Sunday, November 21, 2010

Weekly Cashews Update

NOV 20, 2010

The Cashew Market is leaving uncharted waters…. and seems to be entering the Bermuda triangle – nobody knows where market will end up.

Although market was relatively quiet in week 46, prices moved up few cents again on limited volume. Business was done for W240 from 3.95 to 4.05, W320 from 3.70 to 3.75, W450 around 3.50, SW320 around 3.50, SW360 around 3.35 FOB. In 3 weeks, prices have gone up by 15%. Prices for broken grades in Indian domestic market moved up sharply – in some cases, higher than the price for wholes !!

RCN prices also continued to climb up – Tanzania RCN has been traded around US$ 1800. There are reports of Mozambique RCN trading around 1300 C&F but since shipments are not likely before Jan, this cannot be taken as indication of the price at which shipments will actually take place (there is even talk of a ban or a delay in commencement of exports). Spot parcels of West African RCN (low quality) in India & Vietnam are being picked up at very high prices. Wage increases in Kerala / Tamil Nadu will add about 10 cents per lb to the proessing costs.

Short crop in Indonesia and a slow, short crop in Brazil coupled with low inventories in importing countries will result in a tight kernel supply position in first quarter 2011. And this will mean that pattern of limited buying for nearbys will continue.

Buyers seem to be reluctant to buy volume as they feel that the high pries will have big impact on usage in 2011. They are content to buy smaller volumes as & when needed – this means there is steady demand at all times. Extent of impact may not be as much as feared (especially because prices of all nuts are high). This could mean that some might be caught without enough product to meet the base demand (higher prices may mean lesser promotions or special offers).

Although it is difficult to say whether prices will continue to move up in coming weeks, we can certainly expect a firm market until there is some indication of the 2011 crop prospects. If 2011 crops are normal, market may soften after April (timing and extent of softness will depend on kernel buying in first quarter). If there is any problem with 2011 crops (on top of the 2010 shortage), prices could continue to move up in 2011 unless there is a big drop in usage.

It is extremely difficult to read the market and judge (or even guess) which way this precariously placed market will move. The steady rise over last 15-18 months with buying support at all levels leads one to believe that the trend will continue until supply improves. Historical highs make one fear that even a small development (fundamental or external) might result in a dramatic change in sentiment and provide the trigger for a trend change.

Would appreciate your comments on market situation + views on trend / prospects + any other information / news

Pankaj N. Sampat

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