Monday, March 28, 2011

Weekly Cashews update

MAR 26, 2011

Cashew market was quiet in Week 13 after two weeks of good activity in all markets. This week, buyers were bidding 5-10 cents lower but there was no selling interest at the lower levels. Stray business was done for W240 around 4.45, W320 around 4.05, SW320 around 3.80, Splits around 3.40 FOB. Some markets paid few cents higher for W240 and W320. Indian domestic market has been quiet for almost a month and inventories at consuming centres are running low - activity is expected to pick up in April.

RCN market is steady – Benin around 1600, Ghana & IVC around 1450, Nigeria around 1400 C&F. Shipments from Nigeria & Benin have started. Ghana/IVC shipments expected to start soon. Shellers hope that movements of RCN in IVC – and more importantly, shipments to India & Vietnam – will pick up in April and provide relief from the tight supply & high prices. Unseasonal rains in Vietnam are causing concern. Drying is a problem – this will affect kernel yield. Crop size may also be lower if rains do not stop. Situation needs to be watched closely.

Due to the late crops in India & Vietnam and slow shipments from West Africa, processing in Apr (and maybe even May) will be lower than normal. This could lead to squeeze in kernel supplies in the second quarter UNLESS the offtake in first quarter is much lower than normal.

For the time being, there seems to be nothing that will change the trading pattern – everyone in the chain will continue to operate for the short term & refrain from taking any large forward positions. This means that there will be regular bursts of activity followed by some quietness. Each burst will mean a dip or spike in prices, depending on who / what initiates the activity. This pattern will keep the market moving around the current range unless there is some big improvement in RCN flow or there is a big kernel demand.

As discussed earlier, a trend change will happen only if there is a big drop in offtake in several markets together OR there is a sudden pressure of RCN arrivals (or there is some big external development). Otherwise, it will take several months for supply-demand balance to be restored and prices to soften from the current levels.


Pankaj N. Sampat

Wednesday, March 23, 2011

Kenya: Attractive prices split cashew nuts dealers

A row is simmering between local processors and former exporters of raw cashew nuts in the wake of rising global prices of nuts. Exporters on Tuesday said a government ban on export of raw nuts since 2009 is robbing the country’s farmers the benefits of the high global prices enjoyed by their Tanzanian counterparts. They said they are planning to put up a processing unit in Kenya. “Instead of going into dispute with the local processors, some of us have decided to put up a factory immediately,” said Mr Samuel Varghese, chairman of the Kenya Cashew nut Processors and Exporters Association in a statement appearing in the Nation on Tuesday.

Mr Varghese said he will offer farmers higher prices - a minimum of Sh65 per kilogramme compared to Sh55 per kilogramme that they are getting from the current processors. Drawing comparison from Tanzania where this season saw farmers getting between $1,600 and $1,800 per metric tonne or Sh65 and Sh75 per kilogramme, farmers in Kenya are supposed to receive $1,500 per metric tonne or Sh55 per kilogramme according to Mr Varghese. Nut Processors Association of Kenya (NutPAK) chief executive officer Mr Charles Muigai said international traders, who dominated the market before the ban, are only interested when the world market prices are anticipated to increase. This is when, he said, they would come in with high prices through brokers who pay farmers poor farm gate prices.


Publication date: 3/23/2011

Sunday, March 13, 2011

Weekly Cashews update

MAR 12, 2011

Cashew prices moved up a few cents more in week 10 – business was done for W240 around 4.35 / W320 around 3.95 / W450 around 3.75 FOB / WS around 3.40 / LP around 3.20 FOB. Even at the higher levels, selling interest was limited. Activity in Indian market picked up – specially for brokens.

RCN arrivals continue to be slow and prices are high. Clearer picture of RCN price trend will be available in April but it certainly seems that RCN supply in India and Vietnam will be tight for couple of months (maybe more if a viable alternate route for movement of IVC RCN is not found quickly). Until shellers have covered a reasonable quantity of RCN – physically – they will be reluctant to make any large kernel sales because of the uncertainty of supply despite the high prices.

Kernel buyers seem to be content to buy small volumes at regular intervals on hand to mouth basis. They are probably waiting for prices to come down before making any large purchases to replenish depleted inventories. For the time being it does not seem if supply will become comfortable soon. Till then, the continued buying for nearbys will support the market.

Even if the RCN flow picks up in April/May, initial prices will be high as most sellers are running out of stock. We might see a softening of RCN prices in June/July but that may not have immediate impact on kernel prices UNLESS kernel offtake in the next 2-3 months is very low and buyers are able to extend their limited inventories for few weeks more. A significant downward move in prices is possible only if during second quarter, the RCN flow is normal AND the kernel demand is very low. If supplies pick up in third quarter it may not lead to lower prices as the third quarter is the peak buying period for all markets (including the largest consuming region – Asia).

Outlook for second half of the year continues to be hazy but everything points to a tight supply and firm market for next 2-3 months (this might continue into third quarter if the RCN flow does not pick up in second quarter).

Overall, the continued uncertainty is making everyone cautious – resultant limited forward cover (both sides) will make the market more susceptible to price swings on either side depending on demand pull or supply push.



Pankaj N. Sampat

Monday, March 07, 2011

Weekly Cashews update

MAR 5, 2011

In week 9, there was slightly more buying interest than last few weeks but volume traded was limited as there are few sellers in the market. Prices moved up a few cents on all grades – around 4.30 for W240, around 3.80 for W320, around 3.35 for Splits/Butts, around 3.20 for Pieces (some processors were able to sell few cents higher). Indian domestic market showed signs of revival in demand for brokens (prices are about 10-15% higher than international market).

There is no better news on the RCN front – India / Vietnam arrivals are slow and prices are very high. Benin expected to start shipping in second half March. No certainty about movement from IVC. RCN available for processing in India & Vietnam in Apr-May will be much lower than normal. Until shellers have firm news about RCN shipments, they will be reluctant to make sales. This means reduced liquidity and could cause sudden spike in prices if there is any big buying interest before supply situation improves.

USA imports of cashews in 2010 were 121,270 mt (1.85% higher than 2009) – origin wise shares were Vietnam 58,540mt (about 2% higher) + India 30,720mt (marginally higher) + Brazil 25,010mt (about 15% lower) and others 6,860mt (marginally lower). We do not have figures for EU imports but believe that they may not be much different than 2009. Imports in FH 2011 will give some indication of impact of high prices on usage – this will help to determine buying interest for the second half.

If demand is very slow in coming months and if (or when) supply situation improves, we might see prices drifting lower but that may not happen till middle or second half of the year as it will take time for the supply-demand imbalance to be corrected. Till then, we can expect prices to move around current levels.

Day by day, the outlook is becoming hazier – there seems to be no end to the tunnel. Historically high prices are causing concern about impact on usage. Supply side constraints are putting a question mark on kernel availability in second quarter (and may be beyond that as well). Even if crops are normal, RCN may not reach processors in time and this could mean significant shortage for few weeks (maybe months). Lack of product could mean lost sales (at the retail level, food / snack purchases are not postponed). This could have great impact on 2011 usage but the extent may not be known until it is too late.

Everybody is being very cautious. Selling and buying is being done for short periods. This increases importance of spot prices and also means higher volatility. Inability to judge trend and take reasonable forward positions exposes everyone to huge risk of sudden moves in prices depending on news & developments on supply or demand side.

Improvement on supply side or negative news from importing countries could have an immediate & significant impact on sentiment and trend. But, for the time being, there is nothing on the horizon to change the firm undertone of the market.

Would appreciate your comments on market situation, views on supply & demand prospects + market trend and any other information + news

Pankaj N. Sampat