Monday, September 13, 2010

Weekly Cashews Update

SEP 11, 2010

Cashew market continued to be quiet in Week 36 – there was good buying interest from USA & Europe at slightly lower levels and some processors in Vietnam did sell W240 around 3.50 and W320 around 3.30 FOB. But in general, most processors were 5-10 cents higher – levels traded were from 3.55 to 3.60 FOB for W240 and 3.35 to 3.40 FOB for W320. Splits were traded (and bid) around 2.85 FOB but offers were scarce. Prices for Splits & Pieces in Indian domestic market continue to be about 10% above international prices.

Spot RCN market in India & Vietnam continue to be firm as availability is limited. Indonesia RCN prices are very high and unworkable even with current high kernel prices. Processors expect some relief when arrivals pick up in Oct. Tanzania / Mozambique arrivals will start in Oct but shipments will not start till Nov (Tanzania) and Jan (Mozambique). If the prices open too high, processors may be reluctant to participate in view of uncertainty of kernel demand for 2011. Reports from Brazil are mixed and a realistic estimate will not be possible till Nov. Processors there expect RCN prices to ease in Oct but unless they see this happening, they do not seem to be interested to make sales even at current levels.

Kernel market is delicately poised. The upward movement has stalled and activity is slow. BUT, despite the limited activity at higher levels, processors do not seem to be under pressure to reduce prices to make sales because replacement RCN is not available (and definitely not at lower prices). Unless Southern RCN prices come to lower (reasonable levels), processors will be content to sell limited volumes and await further signals about market trend. Buyers are reluctant to buy large volumes for forward positions at these levels as there is some concern about impact of higher prices on 2011 usage. When higher prices are reflected on retail packs, it will certainly have some impact on usage but extent of impact is a question mark. If there are no other negatives, impact may be too much.

For the last couple of years, processing in Asia in first quarter has been lower than other quarters due to lower RCN availability. This situation is likely to continue in 2011 since Southern Crops were short in 2010 and most processors will have less RCN to process after Dec. Coupled with the trend of “hand to mouth” buying, this reduced availability will keep prices firm and provide a floor to the market. Easing (and even slight softening) of prices will happen only when usage is substantially impacted (for example a 5 to 10% decline in usage in USA & EU will not have much impact) or if 2011 crops are significantly higher (atleast 10% higher than 2010 to come to normal level).

It is difficult to judge how things will develop in the long term (middle and second half 2011) but it definitely seems it will remain firm in the short term (rest of 2010) and volatile in the medium term (first quarter of 2011).

Pankaj N. Sampat

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