The last two months have seen a sea change in sentiment in the Cashew Market. There has been a significant increase in prices after a very long period of the market moving sideways in a narrow range.
Currently – middle of May 2015 – range of prices is W240 from 3.80 to 3.95, W320 from 3.55 to 3.75, W450 from 3.40 to 3.50, Splits from 3.15 to 3.25, Pieces from 3.00 to 3.15 FOB with hardly any offers at the lower end of the range.
An interesting phenomena has been the narrowing of differentials between grades. Premium for large wholes and discount for lower grades has narrowed significantly. Demand for large wholes is limited. Availability of lower grades is very tight. In fact, in the Indian domestic market, Splits and Pieces are trading at prices higher than international market for some Whole Grades (this has happened after several years).
Until middle of March, everybody was expecting that Cashew Market in 2015 would be a continuation of what we have seen since the second half of 2012. Crop prospects were looking okay. RCN traders were willing to make sales at reasonable price in line with kernel market. Shellers were not keen to buy because the season was just beginning. Kernel buyers did not feel need to lock in volume for long spreads in a market which was going nowhere. There was nothing on horizon pointing to any major change in prices or market trend.
In the RCN market, things started to change by middle of March. There were reports of lower kernel yields in many areas. Delays in shipments and fears of further reduction in yields in later arrivals forced shellers to pay higher prices to secure supplies of early arrivals.
This is one of the years in which RCN prices have been going up during the peak harvesting period of the Northern crops which contribute 75% of the World Production. In previous years when this has happened, there have been reasons like definite short crops or movement issues due to disturbances in growing areas. This year is a mystery !!!
One thing which is different this year is the increase in number of RCN traders (also shellers). Although the quantity each new player will or can buy is not large, the cumulative effect has lead to more competition in RCN buying leading to people paying prices which are totally out of whack with kernel prices. Traditional players are forced to follow the market to meet their requirements.
On the kernel side, availability was comfortable in the first quarter. Buyers were able to get what they needed. There was no pressure to pay higher levels to lock in supplies for forwards. By end Mar/early Apr, offers started becoming scarce. With the delays in RCN shipments and increase in RCN prices, shellers were reluctant to make new sales and started increasing kernel offers. Some buyers who needed product for second quarter started paying higher prices and this prompted some business for second half at a small premium. Today, even those premium prices seem low !!
In the last 2 months – from middle of March to middle of May – RCN price has gone up by 250-300 dollars per ton which is equal to 45 to 55 cents per lb of kernels. In the same period, kernel prices have gone up by about 20-30 cents. This leads us to believe that unless there is a big decline in RCN prices, shellers will not be able to reduce kernel offers.
What can we expect in coming months ?
Given the fragmented production base, it is impossible to say what the crop is until major portion of the African crop is shipped. Since shipments are slow, we will have a reasonable idea only by Aug. One thing is more or less certain, kernel yields are lower in almost all African origins. If shipments pick up in May/Jun, RCN prices could come down a bit. But that may not be enough to compensate for decrease in yield.
We expect kernel availability to be lower than normal in May/Jun. Hopefully, things will be better after July but by that time, buying will be at its peak in Asia (including the largest consumer – India – which is predominantly a “ spot “ market). In the third quarter, we can also expect some buying from importing countries to fill uncovered positions for 2015 and some portion of early 2016 requirements.
Next few months will be interesting. There are several factors which will determine the Cashew Market trend i. e. RCN prices, roaster & retailer strategy, trends in other nuts, general economic situation in the main importing countries and currency movements.
In our JAN 2015 analysis of Cashew price movement for 10 years, we saw that prices moved in the following ranges (except for the aberrations in 2008 and 2010/2011) :
2.00 to 2.50 from 2005 to 2007
2.50 to 3.00 from 2008 to 2011
3.00 to 3.50 from 2012 to 2014
At any time, it is dangerous to predict what will happen in a market (for anything). Specially for our “crooked” nut (!!) at a time when supply position is not very clear. But based on a gut feeling we are willing to hazard a guess that in coming months, price for W320 will tend toward the middle or higher end of the 3.50-4.00 range with very little chance of it going below 3.50.
We would appreciate your comments on the market situation, supply side factors, usage prospects and your views + forecast of demand and price trend in coming months.
Pankaj N. Sampat
Mumbai – India
Mobile + 91 98200 79015