Monday, August 23, 2010

Weekly cashews update

AUG 21, 2010

Cashew market was quiet in Week 33 but undertone continued to be firm – price range moved up a few cents i.e. W240 between 3.40 to 3.45, W320 between 3.25 to 3.30, W450 was 3.10, SW320 around 3.10 FOB. As we have seen in the last few weeks, some processors sold below this range and some were able to sell few cents higher - the difference between lowest and highest price continued to widen.

RCN market is steady – afloat parcels being traded between 950 to 1000 for IVC and around 1200 for Guinea Bissau. Indonesia new crop being quoted around 1500 C&F with reports of bad weather in some areas. No significant news from East Africa or Brazil.

In last few weeks, there is steady demand from “off markets” which buy spot / nearbys and pay few cents more to regular suppliers for quality and reliability. Traders in USA & EU have also been buying regularly – either to cover short positions or to have something on books to be able to offer when endusers come in to buy. Market seems to be comfortable with this trend – at least for the time being. Forward cover / sale position is limited and as prices continue to climb, the risks are becoming bigger (for everyone in the chain).

Processors expect good demand in the next six weeks and are prepared to wait - each round of buying (so far) has seen some increase in the price range. They are not in hurry to sell because there is no replacement RCN to be bought before Nov (except for limited quantity of high priced Indonesian in Sep/Oct). So, general feeling is that there is room for some price increase in this period.

With the prices being high, the question uppermost in all minds is whether these levels can be sustained next year. The feeling is that if prices are at / higher than current levels at the end of 2010, then the 2011 crop RCN prices will open high and there will be little chance of a significant price decline for quite some time, although there will be periodic dips. We can expect 2011 RCN prices to open at lower levels only if there is a significant decline in kernel prices by end 2010/early 2011.

Prices of many food commodities are higher than recent historical average. As far as nuts are concerned, good demand growth for most nuts and short supply in some nuts is likely to keep prices high (with some dips depending on growers/processors need to sell during periods of low buying interest). Unpredictable external factors can throw surprises but no changes are expected in the fundamental factors for cashews in the near future to change the trend. At some stage, the trend will change (either on fundamentals or sentiment) and we will see realignment of price range but it is difficult to judge when and at what level this will happen.

Comments on market situation + views / forecast of trend for coming weeks + any interesting info or news would be appreciated.

Pankaj N. Sampat

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