Weekly Cashews update

JUNE 4, 2011

Week 23 saw further increase in cashew prices – everybody wants to know when and where the juggernaut will stop !!

Business was done for W240 upto 4.65 and W320 upto 4.25 FOB (some processors were able to sell few cents higher). There were bids for Splits upto 3.75 and Pieces upto 3.60 FOB. Trading was well spread amongst various markets and buyers (although volume was not large). Indian domestic market saw more activity in broken grades – prices are about 10% higher than international market. Domestic demand for wholes is expected after few weeks.

RCN market is steady. Lots available in most origins are of lower quality. Goods bought few weeks ago but not shipped are also deteriorating. Container & vessel availability is very tight. As discussed earlier, arrival of nuts into India & Vietnam is going to be late and spread over a longer period than normal. Shipments made early April are just arriving in India & Vietnam (about 3-4 weeks late). First vessel to Brazil is expected to arrive over the weekend.

In a normal situation, after a 35-40% rise in prices, one would expect a correction or softening of prices. But this has not been happening because (1) the rise has been gradual - spread over 12 months (2) it is based on real shortage in supply leading to higher RCN prices (3) increase in processing costs. There have been periodic dips but each dip has been followed by a spike which has taken the price to a newer high. The big question is : When will this trend break ?

At the moment, there is nothing on the horizon to warrant a large, sustained decline in prices. Supply-demand balance will not be restored until there are at least two good crops. Meantime, the month-to-month tightness will continue as RCN arrivals are slow and unlikely to speed – things are not improving in Africa.

Although people expect lower offtake in USA & EU due to higher prices, a large decline in offtake may not happen till end 2011 / early 2012 because the old price deliveries will continue for a few months. Asian markets which had good offtake despite the high prices at end of 2010 may not have much difficulty in accepting the price increase of the last 3 months.

Third quarter of the year will see good demand from India & West Asia due to the festivals. Also, we can expect continuation of the pattern of periodic buying by the traditional markets as most buyers do not have forward cover and will need to buy at regular intervals. Since there is unlikely to be any buildup of RCN inventory with shellers, they will not be under pressure to reduce prices – on the contrary, we would not be surprised if prices went up a bit more in the coming weeks.

End of third quarter / beginning of last quarter will be an interesting period. By that time, we will get a good idea of impact of current price levels on retailers & roasters/repackers strategies for 2012 + spot offtake in Asia and a fair idea of Southern Hemisphere crops. Then, we will know if the trend will change and prices drift to end 2010 levels or whether they will remain around current levels for some more time.

As we said in our previous report, the last 9-12 months have been exceptionally difficult for everyone in the cashew business. It seems that next 6 months will be no different with so many uncertainties & variables. It will take quite some time for things to come back to normal – until then, everyone will have to be alert to adapt to any development (fundamental or external)>

Would appreciate your comments on market situation, demand trends and prospects, your views & forecast of market trend in coming months... and any other news or information

Regards,
Pankaj N. Sampat