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MARKETING

Cashew Market 2020 review & looking forward to a better 2021
Monday, 04 January, 2021, 08 : 00 AM [IST]
Our Bureau, Mumbai
As we exit “Forgettable 2020” and step into ”Hopeful 2021”, here are some observations and thoughts on the Cashew Business – keeping price movements aside for a while.

Some notable points about developments in the Cashew Market in 2020 :

1)    Vietnam and Cambodia : Harvested bumper crops – in total, about 20 per cent more.  Combination of RCN and partly processed kernels imported into Vietnam was approximately 15 per cent higher. Both are reflected in Vietnam kernel exports - about 10 per cent higher. Vietnam maintained its dominance as the largest kernel exporter.

2)    India : Significant adverse effects due to the lockdown and restrictions,  Processing volumes were down. Consumption in 2 important segments (HORECA and un-organised snacks and sweets) was severely dented.  Exports were limited to specific niche markets and buyers.  At the end of the year, kernel inventory has come down due to some revival of demand in Q4.

3)    Africa : Strengthened its position in the Cashew sector with about 55 per cent of the World production.  Overall production was unchanged although there were variations in individual countries.   During peak of the harvest, movement (goods & people) was restricted. Shipments were spread over a longer period. Kernel yield and quality were adversely affected.  Processing increased – evident from increased export of kernels (finished and partly processed).

4)    Tanzania : 2 crops (2018 + 2019) were shipped between Sep 2019 to Mar/Apr 2020. Shipments of 2020 crop have started arriving in India and Vietnam.  Despite limited kernel activity, most of the 2020 crop has been sold in the auctions at higher than  expected prices. (Note : 1 Tanzania crop yields > 50K of kernels. Although 2 crops were processed in 1 year, there does not seem to be any excess inventory in the chain – except broken.  Which means overall consumption has been strong despite the reduction in India).

5)    USA & EU : The 2 largest consumers (after India) saw significant increase in consumption (imports) despite Covid (or maybe, because of it.).  There was reasonable growth in other importing countries also.

6)    China – 1 of the larger markets (buying almost exclusively from Vietnam) has seen revival of imports in the last few months after a significant decline in FH of 2020.  It will probably end the year with about the same volume of imports as 2019.

 Looking towards 2021, here are some thing to keep an eye on :

1)    Covid  :  Quite expectedly, this will be on the top of everyone’s mind. Uncertainty has increased after the recent developments in Europe. If things worsen, it could have an impact on movement of 2021 African crop.  Plus the quality of information that we get due to less people going to Africa. And other unforeseeable impact on supply & demand.

2)    Crop prospects and movement : This is the next important development which will be closely watched. So far, there are no adverse news from any origin.  In coming weeks, as usual, we will hear lot of news (and rumours).  And that will have an impact on what people do in the early part of the harvest.

3)    Vietnam : RCN inventory seems to be better than India.  If Vietnam and Cambodia crops are good like 2020, Vietnam processors will  have enough RCN for FH 2021 processing. They may not be in hurry to buy in Africa and also will not be impacted much if there are delays in Africa shipments.

4)    India : seems to be coming back to normal. If this trend is continued, we can expect a quick and smart revival of domestic demand as Cashews have multiple uses in the Indian diet. RCN inventory for Q1 processing is limited. If there is a big increase in demand, we could see a rush for early arrivals of 2021 crop.

5)    Consumption : Apart from the expected demand revival in India, we can expect growth to continue in all markets.  Adequate supply and reasonable prices for all Nuts coupled with increased preference for Natural and Healthy food should help the trend.

6)    Brokens and Lower Grades : Slow sales continue to be a challenge. This is affecting the processors in 2 ways – cash flow is adversely and overall realisation per mt of RCN is reduced.  As an industry, strong and collaborative efforts are required to make these lower grades suitable for use as ingredients in food products – this will help viability of processing and increase farmer incomes.

7)    Freight : Rates from Asia have gone through the roof.  Increases are upto 2-3 per cent of value of goods which is quite significant when compared to the margins of the various links in the chain (especially the traders). Some increases are expected from Africa to Asia also.

8)    Market : Delicately poised.  If there is strong kernel demand in Jan/Feb, opening RCN prices will be high and will stay high for most of the crop.  If kernel demand is limited / slow, we could see a dip in RCN prices  between 15 March-15 May when arrivals in origin are at peak.

If the Indian revival is sustained and if growth trend in other market continues (even at lower level), we expect a gradual rise in kernel prices after things settle down (post harvest).

Unless RCN price comes down significantly, there is not much room for decline in kernel prices as they are already very low.  As overall supply of all Nuts is good, we don’t expect any big jump in prices either.

To end this report, here are some universally known facts which I felt would be good to put it in 1 place to provide food for thought for all of us :

1)    About 80 per cent of World Production (Northern Crop) is harvested in Q2.  This is unlikely to change in the foreseeable future.

2)    Over 50 per cent of World Production is produced in 4 countries (IVC + India + Vietnam + Cambodia) with balance spread over about 20 countries.

3)    About 25 per cent of World production is always held as working inventory at different stages of the supply chain.

4)    Over 80 per cent of World Production is processed in 2 countries (India + Vietnam) - with both importing 60 to 70 per cent of what they process. This will change in the next 5-7 years as processing in Africa increases.

5)    About 75 per cent of World Kernel Exports of approximately 650K is from 1 country (Vietnam).  This also will probably change in the next 5-7 years with Africa becoming significant player in kernel market.

6)    Over 30 per cent of kernels produced (about 925K) are consumed in India.  If we take Asia as a whole it would account for about 50 per cent of World Consumption.

7)    About 60 per cent of the balance = 30 per cent of the total is consumed in 2 regions (North America and Europe).
 
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