AfricasheW450 - April 2023 Market Analysis
Cashew Market Outlook
By: Jim Fitzpatrick
(Please note that all views expressed in the “Cashew Market Outlook” section are those of Mr Fitzpatrick and do not necessarily reflect the view of the African Cashew Alliance)
The past month has seen the continued return to form for kernel exports from Vietnam. Shipments to all destinations continued the improvement seen in March. Notably shipments to the US and China continued back toward positive performance. Overall exports of cashew kernels are up by an estimated 6% for the first 15 weeks of the year making up for a poor January. This is expected to continue for the second half of April and May.
Prompt and spot buying has been a feature whilst forward buying of kernels remains muted. This may change. The much-publicized negative economic forecasts of 2022 appear to have been overstated. The US appears to be out of danger of recession. Inflation is falling. Interest rate rises have slowed in the US and Europe. Many consumer groups are suggesting that supermarket chains took advantage of the negative forecasts to increase prices without good reason thus damaging demand. Tree nuts are a case in point. Supermarket prices in the US increased at the end of last year when many nuts, including cashews, were at low wholesale prices. A new, highly emotive, term has been coined in the news media to describe this - “greedflation”. If true, for cashews it has an impact right back to the farm gate.
The RCN trade saw international prices ease down in April due to lower quality and slower trade. Many believe that prices have now reached a level of stability. This is not reflected in the traded volumes. Vietnam's imports are up about 8% for the year to mid-April. It is reflected in the prices that buyers are prepared to pay as cashew kernels have not yet moved up to sustainable levels compared to RCN. In the past week, kernel prices from smaller Vietnamese processors for prompt shipments have dropped back by about five cents per lb. to a lack of firm buying interest. A quick (strictly a guideline only) calculation of the unit cost of imports compared to the value of exports from Vietnam shows a loss of about 5%. Difficult times remain for Vietnam processors that continue to base their marketing strategy on lower prices even when there is very little competition in the market. Is this a consequence of having so many buyers of kernels and traders of RCN so heavily involved in processing?
At the farm gate in West Africa fortunes are varied. Recent days have seen a pickup in demand in Benin as the RCN export season approached. In Nigeria and Ghana, prices have stabilized for better quality material as the crops come toward their end. Prices in Senegal have opened at high levels although they may ease as more products become available. In Guinea Bissau, the prices have stabilized albeit below the minimum pricing and news is awaited on the season's export tax regime with recommendations now in the hands of the government that would reduce export taxes. Cote d’Ivoire is showing a less positive trend. Farm gate prices have slipped well below the minimum levels. Processors find themselves in a position where legally and ethically, they should pay at least the minimum price. Many are. But others are trying to find ways around the law and undermining the regulations and the future of the sector.
In terms of overall global supply, the forecast for last month remains valid. The Indian crop forecast is positive but will not impact international RCN demand as India imports 50 - 60% of the RCN it processes. The Cambodia crop may be lower than expected based on Vietnam's import figures. Earlier estimated at 700-750,000 tonnes, it could be closer to 600,000 tonnes. Supply still looks adequate to meet demand, possibly with some carryout but no significant oversupply. There are not too many developments that could change that at this point. However, if demand from India were poor then it could be a more challenging year. RCN exporters and processors will be watching closely as India emerges into its peak season demand for kernels.
There have been some interesting developments in policy and regulation in the past month. In Vietnam, Vinacas, the cashew association, has voiced negative comments on the import of “borma” kernels (partly processed unpeeled kernels). They say that this trade is damaging the processing industry and should be taxed. They blame large trading companies. Some suggest that if African countries tax RCN exports, then Vietnam should tax “borma” kernel imports. It seems to me that this trade is not good for African or Vietnamese processors. It is a counter trend on food safety and sustainability.
From Tanzania, the announcement of a ban on RCN exports from 2025/26 seems optimistic given how long it takes to build a processing industry and the inadequate budget allocated for processing development by the government. However, as a statement of policy and the way forward, it is an interesting development that could make sense given a realistic timeframe and investment strategy.
Looking forward to the rest of May and into June, it seems that the chances of price falls are very limited; modest price rises seem possible. International trade is likely to continue to regain momentum both on kernels and RCN. Indian RCN buying, the development of the season in the SeGaBi reason and US forward buying are the key factors to keep an eye on. Looking further forward, a strong El Nino weather phenomenon is expected by meteorologists in 2023. This can cause unusually high temperatures and cause drought conditions impacting crops. Strong La Nina in 1998/99, 2009/10 and 2015/16 were all followed by poor cashew crops in Asia.
