RCN prices have also been moving within a range. Good volume has been traded to Vietnam but movements from West Africa are slow. Lack of warehouse space in Abidjan is creating additional problems. There have been good efforts to educate farmers and traders about the need (and advantages) of proper handling of RCN between collection and shipment. But, the early rains in many areas are causing concern about the quality.
In previous reports, we have talked about the cause of higher price differential for lower grades (higher availability due to mechanisation and poor RCN quality) and its effects (drag on shellers cash flow, reduction in realisatiion per mt of RCN). Another effect is lower availability of white wholes even when there is no reduction in availability of RCN. This is changing the traditional parity calculations. Industry has to work on all angles to remedy this situation – better RCN quality, improvements in processing, new uses for lower grades.
In the next 8-10 weeks, we will continue to get confusing reports on the supply side. Picture will be clearer by end June. BUT, overall feeling is that (a) availability in 2013 would be same as 2012 (b) downside on prices is limited (c) any price decline will be more or account of lower yield rather than increased availability.
Demand prospects continue to be hazy. Gut feeling is that demand in most markets should be better considering prices have been steady at relatively low levels for a reasonably long time. Except for 2011 when prices were very very high, usage in Asia has always been good.
Over the last few months, we have seen that when prices have been moving sideways in the 3.30-3.50 range. When prices are in lower half of the range, there is good buying interest from all markets but selling is limited to nearbys (at that time some business is done for forwards at the higher end of the range). When nearby prices are at higher end of the range, buyers are reluctant to pay additional premium for forward positions and this makes the market quiet again. Unless something dramatic happens on the supply side leading to higher RCN prices, we expect that market will continue to move in the current range.
To sum up, we continue to believe that market will remain steady to firm during 2013 with some possibility of a limited dip in Apr/May if RCN prices come down and a strong possibility of higher levels in the second half of the year, especially if the RCN prices do not come down.