Sunday, February 27, 2011

Weekly Cashews update

FEB 26, 2011

Cashew market was very quiet in Week 8. Price range widened as some processors (mainly from Vietnam) sold at lower levels. Business was reported for W240 from 4.25 to 4.35 and for W320 from 3.70 to 3.85 FOB. Brokens were in short supply and prices moved up to over 3.30 for Splits and over 3.10 FOB for LP. Indian domestic market continues to be quiet but still above international prices.

No change in RCN situation. Arrivals in India and Vietnam are very slow and prices are very high. Until arrivals pick up – which may be late March - prices are not likely to ease. Some trades for Nigeria around 1225 and Benin around 1550 C&F. IVC situation very unstable and if this does not clear up soon, there could be a big disruption in supplies leading to increased competition for supplies from other origins and other negative impacts discussed earlier.

February has been a quiet month in the kernel market (which is not unusual) but considering that everyone has been working on low inventories, it has been quieter than expected. During March, we should get some indications about offtake in the major importing countries. If this is not as bad as expected, buyers will need to buy to replenish cover for mid year requirements and this will provide support to the market around current levels. If the quietness continues through March, it might mean that kernel prices may drift lower which might lead to lower RCN prices from April (especially if there is some movement in March towards normalcy in IVC).

Unless supply situation eases and RCN prices come down, shellers will not be able to reduce their selling price ideas – they would rather reduce volumes than operate with disparity between RCN & kernel prices.

Another important factor to watch is Asian demand. If the trend of reasonable volumes being traded every few weeks for nearbys continues, the market will be supported at current levels till middle of the year.

It seems that Mar/Apr will determine trend of cashew prices for the rest of the year. If there is reasonable kernel demand in this period or if the IVC situation is not resolved in this period, there is very little chance of any price decline – we could even see a spike in price if there is a long delay in IVC.

On the other hand, if kernel demand is very slow (in all markets) and IVC movements are not delayed too much, prices might drift lower in the second quarter and stabilise in a new range when supply / demand imbalance is corrected.

The unprecedented uncertainty on both sides – supply and demand – is parlaysing everyone in the chain. There is very little cushion to absorb any sudden movements on either side. It seems that uncertainty will continue for few weeks more. This points to increased volatility in the short term.

For better understanding of the market, would appreciate your comments on the various factors, your opinion on prospects for coming weeks and any other news + information

Pankaj N. Sampat

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