After a quiet May + June (with slight softening in second half of June/early July), cashew market suddenly picked up steam by middle of July. In second half of July 2016, prices for all grades moved up by 10-20 cents per lb. Reasonable volume was traded to Europe & USA for shipment upto Dec 2016.
In the last 2 weeks, Europe & USA have been relatively quiet but West Asia has been active and prices moved up a bit more. Indian domestic market has seen a burst of activity in the last 2 weeks. Price of Splits & Pieces have gone up by 15 PERCENT !!!
In week 32, price range was W240 from US$ 4.35 to 4.60, W320 from US$ 4.20 to 4.40, W450 and SW320 from US$ 4.00 to 4.20, SW360, Splits & Butts from 3.25 to 3.40, LP from 3.15 to 3.25 and SP from 2.90 to 3.00 FOB (Note : differential between W240 + W320 is very narrow and differential between Wholes & Brokens is very large).
Overall, 2016 crop has been disappointing – reduction in quantity in some areas + reduction in kernel yield in almost all areas. RCN prices have been high throughout the season – in fact, they increased as season progressed. Current range for African RCN is from US$ 1450 to 1850 C&F India / Vietnam. Between 2014 crop and 2016 crop, there has been an increase of 25-30% in average RCN price. From now until March 2017, replacement availability is limited to about 25% of world production. So, there does not seem to be much chance reductyion in RCN price this year.
Although kernel prices are close to historical high of 4.60-4.70 seen in July 2011, most processors prefer to sell for nearbys (max 3 or 4 months forward). Of course, buyers also are not keen to take any large positions at these levels. This situation is likely to continue till Feb/Mar 2017 by which time, there will be some idea of 2017 crop prospects.
In first half of 2016, RCN imports into India were down by 175,000MT and imports into Vietnam were up by 26,000MT – net decrease of almost 150,000MT.
In the same period, kernel exports from India were down by 14,000MT (approx 56,000MT of RCN) and exports from Vietnam were up by 14,500MT (approx 58,000MT).
This means that during Jan-Jun 2016 (1) kernel supply to importing markets was almost the same (2) kernel supply to Indian market was substantially lower (3) inventory was drawn down substantially in India and marginally in Vietnam.
A logical conclusion is that unless RCN imports in July-Oct are substantially higher, overall kernel availability in 2016 will be lower than 2015.
In our last report (end of May 2016), we were talking about possibility of a slight dip in prices in third quarter if supplies improved but that does not seem likely for the time being. Now, we can expect prices to remain firm around the current levels for rest of the year (and maybe even move up a bit more if spot demand continues to be strong after Oct). The only reason for a decline would be if activity in Sep/Oct for first quarter & first half 2017 deliveries is lower than normal due to reluctance of buyers to take large positions.
At the same time, there does not seem to be reason for a further big increase in cashew prices which are close to the short lived historical high of July 2011. Especially when prices of other nuts which were high & firm in the last 2 years are lower & softer this year. As has been said earlier, there is an unspoken fear that if the prices go up too much, it could seriously impact demand. It could take a long time to regain lost interest.
To sum up, we see market moving sideways with a firm undertone in the coming weeks. Hopefully in the last quarter we will get some indication of 2017 prospects depending on activity in the kernel market in the next 8-12 weeks. At the moment, the only thing that we can say with reasonable confidence is that prices in 2017 will certainly be higher than the 3.25-3.50 range that we saw for a almost 4 years (from beginning of 2012 to end of 2015). The new “ normal “ could probably be 3.75 to 4.25 with “ comfort “ zone around 4.00 dollars.
Would appreciate your thoughts on the prospects going forward.
Pankaj N. Sampat
Mumbai – India
Phone + 91 22 64564300
Mobile + 91 98200 79015