Monday, March 24, 2014


Market seems difficult and confused.  If you're not interested in the reading material, just scroll down to the bottom for a summary

1- Vietnam crop:
Because of the cold weather during the flowering, nut count is smaller and outturn is low.  But due to many new processors and likely very little stocks carry over from last crop so demand of seed is huge, there is too much competition to buy seeds. Seed price indeed have not come down, and even go up a bit.

Kernel seems to move in different directions, there are many offers of kernels from Vietnam, so kernels price is not going up. Situation became very difficult time for the processor because there is no parity.

Vietnam crop is now less important to processors like they used to be. We import more and more. Last few days, our staffs went to Cambodia from what they see, they feel and Cambodia crop is getting bigger and bigger. I do not really know how big Cambodia crop is but they export more and more to Vietnam.

Price of seed today in Vietnam is around 22,300-23,000 VN$ with low outturn.

2- West African crop:
IVC crop: IVC government is still controlling to price paid to farmers, and they do not allow export at low price. I heard they had cancelled the export license of some exporters because they were selling low price.  Because of this, IVC raw seed price remain stable and even up a bit.  At one time, IVC 48 lbs dropped to 950 USD/mt cnf Vietnam but are now up 10-20 USD per tons (traded 970-980 usd/mt cnf Vietnam for 48 lbs).  IVC raw cashew nut is the key important factor, as crop is so big (around 500,000 MT), so IVC price will affect price of Nigeria, Benin, Ghana, Burkina Faso, Guinea Bissau…..

One of the reason IVC price is stable is because of Vietnam. We are hearing that Indian crop is good, so Indian processors find price of IVC as too high, and they’re not buying much.  But Vietnamese processors are buying a lot from IVC.  Some Vietnamese processors like to gamble.  They will accept high price, but when the cashews arrive and if the market is down, they will try to find discrepancies in L/C and try to reject the cashews.  It happens all the time when market is down.(We don’t deal with these guys though)

It is reported that this year quality from IVC is good and big nut count (last year nut count of IVC was also big that's why supply of WW240 was good).  I do not hear any bad news about crop in other countries like Nigeria, Burkina Faso, and Ghana. Guinea Bissau crop will only start later.

If everywhere crop is good, I do not know how IVC government can hold the price of seeds.

3- Processing in Vietnam:
Still good… Very good.  That's why there are a lot of offers of kernels.

4- Vietnam domestic market of kernels. 
Market seems to be stable, not coming down like last few weeks. I think because price is reasonable so demand is good, that's why price stable.

5- China market:
After the lunar New Year, demand seems to be good.  But they are beginning to follow Western buyers, which is to pay less price for WW320 because of good supply from Vietnam. They still buy a lot of LBW and DW because lower price. China does not buy much WW240.  Normally China will reduce buying in April, May when the weather getting warmer.  Chinese buyers are complaining that the currency(RMB) is dropping fast against USD, so price become more expensive. This can affect their purchase from Vietnam.
I will be going to China in Mid-April to visit some of our buyers, then I will know more about China market and demand.

6- Western market:
Because of so many offers from Vietnam, buyers seem not in a hurry to buy and only buy if they feel price is cheap. It looks like offer will be more in April, May, June, July.  If packers suppose selling at same level as today, can Western buyers absorb the increase in quantity from Vietnam??? Or they need a lower price to push demand???

So in summary, this is a difficult time for processors, paying high price for seeds and selling kernels at low price. April, May, June might be more difficult for sellers because they need to sell bigger quantity then same period of last year. If price fall, they may face big problems.

In the past, most companies lost money mainly because they purchased raw seed at high price, like:

Fatimex: bankruptcy, mainly because they purchased seed at high price and bad management
Lafooco: down mainly because they purchased and a bit high processing cost
Nitagrex: down because they purchased seed at high price although they enjoy low processing cost
Pygemaco (Pycasco): down because they purchased seed at high price although they enjoy low processing cost. Their management wasn’t very bad.
Nam Long: same problem, purchased seeds at high price.

So for most packers in Vietnam, the main problem is purchasing seed at high price. Other problem is management and high banking interest (but if high banking interest will affect all packers, not just few)

It does not mean that when you purchase seed at high price, the international buyers need to pay you high price for kernels. This is wrong thinking.

So we will see if:

a) buyers will pay higher price for kennels to have parity for processors
b) Raw seed price has to come down for parity
c) processors is making wrong decision to pay high price of seeds and will suffer.

In the interest of saving time, I'll just sum it up this way
Packers/Sellers are asking for higher pricing, because of high prices of RCN.  Buyers are very hesitant to buy at current level, because.... heck, it's a down market!!

It's a dangerous game "chicken" that they're playing... seeing who'll budge first.  The best advice anyone can give right now is "Keep your head down and your eyes/ears open".  When the market bottoms out/hits the floor, you can give me a call(or if you need spot shipments right now)

- Thomas Kim

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