01 OCT 2020

The first half of 2020 was Annus Horribilis.  Pandemic of an intensity not seen before in our lifetime made us scamper into our hole (home) for safety.

The Cashew industry went through an upheaval not seen in a long time. In less than a month, RCN prices came down about 30% (fortunately, we did not have the bloodbath of 2018 when prices crashed about 50% but this time the fall was much faster). Kernel prices came down about 20%.  We also saw something never seen before – India (the second biggest processor and the biggest consumer of Cashew) was under complete lockdown for 6 weeks followed by 8 weeks of partial lockdown.

The third quarter has seen things becoming stable (not normal) as people (and businesses) start getting used to working in a changed and strange environment.

Cashew market also stabilised by Jun/Jul and has seen some revival of prices in the last 4-6 weeks.

Some points to be kept in mind :

1) West Africa RCN season was slow and prolonged – shipments are still going on plus there are unsold stocks.  This means most of the inventory accumulated in India & Vietnam has been used up. It also means that overall kernel yield (especially Whites) will be lower than normal.

2) India lost several weeks of processing and several months of consumption in some market segments due to the lockdown. These losses of production and consumption are irrecoverable. Processors – specially the new ones who have come up in non-traditional areas in the last 5-7 years have been most affected by this.  There has been some revival in demand in last few weeks but it seems clear that India consumption in 2020 will be lower than 2019 (although accurate data is not available).

3) Processing in Vietnam which accounts for 70% of the World Kernel exports was largely unaffected by Covid.  This was probably the saving grace for Cashew business – if there had been any significant issues in Vietnam, we would be looking at a totally different scenario despite the fact that overall RCN availabilty in 2020 was higher than ever before (remember that 2 Tanzania crops were processed in 2020 !!)

4) Consumption in the importing countries spurted in the Q2 and seems to have come back to normal in Q3.  We can expect that overall consumption in importing countries will be 5-10% higher than 2019.

5) The Covid situation is still fluid.  It is impossible to predict what will happen when and where. And what impact it will have on supply & demand. Long term planning becomes difficult in such uncertain times. Caution combined with calculated risk taking will help protect the business from unexpected disruption.

Going into the last quarter of 2020, there are some positive trends in the cashew market. Vietnam W320 which had gone down to US$ 2.50-2.70 by Jun/Jul has recovered to US$ 2.85-3.05 with reasonable demand at current levels. Better quality Africa W320 are about 15-20 cents higher. India W320 are being sold in the range of US$ 3.60-3.80 FOB to buyers who want the Indian quality.

Although prices for Brokens have also moved up a bit (India as well as International), the differential continues to be large.  This and the fact that the demand for brokens has not revived is a cause for concern for the processor because it reduces his realisation per ton of RCN and affects his cashflow as well.

RCN prices have also moved up because although there is still some quantity available in West Africa, good quality RCN is limited.  Early shipments of Indonesia RCN traded as high as US$ 1500-1550 (small lots) but have now eased a bit. General feeling is that price should come down for any large buying to be done.  Tanzania auctions will start in Week 41/42 but unless the kernel prices move up further, processors will not be aggressive in bidding. Traders might take positions to begin with but may find it difficult to sustain unless processors come in.

Current kernel prices are the lowest in the last 10 years and much below the 10-year average. Considering that Nuts consumption is strong, downside is limited.  At the same time, since overall supply of Cashews (in fact, most Nuts) is comfortable, it would be unrealistic to expect a big jump in prices unless something dramatic happens with crop in 1 or more origins.  But it would be reasonable to expect a gradual upward movement from current low levels in coming months.  And that would probably be good for everyone in the chain rather than a sudden big spike or dip.

To end the report, I will make a guess about prices – my feeling is that RCN prices will remain around current levels and kernel prices will go up by about 5% by end of the year.

Would appreciate your thoughts on the market situation and your views on what we can expect for Tanzania 2020 & Kernels for FH 2021.

And finally, take care and stay safe – personally and in business !!

Pankaj N. Sampat
Mumbai & San Francisco
+91 98200 79015 / +1 415 881 0633

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