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)
Over the past month cashew kernels have traded in a narrow range drifting along the bottom of the 2 year price range and likely to finish the year at the years lowest levels. WW320 are offered as low as US$3.15 per lb FOB Vietnam. This has come about as a result of a lack of buying interest as buyers are either coverted unbtil the first or second quarter of 2020 or have closed their books for the year. 2019 was a year of falling prices on cashew kernels.
It has also been a year of improved demand from all major markets except the USA which will
probably finish the year with around the same level of imports as in 2018. The price correction which started during the first quarter of 2018 has continued throughout 2019. Prices for kernels today are very attractive for buyers but most will wait to see the sales results at the end of December and the prospectsa for new crops in the Northern hemisphere before making new buying decisions.
As buyers are well covered it stands to reason that processors are well sold. Most larger processors are not offering at present or are only prepared to sell at higher prices as they already have sales commitments for next year. They may be reluctant to take on new sales commitments as they cannot buy RCN at prices which allow them to make a profit based on the current kernels market. VINACAS, the Vietnamese cashew association has warned processors not to buy RCN at the current levels. This warning is likely to make it more difficult to sell RCN and could help to bring prices into line with kernels.
Cashew kernels may finish 2019 on the seasons lows but they will still be higher than 99% of the last decade and equal to prices between 2012 and 2015. Both were periods of high growth in demand and supply.
The RCN trade over the past month has been focused on East Africa. The Tanzanian crop season started. Circa 160,000 tonnes have been taken into warehouse. Almost 140,000 tonnes have been sold at auction at prices ranging from US$1050-1275 per tonne ex warehouse for 51-53lbs outturn.
The crop estimate was initially 300,000 tonnes but some official sources have downgraded this to 250,000 tonnes. Deliveries into the warehouses are almost 100,000 tonnes behind deliveries by 15th December 2017 when the crop finished at 311,000 tonnes which suggests that the downgrading may be correct. Tanzanian authorities will be pleased at the progress especially as they have a significant tonnage of 2018 crop left unsold in warehouses.
The crop outlook in Mozambique is good. Trade sources estimate the crop at 120,000 tonnes whilst official sources see it as much larger close to 150,000 tonnes. The market regulation has operated more loosely this season as exporters have already accumulated large volumes for export. 2019 was a year of some records. Vietnams imports of RCN were at a record level of 1.47 million tonnes by mid-November. Vietnams kernels exports too are at record levels exceeding 390,000 tonnes by mid-November. EU imports will for the first ten months of the year are 14% up another new record. There is no doubt that in many markets the demand for cashew nuts remains strong. In markets which use broken cashew the story is a little less optimistic. Many buyers cut back usage during the price highs of 2016-2018 and some of these buyers have not come back to the market. Processors all around the World are left with unsold inventories causing large white pieces and splits to fall to prices not seen since 2013.
Looking at the market today it appears that Vietnam needs very little additional RCN to make it through to new crop although some of the available material is old crop Tanzanian and processors may prefer new crop material. India may need to import in the region of 100,000 tonnes in the period Nov-Jan which will be sourced largely from Tanzanian material already bought at auction and later with Mozambique origin. Prices of RCN in the international market have drifted down by US$50-100 per tonne from the highs of a few weeks ago. Top quality Tanzanian material should be available at $1600 per tonne Cfr and Indonesian at Us$1550 per tonne Cfr. Even at these prices, processors are unlikely to be attracted as they cannot sell kernels at the equivalent prices.
The outlook for the rest of the year is for relatively calm trading conditions. RCN prices may fall back a little. Kernels may drift down but only for near shipments from medium and small processors. The New Year will bring all the questions about the new crop. The year will open with the RCN market less well stocked than at the end of 2018 but without any shortage. Kernels demand is likely to be good or even very good in 2020 based on current prices. Good crops will be needed all round to sustain workable prices and growth in demand. Let’s hope that the market and especially cashew processing in Africa gets back on the right track in 2020.