Indian and Asian markets have, of late, absorbed large quantities of cashew kernel while consumption in the traditional markets remained largely flat, making trends in Asian markets a deciding factor of prices.
“India has been the largest consumer of cashews for some years and in the last 2-3 years, consumption in other Asian countries has also been growing fast whereas consumption in traditional markets has been flat or showing small growth in some segments”, Mr Pankaj N Sampat, a major Mumbai-based dealer told Business Line .
Spot market and effects
Asian market, he said, is a spot market where price changes are passed on to final consumer almost immediately. Impact of this change has been felt only in the last year or so because roasters in the traditional markets have been buying for shorter periods, compared to the 6-12 months forward contracts they have been doing in the past.
This has meant that their buying prices have to be dependent on the Asian spot market prices. This phenomenon has changed the structure of the cashew market and dynamics of price movements, he said. Thus, there has been a sea-change in the geographical distribution of cashew consumption.
If the demand from traditional markets is dramatically lower till March/April, then “we could see prices drifting towards the 3.50 level – this will impact spot prices as well. If this happens, processors will be slow in buying Raw Cashew Nut(RCN) at beginning of the season unless RCN prices are much lower than current levels – they also have to factor in the higher processing costs. But if there is any disruption in RCN, processors will be forced to pay high prices for whatever is available.”
The cashew market world over continued to remain sluggish till last weekend. However, there was some buying interest at lower levels.
But, except for a few processors who sold limited quantities, there was not much business, trade sources said. Large processors in both origins are not willing to reduce their prices due to uncertainty over RCN crops and prices. Consequently, there is a wide range of offers in the
market: for W240 from $4.20 to $4.40 and for W320 from $3.65 to $3.85/lb (f.o.b).
In fact, the fundamentals remained unchanged, supply will continue to be tight for a few months and supply prospects plus demand trends for 2011 are uncertain, they said.
“We can expect a lot of volatility in the market in the next 2-3 months because of these uncertainties and the news and rumours from various origins,” they added.