Samsons Traders

JAN 5, 2013

As the market continues to be very quiet, we will take the opportunity this week to review what happened in the Cashew Market in 2012.

After a roller coaster ride in 2011 when cashew prices moved from 3.75 in Jan to 4.75 in Aug and back to 3.80 in Dec,  the year 2012 was a period of great  stability in cashew prices.  Except for a brief period in Apr/May 2012 when prices jumped up to 3.60-3.80 range, the cashew market was moving in 3.25-3.40 FOB range for almost the whole year.

Although we strongly believe that cashew prices do not follow any annual trends or patterns,  we made an analysis in July 2012 of price movements for previous five years (2007 to 2011).  That analysis showed that prices in Sep (after main crops) were higher than Apr (beginning of main crops) and prices at end of the year were higher than beginning of the year.  During 2012, market did not do what it had done in the previous 5 years !!!

The jump in Apr/May was triggered by concerns about movement of RCN from West Africa following political issues in Guinea Bissau and logistics issues in Ivory Coast.  Once the flow of material started in June, prices came down to the previous levels and have been moving in the 3.20-3.40 range since then.    Every few weeks when there is a spurt of buying prices go to the higher end of the range.

After the huge unhealthy volatility in 2011 and due to the uncertain economic conditions, buyers in USA & EU have been buying smaller volumes for shorter spreads with smaller time gap.  This meant that there is some one buying every few weeks.  This kept the market steady within a narrow trading range. In one way,  this is good as it reduces the risk for everyone.  But it has a flip side.  One, the inability to do long term planning makes it difficult for shellers to buy RCN when the Northern crops are in full flow.  Secondly, the fact that manufacturers do not buy long term means there are periods when there is not enough product on the shelves – and a sale lost is lost forever. Finding the right balance is a challenge all segments of the chain are facing – and this challenge becomes more challenging considering that over 75% of the crop is harvested in 4 months !!

Another major change the industry faced in 2012 was that the differential between wholes and brokens & white and scorched grades widened substantially.   In the last few months even with the wider differentials it has been difficult to sell the lower grades.  Part of the problem is increased supply of brokens due to mechanisation. To a smaller extent, the deteriorating quality of WA RCN has increased the availability of second grades.  Shellers have been hugely affected by this because the realisation from a ton of RCN is significantly lower than what it used to be PLUs the difficulty in selling is adding to the carrying cost. Impact on Indian shellers has been cushioned by good domestic demand for broken grades.  Finding more usage for brokens / second grades and reducing the price differential between grades is another challenge the industry has to address to increase price stability.

Imports into US during 2012 have been higher than 2011.    Although we do not have exact figures of imports in the second biggest importing region (EU), we believe that their imports also have been higher than 2011.   Usage in India and most other markets has also been higher in 2012.  Apart from the lower prices, we believe that stable prices and improved supplies have lead to revival of consumption.

To end our report,  a quick recap of Week 1 – stray trades and no change in prices. Range of offers  W240 from 3.75 to 3.90 / W320 from 3.25 to 3.40 / W450 from 3.05 to 3.15 / SW320 from 2.90 to 3.05 / SW360 from 2.70 to 2.90 / Splits from 2.10 to 2.20 / Butts around 2.25 / Pieces from 1.40 to 1.50 FOB.

We would appreciate your views on current situation and future expectation, any special news or information…. and your interest

Regards,
Pankaj N. Sampat
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