Monday, September 27, 2010

Weekly Cashews update

SEP 25, 2010

In Week 38, there was hardly any export activity from India in the Cashew Market as the domestic demand is strong & prices for most grades are much higher than international market. Stray business was done for W240 around 3.60 and W320 around 3.35 FOB. Some processors in Vietnam sold at lower levels – W240 around 3.50 and W320 around 3.25 FOB but volume was limited (large processors not offering or asking same prices as India). Brazil is very quiet. Trade is selling some quantities at few cents below quotes from large processors.

Recent RCN news is not encouraging – Indonesia & Brazil are reporting that weather problems will affect crop size & quality. Clear picture will not be available for some time but the concern will add to uncertainty. No adverse news from East Africa but uncertainty about movement continues. Spot RCN prices in India & Vietnam continue to be high – limited volumes being traded. Processors will be reluctant to buy big volumes unless kernel activity picks up but small purchases by large number of players might lend support to the market.

Despite limited activity with major markets in last six weeks, there is no pressure on processors to reduce prices because (a) some volume is being traded to one market or the other (b) Indian domestic demand has been strong for last 2-3 weeks (c) there is little replacement RCN available till next North crops which will start in Mar 2011.

There is little chance of reduction in RCN prices in 2010 unless there is a big decline in kernel activity in last quarter. Unless RCN prices come down, processors will not be able to reduce their kernel offers. So, we can reasonably expect market to be firm till the end of the year – beyond that, trend of kernel buying activity will determine price movement in first quarter and that will impact RCN prices when 2011 crops start in second quarter.

Outlook for 2011 is very unpredictable. There is concern about impact of high prices on retail offtake. So, retailers and roasters may reduce volume and period of cover. This will mean regular small buying by some market or the other leading higher volatility within a range. Breakout from the range will happen only when there is a substantial shift in fundamentals i.e. either a big increase in supply or a big decline in usage.

In the last few years, there has been a power shift on both sides of the cashew market – supply and demand. India is no longer the largest supplier to the world market – that position has been taken by Vietnam for kernels and West Africa for RCN. On the demand side, USA & EU continue to be large buyers but they have been overtaken by Asia which is now the largest consuming region (India is the largest consuming country). This has altered the market dynamics – relative power of each region to determine market trend has changed. It is now much more a spot & nearby market – activity in many more origins and markets influence the price than in the past. Stakeholders will have to change their strategies to succeed in this changed environment.

Pankaj N. Sampat

Monday, September 20, 2010

Weekly Cashews Update

SEP 18, 2010

In Week 37, there was hardly any change in cashew prices - despite relative quietness for more than a month (although some business is being done every week). Some business was done from Vietnam for W240 from 3.45 to 3.50 and W320 from 3.25 to 3.30 FOB. Prices from India were 10 cents higher – some business was done to buyers who are prepared to pay few cents higher to specific processors for quality and performance. Large processors from Vietnam were also quoting same levels as India. Prices in domestic market in India for almost all grades is higher than international market – so there is no pressure on Indian processors to sell at lower levels (at least for the time being).

There is no adverse news about crop prospects in East Africa but there is no certainty when shipments will start. There are mixed reports about Indonesia & Brazil crops. RCN traders are expecting prices for East Africa & Indonesia RCN to be higher than last season as kernel prices are higher but unless kernel activity (especially for 2011 deliveries) picks up in the next few weeks, processors will be reluctant to take on positions at higher levels. A realistic estimate of Southern crops and price trend will not be available till late Oct/early Nov. Meantime, spot market for West Africa RCN in India and Vietnam continues to be firm.

There is nothing on the horizon to change outlook for market – it continues to be hazy !!

There is no pressure on processors to reduce prices as they have limited unsold quantities from RCN bought in 2010 and they do not know what prices they will have to pay for the limited RCN available till the next Northern crops beginning in March 2011.

Uncertainty about demand prospects and concern about impact of high prices makes buyers reluctant to buy forward positions at higher levels. In first half 2010, growth has been about 6-7% in USA and about 3-5% in the Europe (other markets have grown faster). In most markets (except Asia), the higher prices of last few months have not yet been passed on to the retail level.

Traditional Asian demand which will continue into Jan/Feb and the lower processing in first quarter should keep the market firm for the next few months. During this period, kernel prices will soften only if RCN prices come down in Oct/Nov and this will happen only if there is very little kernel business done for 2011 deliveries in the next two months.

If there is a doube digit decline in usage in USA & EU in first few months of 2011, we can expect lower kernel prices when the Northern crops are harvested after Mar 2011 but till then, there does not seem to be much chance of a major decline in prices. If the usage decline is in single digits, the decline prices may not be much as even a steady Asian demand will support the market if prices come down a bit (unless the Northern crops are much bigger than 2010).

If there are no big surprises on demand or supply side, we continue to expect a firm market for next few months, a volatile market in the first quarter with a big question mark for middle & second half of 2011.

