Monday, March 07, 2011

Weekly Cashews update

MAR 5, 2011

In week 9, there was slightly more buying interest than last few weeks but volume traded was limited as there are few sellers in the market. Prices moved up a few cents on all grades – around 4.30 for W240, around 3.80 for W320, around 3.35 for Splits/Butts, around 3.20 for Pieces (some processors were able to sell few cents higher). Indian domestic market showed signs of revival in demand for brokens (prices are about 10-15% higher than international market).

There is no better news on the RCN front – India / Vietnam arrivals are slow and prices are very high. Benin expected to start shipping in second half March. No certainty about movement from IVC. RCN available for processing in India & Vietnam in Apr-May will be much lower than normal. Until shellers have firm news about RCN shipments, they will be reluctant to make sales. This means reduced liquidity and could cause sudden spike in prices if there is any big buying interest before supply situation improves.

USA imports of cashews in 2010 were 121,270 mt (1.85% higher than 2009) – origin wise shares were Vietnam 58,540mt (about 2% higher) + India 30,720mt (marginally higher) + Brazil 25,010mt (about 15% lower) and others 6,860mt (marginally lower). We do not have figures for EU imports but believe that they may not be much different than 2009. Imports in FH 2011 will give some indication of impact of high prices on usage – this will help to determine buying interest for the second half.

If demand is very slow in coming months and if (or when) supply situation improves, we might see prices drifting lower but that may not happen till middle or second half of the year as it will take time for the supply-demand imbalance to be corrected. Till then, we can expect prices to move around current levels.

Day by day, the outlook is becoming hazier – there seems to be no end to the tunnel. Historically high prices are causing concern about impact on usage. Supply side constraints are putting a question mark on kernel availability in second quarter (and may be beyond that as well). Even if crops are normal, RCN may not reach processors in time and this could mean significant shortage for few weeks (maybe months). Lack of product could mean lost sales (at the retail level, food / snack purchases are not postponed). This could have great impact on 2011 usage but the extent may not be known until it is too late.

Everybody is being very cautious. Selling and buying is being done for short periods. This increases importance of spot prices and also means higher volatility. Inability to judge trend and take reasonable forward positions exposes everyone to huge risk of sudden moves in prices depending on news & developments on supply or demand side.

Improvement on supply side or negative news from importing countries could have an immediate & significant impact on sentiment and trend. But, for the time being, there is nothing on the horizon to change the firm undertone of the market.

Would appreciate your comments on market situation, views on supply & demand prospects + market trend and any other information + news

Pankaj N. Sampat

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