OCT 6, 2012
During weeks 39 + 40, we saw slightly more activity from USA & EU than previous weeks. BUT, the Cashew market is continuing to pass through the longest quiet & steady period in many years. Despite this, there has not been much change in prices in the last 3 months !! BUT, the range of offers from different processors continues to be wide – current prices are W240 from 3.55 to 3.75 / W320 from 3.20 to 3.,35 / W450 & SW320 from 3.00 to 3.15 / SW360 from 2.70 to 2.90 / Splits from 2.05 to 2.25 / Butts from 2.10 to 2.30 / Pieces from 1.60 to 1.75 FOB. There has been a slight pick up in activity in the Indian market as well in the last few days. Although there has not been any big increase in prices in domestic market, the appreciation of over 5% in value of INR vs USD means the equivalent USD prices are higher.On the RCN side, there is nothing much to report. There have been some sales from stocks of West African RCN in Vietnam and India. Good volume of West African RCN is still available but quality & consequently realisation / kernel parity are a concern. Good quality Indonesia RCN continues to trade at a significant premium. No news from Tanzania or Mozambique about pricing & movement, except that crops should be normal – question is how much will be collected + sold (and when). There is no change in the news from Brazil – expectations are for a crop below 250,000 for third year in a row.
Supply of RCN is comfortable and unless the 2012/13 crops are bad (in terms of collection rather than actual production), there is no reason to fear a supply tightness. BUT due to reduced buying in West Africa during the 2012 season, lot of RCN is in the wrong place. Conversion into kernels in the last quarter of 2012 is likely to be less than normal. If kernel activity picks up, processing in first quarter of 2013 may be higher than normal.
Demand outlook continues to be hazy – especially in USA & EU. Continued economic uncertainty makes it difficult to forecast or project offtake in coming months. Everybody seems to be content making short term deals. Unless this changes and there is some confidence for future planning, periodic buying in small & short trances is likely to continue.
Although it is difficult to judge how much forward business has been done, trend of short term covering for the last few quarters and relative quietness in the market for last 2-3 months leads us to believe that buying for shipment in last quarter has been lower than normal. This is corroborated by reports that offtake in many markets in last few months has been slow meaning inventories are lasting longer than planned. If the offtake in the last quarter picks up, it could mean bunching of buying for nearbys and first half of next year.
There is nothing on the horizon pointing to a major move in prices in the foreseeable future. AND that would be good for everyone in the chain as stability in prices would induce confidence in consistent supply. BUT if the Indian demand picks up in next 4-6 weeks and IF that is coupled with buying interest from USA & EU for 2013 shipments, we could see some upward movement in prices before the end of the year. However there is no reason to expect any big jump in prices.
Another point to be kept in mind is that processing costs have gone up significantly in the last 3 years in all countries. This portion of increase in average price is unlikely to go down. So kernel prices can come down significantly only if RCN prices come down
Overall it would be reasonable to expect a steady market in the last quarter moving in the current range with limited downside and some possibility of a price increase if activity picks up in next 4-6 weeks.
Pankaj N. Sampat
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