Cashew prices slipped by about 7 to 10 per cent during the last fortnight of September, after moving up by about 10 per cent during June-July and sideways in August and early September. Volumes were not large, with mostly October contracts being traded, sources said.

During the last couple of weeks, offers and trades have been in a wide range of 6 to 7 per cent on the same day and “such a wide range is making it more difficult than usual to understand the market”, sources said.

W320 from Vietnam was offered between $4.05 and $4.20 a pound and $4.20 to $4.35 a pound from India. That from Brazil was at or above the higher end of the range as there's not enough supply for October contracts.

“Not much trade has taken place in other grades but differentials are normal — premium of 25-30 cents for W240, discount of 10-15 cents for W450/SW and 50-60 cents for splits/butts/pieces,” Mr Pankaj N. Sampat, a Mumbai-based dealer, told Business Line .

Local DEMAND UP

During the last week, there was a slight pick-up in local demand — pieces moved up by about 5 per cent. The next two weeks will reveal the demand trend for the festival and marriage season, he said.

There is local demand for spot parcels of West African raw cashew nuts from small shellers who cater to domestic market. Traders have not sold RCN in Vietnam and demand for it is expected to pick up there after small and medium processors sold kernels recently.

Indonesian RCN was down to $1,800 from $ 2,000 a tonne reports of lower quality pulled down demand. Though there is talk of delay, auctions in Tanzania should start by mid-October, he said. Auctions in Mozambique will not start till January. Brazil is expecting a normal crop.

“Good 2011 southern crops might ease the tight supply position in first quarter but a real restoration of supply-demand balance can happen only in mid-2012, provided all the 2012 northern crops are good. Or there should be a big drop in offtake in last quarter 2011 and/or first half 2012,” he said.

Kernel orders have been mostly for deliveries in October — if offtake in September or October is not as bad as feared, demand for deliveries in November and December can be expected, he said. Business for shipments in the first half of 2012 has been little and it is expected that some buying, at least for the first quarter, will happen in a few weeks. Buyers are waiting for the market to bottom out. Shellers are reluctant to sell at lower prices because they do not know what price they will have to pay for RCN in the last quarter.

High kernel prices in the middle of the year, drift in the prices in third quarter and an international financial crisis in the last quarter of 2011 remind one of 2008. However, there is a vital difference: in 2008, buyers were well covered for six to nine months because of which the market could not absorb the selling pressure in the last quarter.

This time around, the period of cover is smaller as prices continue rising amid fears of declining demand. Besides, processing costs are much higher than what they were three years ago. So the price decline may not be as big as 2008 despite weak financial markets, he predicted.

Overall, it seems that the “uncertainty of demand plus currency movements plus financial situation will keep the market volatile for next two-three months”. “Increased trouble in financial markets will affect retailer sentiment resulting in lower contracting plus drifting of prices,” Mr Pankaj said. Markets could rise if things stabilise or the drop in demand is not as bad as feared. “The volume plus frequency of buying during October-November for the next few months requirement will determine whether prices will drift lower or move upwards to the higher end of current range,” he added.