Monday, May 09, 2011

Weekly Cashews update

MAY 7, 2011

There was reasonable activity with all markets in Week 19 with prices moving up a few cents in the latter part of the week. Business was done for W320 from 3.85 to 3.95, W450 & SW320 from 3.75 to 3.80, SW360 from 3.55 to 3.65, Splits around 3.45, Pieces around 3.30 FOB (some processors were able to sell few cents higher). Lower offers are no longer available from both origins. Prices moved up a bit in the Indian domestic market as well.

RCN market continued to see a wide range of prices depending on origin, quality and payment terms. Shipments are expected to move faster in May although this is not certain as there are lot of logistic problems in several ports. Based on cutting test results in origin, kernel yields from most origins are expected to be lower than normal. Vietnam has been more aggressive in West Africa than normal. Coupled with the quantities being picked up by Brazil, this will leave substantially lower quantity for Indian processors.

As discussed earlier, processing in Feb-Apr has been much lower than normal (some processors have been running to less than 50% of capacity). May is also expected to be slow with bulk of RCN arriving in India & Vietnam from mid June. If you take into account lower kernel yields in coming months, it means that the pipeline will continue to be tight in the foreseeable future. Supply will become comfortable only after there is an increase in production. This can happen only if 2011/12 crops are really good – we have had two consecutive bad crop years.

Usage in some markets will definitely be affected due to the high prices but even a double digit decline in some markets will not equal the supply shortage from two bad crops. In Asia, the high prices have not had any impact on usage – in the last quarter of 2010, demand was strong despite prices being at historical high levels.

In the next 3-4 months, we expect good demand in Asia (including West Asia) for the traditional festivals. Also the two big importing regions – USA & EU – are expected to continue their pattern of buying for few months requirement. USD has moved up about 3.50% in two days at the end of this week. If it resumes decline in few weeks (or even remains around current levels) the cost for EU, Australia and some other markets will continue to be around 2010 average – this should reduce the impact of higher prices when contracts are being made for late 2011 & early 2012 deliveries.

There is a view that all this means that prices can go higher before they start coming down (when supply improves or if demand in all markets sees a big decline). Our feeling is that even if prices do not go up much, there is very little chance of any significant decline in prices for next few months (although we may probably see some dips when some processors need to sell to raise cash to pay for RCN purchases).

To sum up, we can expect the market to be steady to firm in the foreseeable future – change in trend & range is possible only when supply becomes comfortable (not possible in the near term) or something unexpected happens on external factors.

Would appreciate your comments on current market situation, your views & forecast of demand + market trend.... and any other news + information

Pankaj N. Sampat

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