01 APR 2019
In the first quarter of 2019, Cashew market has moved sideways in a narrow range with a soft undertone reflecting comfortable supply situation.
Opening the year around 3.60-3.80 FOB, Vietnam W320 drifted to a low of 3.25-3.35 FOB by end Jan/early Feb, moved up to 3.50-3.70 in mid Feb and eased again to 3.40-3.50 FOB by end March.
Current range of offers from Vietnam is W240 around 3.80 to 3.90, W320 around 3.40 to 3.50, Splits around 2.60 to 2.75 and Pieces around 2.30 to 2.45 FOB. Prices from India are 20-25 cents higher (for Wholes).
RCN prices have also drifted downwards – decline of over US$ 300 per mt in the first quarter. Current range of offers is Ghana & Benin around US$ 1250 to 1300 / IVC around US$ 1225 to 1250 / Nigeria around US$ 1050 to 1150 C&F India / Vietnam.
Current prices – RCN and kernels – are in the range last seen in 2015. Lower than 2016 and significantly lower than 2017 & 2018. And this is despite the fact that over 250K of Tanzania which is normally available for processing in India & Vietnam between Nov to Feb (providing 50K of kernels in First Quarter) is still lying in Tanzania 6 months after harvest.
Outlook for 2019 Northern crops is good. Continuing the trend of last few years, kernel yields from some West African RCN including IVC is lower. But, since overall RCN supply has increased, the reduction in yield is not having much impact on kernel availability.
India & Vietnam processors are not as aggressive as usual in buying early shipment from West Africa. Even though the prices are the lowest since 2015. They are buying only in small lots as (1) their domestic crops which are also being harvested now are good (b) there is fear of what will happen when Tanzania RCN comes to market – which it eventually will and (c) kernel market is not very active.
There is very little funding in Africa from RCN traders who are nursing big wounds from the 2018 season. And this is keeping prices low. Farmgate prices are significantly lower than the last 3 years. Any further big decline could mean reduced collection in some areas leading to crop wastage.
Slow RCN buying coupled with financial tightness (RCN traders as well as India & Vietnam processors) could mean lower volume of processing in India & Vietnam. So even though RCN supply is adequate, there could be reduced kernel availability in some months.
Going forward, it is difficult to judge what will be the price trend. When prices are firm, all factors look bullish. When prices are soft, everything looks bearish. Fundamentally, supply is comfortable. There is steady (but not spectacular) growth in demand.
The big fall in prices that we have seen since middle of 2018 was mainly because the prices went up to unrealistically high levels in 2017 and remained there till mid 2018. Of course, the fact that supply was more than demand added to the speed of decline. It will take few months more for the effect of that price decline & excess supply to be worked out of the system.
BUT, one thing to be kept in mind is that despite the steep in increase in prices from 2016, there was no decline in cashew usage during 2017 and 2018. Overall (globally), there was probably a small increase in usage in each of the years.
We feel that comfortable supply has been accounted for in the current market situation. Price trend will now depend on demand trend. In the short term we can expect some volatility depending on what happens with RCN prices and speed of RCN buying. Any move from Tanzania could create another dip in prices. Except for that, downside is limited.
After 3 years of rising prices, lower prices should help growth in usage, especially in the biggest market (India). There is a possibility that prices could move up later in the year after bulk of the 2019 RCN crop is traded. But the increase would be slow & gradual, not a big jump. Extent will depend on what levels RCN are traded in Apr-Jun.
Kindly share your views on market situation, factors likely to affect market in coming months and your opinion on demand & price trend for 2019.
Pankaj N. Sampat
Mumbai & San Francisco
+91 98200 79015 / +1 415 881 0633
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