Monday, October 25, 2010

Weekly Cashews Update

OCT 23, 2010

There was reasonable activity in the Cashew market in week 42. The lower offers were taken out of the market early on. By end of the week, prices from medium packers had moved up to 3.25 FOB for W320 (large packers were able to sell few cents higher). There were some trades in W240 around 3.60 and W450 around 3.10 FOB. Most of the sales were to US & Europe importers for Oct-Dec (some for Jan-Mar). India & China buyers were quiet but they are expected to start buying again in Nov.

RCN market continues to be firm. West African RCN in India traded in the range of 1200 to 1350 dollars (depending on quality). Indonesia RCN is steady around 1500 despite lower quality. Tanzania continued to get surprisingly high prices in their auctions. Brazil reports of crop shortage range from 15% to 30%. This means that almost all origins have had short crops in 2010.

Last fortnight’s lower offers for 2011 deliveries from the importers did not induce any significant business. If RCN market continues to be firm, we feel that the lower offers will dry up soon. We expect some roasters – in USA as well as Europe – will start to buy some quantities if they see firmness continuing for next few weeks. Most of them are very lightly covered for 2011 and may not be able to postpone buying for too long (they will soon have to cover at least the first quarter, if not the first half).

Most buyers have been restricting volume and period of buying because of the wide difference between prices from small / medium processors for nearbys and large processors for forwards. This has meant that they need to buy something every few weeks and each time after a dip, prices have moved up a few cents. So far market has not pierced the 2008 ceiling but it cannot be said with certainty that this will not happen sometime during the year.

Outlook for mid / late 2011 continues to be cloudy – demand trends are uncertain and it is impossible to judge what 2011 crops will be. So, it would be unreasonable to predict long term price movement. But in view of supply tightness (which is likely to continue till Apr/May 2011), it is more or less certain that prices will continue to be firm for rest of 2010 (and even early 2011). There is some chance of a further increase in prices if kernel activity picks up and / or RCN prices continue to be firm.

If there is a big drop in usage in FH 2011 coupled with good or normal crops from Mar/Apr 2011, we could see prices softening. Absence of one or both could mean the opposite. In the meantime, it is reasonable to expect that prices will continue to be firm and will be determined by spot / nearby demand (or interest to sell) till there is a significant change (or a reasonable expectation of a change) in one or both fundamental factors. This cannot happen before Mar. A change in sentiment could also prove to be the tipping point. External factors – economic news, currency movements, etc – also need to be watched.

For the time being, there is no reason to change the earlier recommendation i.e. everyone in the chain (RCN traders - processors – traders – roasters) should cover some portion of their need (to buy or sell) for a few months to avoid being caught on the wrong foot as any change in trend could be quite sharp.

Would be grateful for your comments on market situation, views & forecast on prospects for demand + price trend and any other news or information for better understanding of the market.

Pankaj N. Sampat

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