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Market Update

AfricasheW450 – September 2019 Market Analysis

Cashew Market Outlook

By: Jim Fitzpatrick

(Please note that all views expressed in the “Cashew Market Outlook” section are those of Mr. Fitzpatrick and do not necessarily reflect the view of the African Cashew Alliance)

The cashew kernels market remained relatively calm over the past month. Major processors are well sold and their customers are well covered. The buying wave which some traders predicted and processors hopped for did not happen, as predicted here in August. Buying in the international market was from mid-size markets and buyers covering product for shipment within three months. Once those buyers had covered, prices started to drift back down again toward US$3.25 per lb. There may have been effort by rumour and misinformation from some RCN traders to push the market toward US$3.50 per lb but this failed for now. Unfortunately demand for cashew pieces has not recovered and as a result of lower quality RCN and the use of mechanised processing, the diversification in uses hoped for has not materialised. This could change as processes are low but there is fierce competition from almonds and hazelnuts which may have more suitable characteristics for industrial applications. Unless and until major buyers come back to the market to buy for forward positions, the kernels market seems likely to remain in suspense around the US$3.25 per lb basis WW320 FOB.

New crops have begun in the Southern Hemisphere. Indonesian RCN is offered at prices in the range US$1650-1700 per tonne Cfr for 53lbs plus for large size nuts with excellent processing characteristics. Tanzanian authorities are forecasting a crop of 300,000 tonnes which would be back toward the record level of 2017. There would be no surprise if the crop exceeded that figure. Meantime the shipments of old crop material, 176,000 tonnes purchased by a large Vietnamese company, appear to have slowed. Trade sources suggest that about 60,000 tonnes was shipped. That would

leave about 175,000 tonnes of 2018 crop unsold in Tanzania. Old crop is offered around US$1500 per tonne Cfr but buyers are reluctant as they know a new crop of better quality is coming in now. There are dual challenges in Tanzania to store and finance the two crops. An announcement on new crop marketing and pricing is expected following consultation with stakeholders. Earlier press reports that the government would leave the market free and that the crop would be marketed through the Tanzanian Mercantile Exchange have been denied by official sources. These circumstances lead us to the conclusion that Tanzania needs a domestic processing sector. Incentives and investment are needed to offer farmers an alternative market and a stake in value addition. In 2019 Tanzanian cashew factories are likely to process only circa 4,000 tonnes of RCN – less than 2% of the crop.   

Mozambique has been a successful processor over the past 20 years. It too has still to announce the new season plans. There have been rumours that the “first refusal” system which banned RCN exports until January will be discontinued. Farmer representatives are pressing for higher prices. The crop is officially estimated at a record 148,000 tonnes.  The combination of changes to regulation, a large crop and high farm gate prices need careful management. Sustainable prices for farmers without damaging processors are essential for long term success.           

The Brazilian crop is forecast at 122,433 tonnes down 14% on last year according to the Brazilian IBGE agricultural production survey. Planted area is down by around 5% and productive area down by 3%. This suggests that Brazilian cashew production is settling around the current levels.

In summary the Southern Hemisphere RCN situation suggests that there will be circa 540,000 tonnes new crop to add to the 174,000 tonnes balance old crop at origin to supply processors in India, Vietnam and Mozambique. In addition, Brazil will harvest 122, 0000 tonnes which will be processed and exported as kernels at the end of 2019 and through 2020.

How much of this is needed by processors? By the end of August Indian imports of RCN have caught up with an exceeded import to the same time last year at 647,000 tonnes. There are significant volumes to be shipped and afloat so that imports in September should exceed the 93,300 tonnes imported in September 2018. If true then India needs to buy a further 200,000 tonnes (2018 Oct-Jan 2019 = 182,000 tonnes) to get through to new crop which should be possible from Indonesia, East Africa and balances remaining in West Africa.

Vietnams imported a remarkable 162,997 tonnes of RCN in September. This was more than double the figure for September last year bringing Vietnamese imports of RCN to 1.3 million tonnes which is up 35% for the same period. This means there was a supply of RCN of about 1.6 million tonnes so far

this year for processing in Vietnam. Is this matched by exports of kernels? It is. Vietnam has exported 328,486 tonnes of cashew kernels in 2019 taking a share of up to 80% of the World export trade in cashew kernels. Exports may slow in the last quarter but Vietnamese processors will need about another six weeks processing material to see them through to Tet which comes early on January 25th in 2020.

In summary the market appears to be well supplied for the coming months. There is an opportunity for Tanzania to sell its remaining stocks if these are competitively priced. RCN may be a little overpriced compared to cashew kernels and could drift down. On the other hand, cashew kernels look competitive and will be in demand for 2020 especially at or near to current price levels. 

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