Weekly Cashews Update

MAR 20, 2010

The upward move in Cashew prices continued in Week 11 – in all grades now but significantly more in W320s. There was good demand from USA and some from Europe & other markets (two weeks it was Europe which was more active). This week, business has been done for W240 upto 3.05, W320 upto 2.80 and W450 upto 2.60 FOB. As we always see in a rising market, some processors sold at slightly higher levels to regular & off markets.

RCN prices in all origins have also moved up – India & Vietnam approx 1100, Benin around 950, IVC around 775 C&F. Shipments from Benin & IVC will start next week. In all origins, people have started talking of concerns – delays and possible shortages. Some of this may turn out to be true but it is too early in the season to say for sure. As we said earlier, for next few weeks, market will be driven by a lot of unconfirmed “news” but there is no alternative because reliable information is not available.

There is no change in fundamentals – supply seems comfortable (unless the worst rumours are true) & demand is steady (decline/low growth in some markets and steady to strong growth in others). Cashew usage is more supply led than other nuts – everything produced is consumed. Carryover is generally small (operational inventories at each stage) unless there is a big change in production from one year to the next (which we have not seen in a long time).

Geographical distribution of cashew usage has changed dramatically – over 50% of the world cashews are now consumed in Asia compared to less than 25% about 10 years ago. Problems of 2008 (world economy in general and cashew industry in particular) + inventory financing constraints + reduced risk appetite + uncertainty of demand trends (economic situation affecting mood of the consumer) have resulted in change in buying patterns of the roasters & retailers. All this has increased the proportion of spot & nearby buying and added to the volatility of market.

These developments will require all stakeholders to change their decision making process and selling / buying strategies. In uncertain (and consequently volatile) situations, the best form of defence seems to be participate at all levels to have a reasonable average rather than act when you have to (because that may not be the right time in the cycle to sell or buy).

Unless something dramatic happens with crops in more than one origin in the next few months when 1.50 million tons are to be traded, a wide trading range of 2.50-3.00 for W320 seems to have been established for 2010 (within this range, we will see more volatility for 6-8 weeks and then a narrower range in the third quarter).

Please tell me your views on market situation + comments / forecast of demand & market trend + any other info & news


Regards,
Pankaj N. Sampat