How to Calculate Agricultural Export Prices in Nigeria

An agricultural export price is more than the amount you paid a farmer or the prevailing market price of a commodity. A Nigerian exporter must account for sourcing, sorting, processing where applicable, packaging, transportation, warehousing, quality assurance, documentation, forwarding, banking, freight, insurance and other costs before deciding what to charge an overseas buyer.

The Nigerian Export Promotion Council recommends that exporters capture all export-related costs, understand their break-even point, set realistic margins, monitor exchange rates and understand Incoterms 2020 when preparing export prices. It also recommends using both the cost-plus and top-down approaches rather than relying on only one calculation.

This makes agricultural export pricing a costing exercise as well as a market exercise. A price that looks profitable on paper can become unprofitable when freight increases, exchange rates change, produce loses weight during handling or unexpected export costs are left out.

The most reliable pricing system is not a single formula. It is a process of updating the major cost variables before every quotation.

An exporter should maintain current information on:

Local commodity prices

NEPC provides local commodity price information that can be used as one market reference when reviewing sourcing costs.

International market conditions

NEPC also provides market information and international price information to assist Nigerian exporters in assessing prospective markets.

Exchange rates

Foreign-currency quotations should be based on a current and clearly identified exchange-rate assumption.

Freight

International transportation should be based on current quotations where possible.

Regulatory requirements

The required certificates and documentation depend on the commodity and transaction. NEPC notes that exporters should identify the certificates applicable to their specific products.

Incoterms

The selected delivery term determines which costs and responsibilities belong to the exporter and buyer.

One of the biggest problems is calculating the price from the farm-gate or purchase price alone. The exporter should calculate the complete cost of getting the required quantity and quality of produce to the agreed delivery point and then compare that cost with the destination-market price.