FEB 19, 2011
Steady to firm undertone in the Cashew market continued in week 7. India sold W240 around 4.30 and W320 around 3.75 FOB – some processors were able to sell few cents higher. Splits & Pieces moved up a bit. It is reported that some Vietnam processors sold few cents lower than India. There is reasonable buying interest around these levels but offers are limited. Indian domestic market continues to be quiet.
RCN market was quiet – some business was done for Tanzania around 1750 and Mozambique around 1475 C&F. WA RCN quotes were Benin around 1600, IVC/Ghana around 1450, Nigeria around 1250 C&F but these can only be considered indicative until physical movements start. India & Vietnam crops are reported to be late – small arrivals have started and prices are very high.
Situation in IVC needs to be watched closely - if not settled soon, it could lead to big delay in movement of 20% of the world RCN production + more competition for lower RCN availability during Mar-May. The delay would also mean quality deterioration and consequent reduced kernel availability even if the crop is normal in quantity. Another impact of this delay would be that the 2011 crop will be spread over a longer period reducing the pressure on available finances.
Everybody in the Cashew supply chain is confused (and uncomfortable) with the current situation as the uncertainties are much larger than normal. Shellers and buyers (traders and roasters) seem to be content to sell/buy limited quantities as and when needed – neither want to take any big positions.
Despite the historical high prices, shellers are reluctant to sell any large volumes as the RCN pipeline is empty and until the gap is bridged, RCN prices are unlikely to ease (there is a large disparity between current RCN and kernel prices). Despite low inventories (RCN and kernels), buyers are reluctant to buy any large volumes until they have some idea of offtake by retailers after the passage of high prices (especially because prices of many other treenuts are a little softer in the last few weeks).
Our feeling is that kernel market will continue to be firm (and could even move up a bit before easing) if the RCN prices continue around current high levels. Until RCN prices come down significantly, any dip in kernel price should be seen as a buying opportunity.
We might see some decline in kernel prices if nearby demand during Mar-May in the new Asian market as well as traditional markets (USA & Europe) is much lower than what we have seen in the last few months. This might lead to slower RCN buying after the immediate needs are covered resulting in lower RCN prices later in the season. If the RCN prices go down enough, we might see a decline of kernel prices to mid 2010 levels. But this is possible only if all 2011 crops are normal + there is no big delay in IVC RCN movements + there is a big decline in retail offtake in traditional markets enabling them to delay any big buying till the middle of second half.
To sum up, we can say that the confusion and uncertainty is likely to continue till April/May – by that time, there will be some clarity on many of the factors i.e. demand trends + crop prospects + IVC situation. Only then, we will be able to make a reasonable “guess” about market trend for rest of 2011.
Pankaj N. Sampat