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AfricasheW450 – May 2019 Market Analysis

2 May, 2019 - 07 : 05

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 month of May brought some more positive signs back to the market. The international cashew kernels market stabilised and moved up from the season lows based on demand from US and some EU buyers including some short covering by importers. Indian demand is expected to pick up in the near future, which will further encourage processors to keep their prices steady. Prices finished the month in a range of US$3.25-3.35 per lb FOB Vietnam for WW320, which is about 10 cents per lb off the lows of the season. Shipments of kernels from the major processing countries have been steady. Indian exports of kernels were up by 4% to the end of April. Vietnamese exports are forecast to be up by 4%, if the second half of the month is as good as the first half was. Most consuming markets are beginning to show signs of recovery following the sharp declines in imports in the second half of 2018. Lower prices take time to have an impact at consumer level so it may be the last quarter of the year before a significant reaction is seen. However, in our view this may be a slower process than usual given the damage done to buyer confidence during the volatility of 2017-18 and especially the debacle of the last quarter of 2018.

The RCN markets moved up during May by US$75-125 per ton. Buyers’ focus in the second half of the month has been on the higher quality material available in Senegal, Guinea Bissau and Gambia. This may suggest that Indian buyers have become more active as they often have a preference for Guinea Bissau and Senegal material. Nigeria and Cote D’Ivoire still have unsold quantities. Cote D’Ivoire is estimated to be about on par with last year on shipment volumes when cross border by land trade is taken into account. Nigeria is likely to be significantly behind last year. It does appear at this time that Cote D’Ivoire and Nigeria may be the countries, which will compete to export their stock as the season in those countries comes to an end. Both have experienced a reduction in quality due to the rains and lack of adequate storage facilities for RCN.

Cashew Wholes steady; Broken remain weak

This will be further complicated by the interest of the Tanzanian government to sell its remaining quantity estimated at 250,000 tons of largely higher quality material. The next Tanzanian crop will start to flow to warehouses in less than 120 days and weather conditions are good indicating another large crop.

Imports of RCN to Vietnam were up year on year by 7% at the end of April. This is likely to be sustained in May as the high season for imports to Vietnam starts. India meanwhile was significantly behind 2018 and 2017 imports at the end of April by a surprisingly high 24%. This probably explained by the lack of imports from Tanzania as January and February figures were very low whilst March and April matched the figures for 2018. Taking into account good crops in Vietnam and India, although the Indian estimates may be marked down, there may be a requirement for as much as 1.8 million tonnes as at the end of April for the calendar year 2019. This volume is available in West Africa and Tanzania, but processors and traders will be wary of pushing the market as the processing margins remain tight at current kernels and RCN prices.

RCN prices have moved up, but quality in some countries has moved down. Indications at present range from US$900 – US$1350 per ton across the quality range of 45-52 lbs cutting test outturn. It is noticeable that arriving and landed parcels in India are making premium prices.

At the farm gate in West Africa fortunes have been varied. Farmers in Guinea Bissau and Senegal have seen the best prices of the season due to timing and quality with prices ranging up to US$650 per ton. In Cote D’Ivoire prices were reported below the minimum farm gate price of US$680 per ton ranging down to as low as US$365 per ton in a situation where it is difficult to enforce regulations due to lower quality and a cash squeeze caused by a lack of demand from traders. The crisis, which developed at the end of 2018, continues to have a major impact at the farm gate despite a stabilisation of kernels and international RCN prices. It is difficult to identify what can be done to avoid this happening other than the longer term ambition of establishing local processing facilities. It is an unfortunate fact that West African farmers have suffered lower prices this year as a result of the problems experienced by processors in Asia and international traders during the price correction (crash) of 2018. Unfortunately, although just about everyone knew the crash would come; few actions were taken to manage it at the farm gate as the problems are ingrained in the structures of the sector.

June 2019 seems likely to see more trading than the earlier part of the year on both kernels and RCN. Kernels buyers and processors will be interested to make sure that prices remain in the current range to ensure throughput and the needed recovery in demand. They may find that prices will tend to trend upward but in a narrow range. RCN prices should remain steady but room for upward movement is limited in the current kernels market. Declining quality in West Africa will influence traded prices. Tanzanian government decisions on the sale of remaining stocks of RCN and buyers’ reaction to any release of product should be carefully monitored.


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