Would appreciate your comments on market situation, views on market prospects and any info / news

Pankaj N. Sampat

Monday, September 13, 2010

Weekly Cashews Update

SEP 11, 2010

Cashew market continued to be quiet in Week 36 – there was good buying interest from USA & Europe at slightly lower levels and some processors in Vietnam did sell W240 around 3.50 and W320 around 3.30 FOB. But in general, most processors were 5-10 cents higher – levels traded were from 3.55 to 3.60 FOB for W240 and 3.35 to 3.40 FOB for W320. Splits were traded (and bid) around 2.85 FOB but offers were scarce. Prices for Splits & Pieces in Indian domestic market continue to be about 10% above international prices.

Spot RCN market in India & Vietnam continue to be firm as availability is limited. Indonesia RCN prices are very high and unworkable even with current high kernel prices. Processors expect some relief when arrivals pick up in Oct. Tanzania / Mozambique arrivals will start in Oct but shipments will not start till Nov (Tanzania) and Jan (Mozambique). If the prices open too high, processors may be reluctant to participate in view of uncertainty of kernel demand for 2011. Reports from Brazil are mixed and a realistic estimate will not be possible till Nov. Processors there expect RCN prices to ease in Oct but unless they see this happening, they do not seem to be interested to make sales even at current levels.

Kernel market is delicately poised. The upward movement has stalled and activity is slow. BUT, despite the limited activity at higher levels, processors do not seem to be under pressure to reduce prices to make sales because replacement RCN is not available (and definitely not at lower prices). Unless Southern RCN prices come to lower (reasonable levels), processors will be content to sell limited volumes and await further signals about market trend. Buyers are reluctant to buy large volumes for forward positions at these levels as there is some concern about impact of higher prices on 2011 usage. When higher prices are reflected on retail packs, it will certainly have some impact on usage but extent of impact is a question mark. If there are no other negatives, impact may be too much.

For the last couple of years, processing in Asia in first quarter has been lower than other quarters due to lower RCN availability. This situation is likely to continue in 2011 since Southern Crops were short in 2010 and most processors will have less RCN to process after Dec. Coupled with the trend of “hand to mouth” buying, this reduced availability will keep prices firm and provide a floor to the market. Easing (and even slight softening) of prices will happen only when usage is substantially impacted (for example a 5 to 10% decline in usage in USA & EU will not have much impact) or if 2011 crops are significantly higher (atleast 10% higher than 2010 to come to normal level).

It is difficult to judge how things will develop in the long term (middle and second half 2011) but it definitely seems it will remain firm in the short term (rest of 2010) and volatile in the medium term (first quarter of 2011).

Pankaj N. Sampat

Tuesday, September 07, 2010

Weekly Cashews Update

SEP 4, 2010

There was very little activity in the Cashew market in Week 35. Some business was done forW240 around 3.55 and W320 around 3.30 FOB (some buyers / markets paid few cents higher for good quality, guaranteed supplies). Splits were traded around 2.80 FOB. There was steady domestic demand in India for large wholes & brokens – prices were higher than international market.

From Vietnam also, activity was limited but some processors were selling few cents below India. Brazil continues to be quiet – apparently they do not have much to offer from old crop and do not seem to in hurry to sell from the new crop as arrivals are slow – clear picture of crop will be available by Nov.

Spot RCN market in India is firm – small processors (catering to seasonal domestic demand) are paying high prices for small lots of ready goods. Indonesia RCN is being offered around 1500 dollars but buying interest is limited as there is a big disparity with kernel prices. There is a feeling that prices may soften end Sep/early Oct when arrivals pick up (unless kernel prices move up in the meantime). In East Africa, everything looks okay on weather front but it is too early to talk about crop prospects, price levels, shipment commencement.

Kernel outlook for next few weeks seems to be firm. Limited replacement RCN availability + steady demand from one market or the other will mean prices will continue to be high. Processors will be content to sell small volumes at a time. Similarly, buyers will be inclined to buy “as needed” because at current levels (a) they will make losses if they are covering short positions (b) risk appetite for going long is limited in view of uncertainty about future demand.

Long term outlook continues to be cloudy. Inventories seem to be low across the chain due to short crops and hand-to-mouth buying. As discussed earlier, tightness will ease only if supplies increase substantially (this can happen only in mid 2011) or usage / demand falls dramatically (nobody knows when – and if – this will happen). Apart from price of cashews, other factors like prices of other nuts + consumer spending on snacks (and snack nuts in particular) + general economic situation will have a significant impact on usage/demand of cashews. High prices may not necessarily mean big drop in usage if other factors are positive.

This situation will make long term contracting difficult – for buyers because they do want to be caught with long positions at high levels which they cannot move if demand falls and for processors because they do not want to have large forward commitments even at current high levels because the next big RCN procurement possibility will only be in second quarter 2011.

So, although one can have a legitimate doubt about sustainability of the current price levels for the long term, there is very little reason to expect a change in the current range and firm trend in the medium term.

I would appreciate your comments on market situation + views on demand & market trend in coming weeks / months + any information & news


Pankaj N. Sampat