Cashew Market Report – April 5, 2015

After a very quiet Jan/Feb, there was reasonable activity in Cashew Market during March 2015. Most of the business was for shipments upto May/Jun but some business was done for shipments in second half of 2015.

During March 2015, cashew kernel price range – depending on the processor and shipment period – has been W240 from 3.65 to 3.85, W320 from 3.40 to 3.60, W450 from 3.15 to 3.25, SW320 from 3.25 to 3.35, Splits from 2.90 to 3.10 and Pieces from 2.85 to 3.00 FOB.

In the last 2-3 weeks, prices for WW320 and SW320 have moved to the higher end of the range with hardly any offers near the lower end of the range.

Broken grades continue to be tight as yield per ton of RCN has come down to normal levels (and below normal for more efficient shellers) and usage (especially in Asia) has gone up.

In the first quarter of 2015, Indian shellers have been served a double whammy. First, a huge wage increase in Kerala which has made processing in Kerala very uncompetitive. And this week, a reduction in duty credit from 5% to 2% of FOB value for all exports after 1st April.

Northern Hemisphere crops – accounting for 75% of the World Production – are currently being harvested. Crops are expected to be okay in most areas. There is concern about lower quantity in some areas and lower kernel yields in some others. Also, there is concern that logistic issues in some countries will delay the movement of RCN to Vietnam and India.

RCN prices were trending lower in February on expectation of good crops but started moving up from middle of March due to slow arrivals and reports of quality & logistic issues in some origins. Currently, India & Vietnam RCN are trading in the range of US$ 1450-1500. Prices from West Africa are in the range of US$ 1100-1300 C&F depending on origin, quality, shipment period, payment terms.

In the last few years, there has been a power shift on both sides of the cashew market – supply and demand. India is no longer the largest supplier to the world market – that position has been taken by Vietnam for kernels and West Africa for RCN. On the demand side, USA & EU continue to be large buyers but they have been overtaken by Asia which is now the largest consuming region (India is the largest consuming country). This has altered the market dynamics – relative power of each region to determine market trend has changed. It is now much more a spot & nearby market. Activity in many more origins and markets influence the price than in the past.

Reflecting this, many buyers in the 2 major importing regions – USA & EU – have changed their buying pattern. The regular buying for shorter periods has meant continuous spread out demand which reduces the volatility in prices. But it also makes the supply chain vulnerable to any sudden spurt in demand or distortions in supply. Another change has been the difference in approach of buyers to issues like vendor inspections for factory hygiene & food safety, quality control, traceability, etc. This has lead to a 2-3 tier market with a difference of over 5% in prices for the same grade from different processors.

As discussed in earlier reports, the long period of stability in cashew prices – more than 2 years now – compared to the upward trend in prices to other nuts has resulted in increase in usage in all markets. This trend is likely to continue as there is nothing on the horizon for a big move but a gradual increase is quite possible. The weaker Euro might have some impact on usage in Europe in the medium term but there is a strong chance that cashew might not be as badly affected as other nuts because it continues to be a “value” nut.

Looking at the trend, we feel that spot and nearby demand will continue during Apr/May. If RCN prices do not come down, shellers will not be able to reduce kernel offers. This may lead to kernel buyers taking increased cover for the busy period of the year (as very little has been traded so far). This could lead to a firming up of prices for second half of the year. The only reason for market going down to the lower end of the current range would be lower RCN prices (relative to quality) and smooth RCN movements in the second quarter of 2015.

Pankaj N. Sampat
Mumbai – India

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