Weekly cashews uodate

FEB 5, 2011


There was no change in cashew prices in week 4 & 5 although there was some pick-up in activity. Fair quantity was traded in the last two weeks by some processors from 3.65 to 3.75 FOB for W320 whereas large packers sold limited quantities around 3.85 FOB (stray business was done few cents higher to off markets). W240 traded around 4.30-4.35 FOB but quantities available were limited.

RCN market is quiet – there is very little unsold product in origin. Shipments from Tanzania & Mozambique will be higher than last season but since the relative quantities were small (less than 10% of world production) and came after disappointing Northern Hemisphere crops, processors were forced to pay high prices. For next few weeks, RCN business will be limited to re-sale of Tanzania & Mozambique RCN. To take advantage of low inventories, RCN traders will release stocks slowly (unless India + Vietnam new crop arrivals are earlier than expected). Realistic WA RCN price trend will not be known till late March/early April.

Everybody in the chain – RCN traders, shellers, kernel traders, roasters, retailers – is wary. There is lot of haziness about kernel demand & crop prospects. Impact of (a) higher prices on demand and (b) higher processing costs on kernel & RCN prices is to be seen.

As prices are high, buyers are not keen to cover more than what they absolutely need to buy. Specially because there is a big question mark about impact of high prices on demand. Although there is risk of being left without product, buyers seem to be willing to wait rather than find themselves holding high priced inventory if the demand drops dramatically. This is a double edged sword because if usage does not drop too much, the steady buying at regular intervals will keep the market firm.

From time to time, some processors are selling at the lower end of the range. This coupled with some selling by traders is providing some respite from high prices. Otherwise, most sellers are reluctant to reduce prices to get sales because there is no RCN available for prompt shipment to cover against sales. Unless RCN prices ease significantly, they will be content to sell small volumes at each spike. For last several months this strategy has been working well. Unless there is a big fall in demand or prospect of big increase in supply, there is no inducement for sellers to change selling pattern.

Many people feel that current price levels – highest we have seen – cannot be sustained and market should drift lower when the big Northern crops start. This cannot be ruled out but a large decline does not seem likely in the medium term due to factors discussed earlier (a) empty pipeline or low inventories (b) higher processing costs (c) steady & regular buying for spot & nearbys.

To sum up, we expect some volatility for 2-3 months and a steady market around current range for most of the year (with a possibility of some increase if there any supply shortage / distortion or if demand is not as badly impacted as feared). A big change in the market trend in 2011 is possible only if all the upcoming crops are good (and move without disturbance) and if the buying interest in the next 2-3 months is slow.

Regards,
Pankaj N. Sampat