Tuesday, June 01, 2010

Weekly cashew update

MAY 29, 2010

There was limited activity in Cashew Market in Week 20. Business was done for W240 around 3.20, W320 around 3.00, W450 around 2.80, WS/WB around 2.50 and LP around 1.70 FOB. Overall, there has been no change in prices (except for an increase in prices for broken grades) despite very quiet market during whole of May.

RCN market is very delicately poised. This week, it seems to be taking a breather after the rise of abt 150 dollars a ton (equivalent to approx 30-32 cents per lb of kernels) in the last four weeks. There is resistance at the higher levels because of quiet kernel market (also, kernel prices have not picked up to the extent of rise in RCN prices). There is not much unsold RCN in West Africa but traders (and processors who sell RCN when trading realizes more than processing) are holding stocks (afloat and in origin). Number of stock holders is larger than normal and so, holding capacity is increased. If they see increase in kernel demand / prices, they can afford to hold on but if the kernel market remains quiet in June, they may be forced to reduce prices to move stocks.

Due to the various uncertainties discussed earlier (recent currency volatility is adding to these uncertainties), stakeholders on both sides (processing countries and importing countries) are reluctant to take large positions, especially for forwards. They are content to sell/buy for prompt and nearby deliveries when needed. This trend is likely to continue as we move into the peak Asian consumption months from August, resulting in continued volatility.

In view of uncertainty of demand trend at higher levels, buyers do not want to cover forward requirements unless the price is at / lower than spot price. Since the RCN prices are high and there is limited replacement available, processors do not want to sell large volumes for longer spreads unless they have a reasonable cushion to absorb further increase in RCN price. All this is leading to reduced liquidity. Small changes in periodic supply push and demand pull will have significant impact on prices.

Considering all factors, we continue to feel that market will move in current range of 2.80 to 3.00 FOB for some time. There is a possibility of a breakout above the range if there is good demand in next 8 weeks. On the other hand, we may see lower prices at the end of the year if the pattern of limited buying continues through the next 3-4 months.

Would appreciate your comments on market situation + views on prospects & trends for coming weeks + any other info / news

Pankaj N. Sampat

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