Monday, December 06, 2010

Weekly Cashews Update

DEC 4, 2010

Cashew market was steady in week 48. No change in prices – W240 between 4.10 and 4.15, W320 between 3.70 and 3.75, W450 & SW around 3.60 FOB. Some sales were made to USA, West Asia and off-markets. Europe was relatively quiet. Indian domestic market was quiet but prices are steady.

RCN market also is steady. More than 60% of the Tanzania crop has been auctioned and now quantities in the weekly auction are becoming smaller. By end of Dec/early Jan, almost everything would have been sold. Shipments from Mozambique are expected to start in Jan (if there are no changes in policy). Crop there seems to be good but traders are quoting high prices. Brazil arrivals continue to be slow – will things improve in coming weeks ??

During Oct/Nov, reasonable volume has been traded for shipment in first quarter 2011. If offtake is low – as many people in Europe & USA expect – they may be able to restrain buying in the first quarter as purchases already made will take them into second quarter with reasonable inventory. This may soften prices before the 2011 crops start. But if offtake is not as bad as feared, they will have to start buying in Feb to cover second quarter needs. Traditionally, first quarter production is lower and will be still lower in 2011 because of short 2010 crops. So, any significant buying in first quarter will result in a firm market as unsold quantities are low.

In the last few weeks, differential between large wholes and W320 has widened - this trend is likely to continue if the Brazil crop is as bad as feared. This could also lead to narrowing of differential between W320 and brokens (there has not been much change so far – except that prices for broken grades in India have gone up very high).

Since prices for all nuts – except maybe Almonds – are high, supply side factors (including rawmaterial & processing costs) will have more impact on cashew kernel prices. Processing costs in India (and I believe Brazil as well) are going up next year. On top of this, if RCN prices remain high, there is very little chance of a big decline in kernel prices although there may be periodic dips from to time. The only possibility for a substantial decline in cashew prices in 2011 is if offtake is severely affected (as many people fear) and all 2011 crops are good. There will be no clarity on these two aspects till middle of second quarter.

We expect reasonable activity during Dec as some buyers will probably want to cover additional volume for FH 2011 to avoid being caught with low cover. This will keep the market moving in the current range. First quarter of 2011 is going to be very crucial – kernel activity + news of crop prospects in that period will determine buying strategy of the processors and RCN traders and that will guide the kernel prices for 2011.

Overall, there is no change in market outlook – firmness for the near term, volatile in the short term, uncertain in the medium term and dark clouds in the long term.

Please let us know your comments on market situation, your views & forecast on demand + price trend, any info on demand & supply factors + any other news

Pankaj N. Sampat