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Cashew prices continue to drift lower

Source: Commodity Online October 26, 2008

Cashew prices continue to drift lower – due to strong USD & limited demand. This week, business has been done for W240 around 2.80, W320 around 2.50 FOB – mainly for nearbys but some for FQ & FH 2009 shipments as well.

Vietnam is reported to have sold few cents lower than India & Brazil is not selling as their ideas are higher. Restricted cash flow & downward renegotiation of renegotiated contracts is adding to the softening of prices.

Brazil crop is reported to be good and RCN prices have come down due to limited buying by processors in view of uncertainty of kernel market. Indonesia prices have also come down for the same reason. There are rumours that Tanzania crop may be short but it is too early to say as collections have just started. Government is buying from the farmers but the first sales auctions to processors & exporters will take place in early Nov.

Fundamentally, current cashew prices should be comfortable for all segments and in normal times, we would expect market to stabilise at these levels (although we have seen lower prices before).. However times are not “normal” and it is difficult to judge when and in what range market will settle down.

Non-fundamental factors like currency movements, liquidity PLUS inventory & risk carrying ability (and appetite) of various links in the chain, counterparty risks, etc will have more than normal impact on buying & selling decisions. Reduced volume of forward position taking will make market vulnerable and we will see periodic spurts & dips (increased volatility).

Although world economy is going through difficult times since last few months, the last two weeks have been terrible. Financial turmoil and currency movements are making things very very difficult for all businesses. Unusual and unpredictable movements are distorting product prices in a way which we have never seen before. Planning is almost impossible as nobody knows which way things will move. As the saying goes “It will get worse before it becomes better”.

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