NOV 27, 2010
There was limited activity in Cashew market in Week 47 but it continued to be firm – prices moved up few cents on some grades. Price range was 4.05 to 4.15 for W240, 3.70 to 3.75 for W320, around 3.60 for W450 & SW320, around 3.45 for SW360.
RCN market also continued to be firm. Quantity auctioned in Tanzania this week was lower and price was 2-3% higher. It is still not clear when exports from Mozambique will start. There is no improvement in situation in Brazil – arrivals are slow and price is high. Total crop figure will not be clear till Feb/Mar – current estimates range from 150 to 200,000mt.
In last month or so, most of the business has been for shipments upto Mar/Apr and some business has been done for 2nd quarter as well (at the same prices). There is reasonable buying interest for 2nd & 3rd quarter few cents below the 1st quarter prices but processors are not willing to discount because there is uncertainty about the 2011 crops and RCN prices.
Overall, USA & Europe contracting for next year shipments from origin (and delivery to retailers) has been much lower than normal. If the demand decline is not as big as feared, buyers will need to buy early in the year for 2nd quarter requirements and this will keep the prices in the current range. If the importers and retailers are able to manage with current cover for few weeks longer, the reduced buying in first quarter will result in a softer market which will have an impact on RCN prices too.
There is no change in the fundamental factors – supply will be tight until the Northern crops start in Mar/Apr. Even if the crops are normal (or good), opening prices are likely to be high due to an empty pipeline – RCN and kernels. In the meantime, if kernel prices come down from the current levels due to less buying activity in the first quarter processors (and RCN traders) might delay their buying and wait for prices to ease when arrivals pick up. But if the crop prospects are not good, they may have to review strategy even if kernel activity in the first quarter is slow.
To sum up, we can expect a firm market for next few weeks. Softening MAY happen in Feb but the decline will be small unless there is a big drop in kernel activity. A BIG drop in prices is possible only if ALL the 2011 crops are good – shortage in 2011 on top of a short 2010 will mean a very firm market all through 2011.
As there are too many uncertainties on both sides, all stakeholders will have to navigate carefully till Mar/Apr - by that time, demand trends will be clearer and we will have fair idea of 2011 crop prospects.
Would appreciate your comments on the current situation + views (and forecast) of trends + any other information / news for better understanding of prospects for coming months.
Pankaj N. Sampat