Tuesday, June 10, 2014

Cashew Market Update

It has been awhile... and not so quiet, as it seems

It is a difficult time for the cashew processors.  If the prices do not increase, then the processors can face problems down the road

During the last few years, with technological innovations, there are so many new small factories coming into the market.  There is no need for large space or capital.  They can just process cashews(steam, shell, then sell the kernels to other processors).  Because of this, the demand for RCN is trending higher.  Vietnam also exports more and more every year.

The export from Vietnam is increasing, mainly based on the supply of seeds from Africa.  With lower cost of production, Vietnam is a bit ahead of India and have enjoyed better business atmosphere.  Recently, however, some factors have changed from India

- India have imported a lot of machines from Vietnam and have begun replicating and have begun to lower production costs to compete better with Vietname
- To stop cheap broken cashews(WS, LP or SP) from Vietnam to India, Indians have applied flat duty at $1 USD/lb.  Indian processors can enjoy selling broken cashews at higher price in domestic markets
- Indian market have always had a lot of demand.

Because of these factors, this year, Vietnam processors are finding it harder to pay for RCN prices from Africa.  The RCN prices have gone up tremendously and mainly shipped to India

A. African Seeds
  Because of big demand from India and Vietnam, the prices have continued to rise.  IVC seeds seem close to an end.  Buyers are in a hurry to purchase and ship.  A good quality 48lbs, which used to trade at 900 USD/mt, are now at 1050USD/mt CNF Vietnam.  Most buyers are now competing on Guinea Bissau RCN.

B. Vietnamese Seeds
   The crop has ended, and only few small crops from northern provinces.  There is high competition for seeds.  Prices on seeds, which were trading at around 23,000 VN$/kg are now up to 25,000 VN$/kg.  For this new price level, factories are covering mainly because they do not have enough seeds to process during Q3 and are hoping(betting) that prices of kernel goes up

C. Broken
   Most buyers believe that there are a lot of broken pieces during processing.  It may be the case in the past, but improvements in procedure have lowered available supply of broken kernels.  Before, we were seeing 20% broken from processing RCN, but some processors have gotten these numbers to 12%

D. Market, western
   It looks as though US and EU buyers have covered enough for nearby, when the pricing had bottomed out.  I do not expect pressure from buyers to make purchases in the near future, though they will move if the pricing is right.

With the current market conditions, I would advise that spot purchases for your immediate needs.  I would only consider contracting options if you need to cover a certain quantity by Q4, and only at a "deal".

Thank You.

-Thomas Kim


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