Cashew prices have come down significantly since the beginning of this year – decline of about 30% from range of US$ 4.75-5.00 FOB in Jan/Feb 2018 to a low of US$ 3.20-3.40 FOB from Vietnam in Sep 2018. At the low end of the range, prices from Africa and India were about 5% and 10% higher.
One significant factor of the decline this year has been the widening of differential in offers from different processors at any given time. Traditionally the differential in prices amongst Vietnam processors was max 10 cents – now it is up to 20 cents. Between Vietnam & India / Africa, the differential used to be 2-3 percent – now it is close to 10%.
Reason for the usual price difference was lower processing costs + difference in quality + small domestic market in Vietnam. Main reason for the increased differential seems to be that Vietnam processors who were able to take advantage of the big decline in RCN prices this year have been continuously reducing prices to move the product & buy spot RCN which has been available in plenty for last few months. Once the overhang of supply of RCN in Vietnam is used up, RCN prices will stabilise. At that time, we can expect differentials to narrow.
After such a big decline, there should be a correction in prices and revival of demand. How long it takes and to what extent the market corrects will depend on how fast inventories (especially RCN) are used up and changes on the shelf (price + promotions).
Decline in prices seems to have stopped – during October 2018, W320 have moved up few cents. Small Vietnam processors who had sold W320 as low as 3.20-3.30 FOB are now asking 3.35-3.40 FOB. The better processors are able to sell at 3.50-3.60 FOB. India W320 is trading in the range of 3.75-3.95 FOB. Reasonable buying interest from USA & EU for shipments upto Mar/Apr 2019.
Most of the problems in RCN market seem to be sorted out. Prices for West Africa RCN in Vietnam & India are stable in US$ 1300-1600 range. Traders inventories of West Africa RCN in Vietnam and India are being picked up faster than previous months and will probably be used up by Dec.
Good quality Indonesia RCN (availability is limited) being traded around US$ 1700. In Tanzania, crop seems to be good (close to 300,000 tons). Farmer co-op are resisting the lower prices. So far only a very small quantity has been traded because RCN traders & processors are reluctant to pay the high prices that co-op are looking for (equivalent of approx US$ 1800). General feeling is prices will ease a bit during Nov/Dec but not too much.
It is difficult to judge how any market will move – specially one which has come off 30% from historical high to a range last seen 3 years ago in a short period of 6 months. The high was reached in a gradual rise over a period of more than 2 years (after 3 years of moving in a narrow range – more or less the current range).
With the current levels, there will probably be interest from the retailers and roasters to cover some volume for next 4 to 6 months. Our feeling is that processors will be reluctant to sell big volumes for larger spreads at current prices.
It would be reasonable to expect market to move in 3.50-4.00 range (with bias towards the middle of the range for the next few months). A break below this range would happen if RCN prices come down significantly in Nov/Dec or if kernel demand continues to be slow in first quarter 2019. A break above this range will happen if demand in first quarter 2019 is normal or better.
Would appreciate if you can share your views on the market trend + demand prospects (and any other news or information).
Regards
Samsons Traders 