

Let us look at it this way, if with all farming production inputs, a cassava farmer expended N742,500 to cultivate one hectare of cassava farm where the harvest of 25 tons (minimum) is guaranteed. And we equally assumed that such farmer has borrowed the fund to cultivate this farm with a commitment to pay between 8-12% return (averagely 10%). One may then decide to put profit marks of 15% (low), 20% (medium) or 25% (high) on his farming investment. With this, price range per ton of cassava tuber will be N34,155 (for low ROI of 15%), N35,640 (for medium ROI of 20%) and N37,125 (for high ROI of 25%). Even at a higher ROI of 30%, the selling price per ton will still be under N40,000 (i.e N38,610).

So, if a cassava farmer consistently makes an ROI of 25% – 30% each year, would such business be considered not favourable than making 80-100% in one year cultivation which will eventually crash the market and make the selling price poor for the following three years? At N40,000 per ton of cassava tuber, any Commercial processor will be able to operate at a profit and the price of the final products would also be favourable to end users. Please note that the current high cost of farming and production inputs, due to high inflation we are experiencing at the moment have been factored into this calculation. Should the economic situation get better, it will also impact same way on the costing/pricing of cassava tuber and its products.

Expectedly, it is the industrial processors, who are more organized and also have better structure on ground for contract farming and out-grower scheme that should be driving this scheme. The players in this sector have used the systemic operations to achieve market price control in the past and I so much believe that the EOP-led pricing approach would not be unsurmountable with them, with the deliberate planning and execution. As a matter of fact, commencing the initiative through their existing out-growers will be a very good starting point, and as time goes on, the other small holder farmers shall be collaborated into the scheme. In our implementation, understanding the real cause of the cyclical prices of cassava tuber each year will enable us to see a way we can strike the EOP pricing approach into the activities of the market forces. Within this is the solution that will benefit not only the farmers and the processors but the Nigeria economy at large.

That is just the way to go to achieve sustainable adequate annual Cassava production. If Nigeria, can achieve harvest of 100 million metric tons in 2025, I can boldly tell you that even only our internal demand and consumption will accommodate all the lots. Not to talk of the recent leakages into other African countries through South-West and North-West Nigeria. Thus, our farmers need to be encouraged optimally every year and price sustainability and assurance of profitable production guarantee through EOP-led pricing is the best route to achieving this. Thus, no Cassava farmer should be afraid of going into Cultivation as much as he can this year. In addition to the profit target, this should be taken as a Nation call to address the current food supply crises. The price of maize and rice is not coming down anytime soon, and this will continue to put pressure on the domestic demand for Cassava tubers.

Achieving this may be complicated, I quite agree, but it is just the main way to go. We just have to start as soon as yesterday. The farmers, the processors, the end user companies for cassava products and the consumers of cassava-based foods will all benefits. This may not totally eradicate the price ‘tug’ between cassava sellers and buyers, but it will ease the tension to a large extent.