Monday, November 08, 2010

Weekly Cashews update

NOV 6, 2010

After a quiet beginning, week 44 saw further increase in cashew prices from middle of the week (in the last 2 weeks, prices have moved up by 6-7%). Business was done for W240 from 3.85 to 3.95, W320 from 3.45 to 3.55, W450 from 3.25 to 3.35 FOB. Most of the business was with USA but other markets also bought some quantities. Bulk of the sales were for Nov-Jan shipments but some business was done upto Mar/Apr. In the domestic market, prices for brokens have started moving up again.

Tanzania RCN prices moved up further to approx US$ 1625-1650 in this week’s auction. Indonesia RCN prices were steady around US$ 1500-1525 but yields are lower. Initial indications for Mozambique RCN are over US$ 1200 but shipments will not be possible before Jan. Brazil situation is unclear and worrying – arrivals are slow, RCN prices are high and processing is much lower than normal. If there is improvement, this will be known only in Jan.

For the next 2-3 months, we can expect market to remain firm because of Chinese demand for their New Year + Indian demand for the winter/marriage season + high RCN prices + limited replacement availability.

Traditionally, processing in India & Vietnam is low in first quarter – in 2011, this will be further reduced by lower availability of RCN from the 2010 crops. So a drop in demand in first quarter may not have large impact on the prices immediately. If the drop in demand extends into the second quarter and is accompanied by normal weather and good prospects for 2011 crop, we might see softer market and lower prices from the second quarter.

Asian markets are showing growth in usage despite the increase in prices (as Asian markets are a spot market, price movements are reflected in retail prices much faster than in the organized markets in the West). The impact of the higher prices in USA & EU is a big question mark. One view is that there could be a 20-25% decline in usage. If this is true (and this will be known only in second quarter), there might be a big drop in prices when the 2011 crops start and this will change sentiment of the market. Another view is that since the prices of other nuts are also high, decline may not be that much. If the decline is in single digits, we feel that there will not be any big decline in prices UNLESS the 2011 crops are very good. And if the trend of short period buying continues in first few months of 2011, the prices will remain at current levels and this will support RCN prices when 2011 crops start.

The long term outlook depends not only on the impact of higher prices on demand but also the state of the 2011 crops. Until there is some definite and clear indication on these two important factors, market will continue to be delicately poised reinforcing the need for caution. The pattern of buying (frequency and volume) + general food (especially nuts) price trends + financial market trends are other factors to be watched closely.

To sum up, we expect continued firmness for the short term (3 months) + volatility in the medium term (3-6 months) + uncertainty about the long term (6-12 months).

Would appreciate your comments on market situation, views on trend and prospects for coming weeks / month and any other news or information

Pankaj N. Sampat

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