Monday, February 22, 2010

weekly Cashew Update

FEB 20, 2010

Cashew market continued to be quiet in week 7 – small volume traded to USA & European traders. Prices drifted few cents lower – W240 between 2.85 and 2.90, W320 between 2.60 and 2.65 and W450 around 2.45 FOB. Off markets and Indian domestic market were also quiet – no significant change in prices.

No fresh news on RCN front – conditions in all origins appear to be normal, except for a small delay in arrivals in India. Physical movements from WA wil start SH MARCH and then, we will have an idea of actual pricing. At the moment, prices seem to have stabilised around 850 C&F for Benin and 725 C&F for IVC.

In the coming weeks, many processors will need to make sales to be able to buy RCN whereas some may decide to wait until they have RCN in hand before making sales. Kernel buyers are content to buy small volumes at each level as they do not see any reason to take large forward cover. This trend is likely to continue unless there is a big change in demand trend or a significant change in supply situation (actual or perceived).

For the time being, it certainly appears that we are likely to see a market with a soft bias as we go into the main RCN procurement season. But the market is so delicately poised and thin (in terms of liquidity) that it would take very little to tip the scale (in either direction).

Potential for volatility is increased due to changes in cashew market structure and trading pattern i.e. (1) increased importance of unorganized spot market (2) reduced forward positions with the major importing countries (3) risk aversion & reduced risk appetite. Added to this is the increasing impact of external factors like (1) currency movements and (2) financial & economic developments which affect inventory management & demand forecasts.

Overall,, it is becoming more & more difficult to judge the trend and predict (or even guesstimate) how things will move.. For this reason, in our last few reports, we have been advocating caution to avoid being caught on the wrong foot by any sharp moves in either direction.

Would appreciate your views on market situation, forecast of demand + activity + price trend for coming weeks and any other news or information

Regards,Pankaj N. Sampat

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