Cashew Market Report – 14 Aug 2017

By end June / early July 2017, Cashew Prices had come down from the peak of May 2017. For the last 4-6 weeks, market has been steady and there has not been much change in prices.

Current offers are in a wide range : W240 from 5.10 to 5.30, W320 from 4.85 to 5.15, W450 from 4.80 to 5.00, Splits from 4.35 to 4.60, LP from 3.75 to 3.95 FOB.

Most of the price decline has been in W240 & W320 from small and medium processors. Broken grades, on the other hand, have moved up and continue to be firm. The large processors have adequate sales and are not yet under pressure to make any big reduction in offers. Although their current offers are certainly below the peak of May 2017, they are still about 20-30 cents higher than the low end of the current range.   And they are able to sell at these higher levels.

Since processors have paid very high prices for RCN this year, they will resist reducing kernel prices until they absolutely have to sell. Reflecting that, the current lower prices from small & medium processors are because they need sales to be able to continue buying RCN to keep factories running.

Demand from most markets has been steady despite the high prices. Reasonable volumes are being traded every few weeks. This is keeping the market steady within a range.   Even now despite the relative quietness, there is some business being done for Oct-Dec shipments. It is not clear whether this buying is to fulfill old commitments or roasters are able to make new sales with current prices.

Indian demand has been slow for last several weeks. During May & June, wholesalers were not building stocks due to the new Sales Tax system coming into effect on 01 July. Fact that prices were are historic highs in May/June was additional reason not to build inventory. During July/Aug, people are getting rid of old stocks and getting used to the new system.  Indian festivals start from Aug with the peak in mid Oct. We should have idea of how market reacts to the high prices by end Aug/early Sep.

If kernel demand picks up in Sep/Oct, prices will move up again… otherwise, we may see the market drifting slowly in coming weeks with a big decline possible only if there is a significant fall in demand for end of 2017 & beg of 2018 deliveries.

RCN prices have also come down from the peaks of May/June but that is mainly because (a) at the end of the season, kernel yields now are much lower (b) there is a bunching of shipments putting some pressure on the availability of funds in the chain.   Most of the 2017 RCN has been bought by at very high levels. RCN prices in 2017 have been about 25% higher than 2016 and 50% higher than 2015 (and about 75% higher than the 5-7 years average !! ). At these historic high levels – never seen before – risks are very high.

During Oct to Mar, shellers will have to depend on Southern Crop (about 25% of World production) apart from the trader stocks of West Africa RCN. Since availability is small, there may not be much change in RCN prices unless there is a big fall in kernel demand in coming weeks. The next big move in RCN prices will happen only Feb/Mar 2018 when the Northern Crop starts.

If Southern crop RCN prices (last quarter of 2017) are significantly lower it will certainly have impact on the 2018 Northern crop.  Lower RCN prices in last quarter is possible only if there is a significant decline in kernel demand in Sep-Dec 2017.  If kernels continue to be bought at current levels till end of the year we do not see much chance of any decline till middle of 2018 (and that too, if the 2018 crops are good).

If roasters make good sales in coming months for first and/or second quarters of 2018, they will either have to buy now or go into 2018 with a short position. Both cases will lead to a strong RCN demand when 2018 season begins and prices will not come down.

Considering that prices of other nuts have been gradually moving up in the last few months from the lows of end 2016/early 2017, there may not be any big adverse affect on cashew contracting for 2018.

To my mind, a significant decline in prices – RCN or kernels – will happen only when there is a big drop in kernel demand.   When and at what level and to what extent this will happen are very very difficult questions to answer !!

Until there is some indication of 2018 demand trend, it would be prudent for both shellers & buyers to be partly covered till first quarter 2018 because market could move sharply depending on what happens in last quarter of 2017.

Pankaj N. Sampat
Mumbai – India
Phone +91 22 64564300

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