The cashew market was quiet last week; for that matter, it has been like that the whole of December because of uncertain outlook. There are hopes in the first quarter of 2011, but buyers are looking for offers a few cents lower than the limited ones in the market. However, stray business was reported, few cents higher, for W240 at around $4.30 and W320 at around $3.75 (f.o.b).

Meanwhile, Indian domestic market — especially for brokens — picked up in the past few days after a quiet first half of December. “Since we have entered 2011, it is worthwhile looking at factors which will have an impact on market trend in the short and medium term,” Mr Pankaj N. Sampat, a Mumbai-based dealer told Business Line .

Shortage

Because of a shortage in crops in 2010, with a drop in world output estimated at between 7 per cent and 15 per cent, “we are beginning the year with a nearly empty pipeline”. Processing in the first quarter will be lower than normal. Besides, prices of seed processed in this period will be very high. First few weeks will see wage increases in India, which will have an impact of about 30 cents a pound of kernels. “Although we do not know details, we believe wages in Brazil and Vietnam are also going up early in the year.” All these point to a firmer market in the first few months.

There was a steady increase in prices through 2010. After a 10 per cent decline from $2.90 to $2.60 in January-February, prices moved up 45 per cent from $2.60 to $3.80 in ten months and most of the increase has been in the past five months.

In the growing Asian market, higher prices were passed on to the consumer, yet consumption has grown. But in traditional markets like North America and Europe, price hikes were either not passed on fully or not at all because of lower-priced contracts for 2010. Impact of higher prices will be known in first few months of 2011. Although base consumption may not be affected much, promotions, special offers, brands and retailers pushing products for better margins, etc., will take a hit. “Close watch is required on the usage figures for first quarter and trend of roaster and retailer contracting in the first few months to get an idea of demand trend for 2011,” Mr Sampat said.

Raw cashew nut (RCN) cost outlook for 2011 is very uncertain, and not just because of the usual weather concerns. Normally, opening prices are high because of good quality and processors' sales against which they can buy a little. After few weeks, when arrivals peak, prices soften and then move up a bit at the end of the season as traders hold back produce and processors try to stock till next crop.

This year, since prices are already very high and forward sales are minimal, there should be lesser rush to buy at the beginning of the season, but because stocks are negligible traders and processors will buy even if there is no parity, trader sources predict.

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