AfricasheW450 - April 2022 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)

April was a month of higher prices and increased traded volumes. Cashew kernel prices in African countries remained stable. They maintained the premium prices that have been a feature for the past year with WW320 holding at US$ 3.15-3.20 per lb FOB. Vietnams export prices moved up strongly toward the end of April. The very low price offers have now disappeared from the market. WW320 is trading in the range of US$ 2.95-3.00 per lb FOB. The higher prices for African cashew kernels reflect lower freight rates and buyers’ interest in high quality, traceable cashew kernels.

International prices for RCN also moved up during the month by US$ 50-150 per tonne depending on the origin and quality of the nuts. Traded volumes have picked up a little but still lag behind recent years, especially for destination Vietnam. Processors may be frustrated by the fact that the rise in kernel prices has been accompanied by a rise in RCN prices making the cost and profit margin calculation as difficult as it has been at any time so far this season. Cost-efficient African processors have been able to source RCN at prices that make sense for kernels export in most of the major producing countries. For example, in Cote d’Ivoire and Nigeria record processing volumes are expected this year.

Farmgate prices have not been impacted by the rise in international prices due to rising costs and a more cautious approach from exporters. Prices are above guide or minimum prices in all producing countries of West Africa. In some countries e.g., Benin, Nigeria and Senegal prices are high due to lower crops and competition for supply. Quality in some regions is now falling. Farmgate prices are expected to drop a little in those countries as a result.

The overall supply forecast for 2022 deteriorated in April. The lower crops in SE Asia as reported here last month are confirmed with estimates suggesting a 30% lower crop this year. The Indian crop is now expected not to reach initial forecasts. Poor weather is to blame with high temperatures, untimely heavy rains and cold nights a feature in a volatile weather pattern. India is the largest consumer of cashew kernels. A lower crop will mean more imports. Import of 1 m tonnes is quite possible up from 875,000 tonnes last year. In West Africa, the crop problems in Nigeria, Benin, Mali and Burkina Faso have been noted here in the past two months. There are still some doubts about the Ivorian crop although 670,000 tonnes are already estimated to have been bought by exporters or processors.

There is better news from the later harvesting countries. Guinea Bissau has had very good growing conditions and a crop at least comparable to last year is expected. Senegal too is expecting a good crop in the region of 50,000 tonnes according to the recently founded Cashew Interprofession. Reliable sources in The Gambia also report a normal crop. These three countries between them deliver about 300,000 tonnes of high-quality RCN which represents about 7% of the world crop. The problem is how to get this product to market.

As in other countries e.g., Nigeria, Mali and Guinea the difficulty of handling large volumes through degraded port facilities or difficult internal networks has been an issue for many years. Now with fewer sailings, higher freight rates and capacity issues, the problems are magnified. Exporters seek innovative solutions such as break-bulk shipment or transhipment through neighbouring countries but costs remain prohibitive.

The combination of weak infrastructure and a strained international supply chain can impact farm gate prices negatively. So an overly complex or unrealistic regulations. Difficulties are emerging in Guinea Bissau as traders are asked to collect taxes from growers on behalf of the government. Senegal has hinted that a regulatory system will be introduced this year. Ghana has introduced some regulations and in Cote d’Ivoire, the system is constantly tinkered with. Business in such environments is difficult. Far too often the farmer pays the price.

During April there was much talk of demand problems. There is no evidence of this so far either in the traded volumes or trade statistics. Vietnam, the major kernels exporter, reported lower exports in Jan-Apr 2022. These were almost exclusively due to the lack of shipments to China due to COVID-19 restrictions. The customs posts on the Vietnam-China border appear to have reached a protocol and shipments have recommenced.  Demand in India appears to be steady. The key markets in Europe are showing good demand despite much discussion of the impact of higher energy prices on consumers.

There is some reluctance among European buyers due to the very strong US$ vs Euro. This can be an opportunity for West African processors that can comfortably sell in Euro. It might seem an obvious conclusion that consumers will buy fewer cashews in harder times but that would have been incorrect during recessions in 2001 and 2008-2009. There may also be a significant change in the reasons that consumers buy edible nuts. In the past, cashews may have been regarded as a luxury snack but today a younger generation of consumers sees the product as part of a healthy diet, not just a treat. Also, look out for high pistachio prices as Iranian production is reduced and potential issues with the production of almonds and hazelnuts.

The 2022 season has had a relatively calm first half compared to years like 2017 when prices surged upwards or 2020 when the pandemic impact first struck. In 2022 the market is still in a recovery stage primarily due to the impact of disrupted supply chains. So far, the signs for increased processing are good. RCN prices are workable for exporters and African processors. The key contradictions remain in the international RCN chain. Buyers of RCN have been cautious. Vietnamese buyers have been able to wait as there was a significant transit inventory in the country. This has been reduced by the poor crop in SE Asia. The window for buying RCN is beginning to narrow. A surge in demand at a time when supply chains are strained could create volatility.  For now, this is limited by low kernel prices.