Agri Business

Upsurge continues in cashew market on supply-demand mismatch

| | Updated on: Jun 08, 2011
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Cashew kernel prices rose on good demand amid limited supply and business was done for W240 up to $4.65 and W320 up to $4.25 (f.o.b), while some processors were even able to sell few a cents higher. There were bids for splits up to $3.75 and pieces up to $3.60 (f.o.b). Trading was well spread amongst various markets and buyers, albeit volume, was not large.

Indian domestic market saw more activity in broken grades — prices are about 10 per cent higher than international market. Domestic demand for wholes is expected after few weeks, according to trade sources.

Raw Cashew Nut

Raw Cashew Nut (RCN) market is steady. Lots available in most origins are of lower quality. Goods bought few weeks ago but not shipped are also deteriorating. Container and vessel availability is very tight. The arrival of nuts into India and Vietnam is going to be late and spread over a longer period than normal. Shipments made early April are just arriving in India and Vietnam about 3-4 weeks late. First vessel to Brazil is expected to arrive over the weekend, they said.

“In a normal situation, after a 35-40 per cent rise in prices, one would expect a correction or softening of prices. But this has not been happening because (1) the rise has been gradual spread over 12 months (2) it is based on real shortage in supply leading to higher RCN prices (3) increase in processing costs,” Mr Pankaj N. Sampat, a major dealer told Business Line .

There have been periodic dips, but each dip has been followed by a spike which has taken the price to a newer high, he said, adding, “The big question is — when will this trend break?”

At the moment, there is nothing on the horizon to warrant a large, sustained decline in prices, he claimed. Supply-demand balance will not be restored until there are at least two good crops. Meantime, the month-to-month tightness will continue as RCN arrivals are slow and unlikely to speed up as things are not improving in Africa, he pointed out.

Although people expect lower off take in the US and EU due to higher prices, a large decline in off take may not happen till end 2011/early 2012 because the old price deliveries will continue for a few months. Asian markets which had good off take despite the high prices at the end of 2010, may not have much difficulty in accepting the price increase of the last 3 months.

Indian, West Asian demand

The third quarter of the year will see good demand from India and West Asia due to the festivals. Also, “we can expect continuation of the pattern of periodic buying by the traditional markets as most buyers do not have forward cover and will need to buy at regular intervals. Since there is unlikely to be any buildup of RCN inventory with shellers, they will not be under pressure to reduce prices and on the contrary, we would not be surprised if prices went up a bit more in the coming weeks,” the trade predicted.

The end of third quarter and the beginning of last quarter, will be an interesting period. By that time, “we will get a good idea of impact of current price levels on retailers and roasters/re-packers strategies for 2012 + spot off take in Asia and a fair idea of Southern Hemisphere crops. Then, we will know if the trend will change and prices drift to end 2010 levels or whether they will remain around current levels for some more time.”

As reported earlier, the last 9-12 months have been exceptionally difficult for everyone in the cashew business. It seems that the next 6 months will be no different, with so many uncertainties and variables. It will take quite some time for things to come back to normal, until then, everyone will have to be alert to adapt to any development, fundamental or external, Mr Pankaj said.

Published on November 12, 2017

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