Monday, September 27, 2010

Weekly Cashews update

SEP 25, 2010

In Week 38, there was hardly any export activity from India in the Cashew Market as the domestic demand is strong & prices for most grades are much higher than international market. Stray business was done for W240 around 3.60 and W320 around 3.35 FOB. Some processors in Vietnam sold at lower levels – W240 around 3.50 and W320 around 3.25 FOB but volume was limited (large processors not offering or asking same prices as India). Brazil is very quiet. Trade is selling some quantities at few cents below quotes from large processors.

Recent RCN news is not encouraging – Indonesia & Brazil are reporting that weather problems will affect crop size & quality. Clear picture will not be available for some time but the concern will add to uncertainty. No adverse news from East Africa but uncertainty about movement continues. Spot RCN prices in India & Vietnam continue to be high – limited volumes being traded. Processors will be reluctant to buy big volumes unless kernel activity picks up but small purchases by large number of players might lend support to the market.

Despite limited activity with major markets in last six weeks, there is no pressure on processors to reduce prices because (a) some volume is being traded to one market or the other (b) Indian domestic demand has been strong for last 2-3 weeks (c) there is little replacement RCN available till next North crops which will start in Mar 2011.

There is little chance of reduction in RCN prices in 2010 unless there is a big decline in kernel activity in last quarter. Unless RCN prices come down, processors will not be able to reduce their kernel offers. So, we can reasonably expect market to be firm till the end of the year – beyond that, trend of kernel buying activity will determine price movement in first quarter and that will impact RCN prices when 2011 crops start in second quarter.

Outlook for 2011 is very unpredictable. There is concern about impact of high prices on retail offtake. So, retailers and roasters may reduce volume and period of cover. This will mean regular small buying by some market or the other leading higher volatility within a range. Breakout from the range will happen only when there is a substantial shift in fundamentals i.e. either a big increase in supply or a big decline in usage.

In the last few years, there has been a power shift on both sides of the cashew market – supply and demand. India is no longer the largest supplier to the world market – that position has been taken by Vietnam for kernels and West Africa for RCN. On the demand side, USA & EU continue to be large buyers but they have been overtaken by Asia which is now the largest consuming region (India is the largest consuming country). This has altered the market dynamics – relative power of each region to determine market trend has changed. It is now much more a spot & nearby market – activity in many more origins and markets influence the price than in the past. Stakeholders will have to change their strategies to succeed in this changed environment.

Pankaj N. Sampat

No comments: