Cashew nuts are considered a luxury product and slower economic growth always leads to lower demand for such products, Pratap Nair of Vijayalakshmi Cashews, one of the oldest and largest cashew-exporting house, said and added that demand from China, which was seen compensating for losses in other markets has also taken a turn.
With tremendous uncertainty in the European economy and financial markets, there is a concern about demand for non-essentials. Given the high prices, European buyers seem to be content to buy in small tranches for shorter periods. US demand seems to be steady but no large buying is seen from any buyer, Pankaj Sampat of Mumbai based Samsons Trading said.
Cashew lost significant market share in 2011 due to high prices and reduced availability. Prices of W 320 grade touched $4.50 per pound in 2011 but have declined to $3.30-3.50. Consumption of snack nuts actually fell by 11% in US during 2011 as gains the annual growth of 2-3 %.
Interestingly, the robust Indian market is also recording lower demand for nuts. The market was growing rapidly in the past few years, Pratap Nair said. India is the worlds largest consumer of cashew nuts with trade estimates of consumption ranging from 1,70,000-1,90,000 tonne.
However, the market has found a reasonable equilibrium due to the lower supply and poor quality of nuts from West Africa, Pratap said. Except for Guinea Bissau, there is not much unsold left in the origins, Pankaj said.
Pankaj feels that given the high prices paid for bulk of the raw nuts, shellers who are able to make forward sales are reluctant to sell at the current lower levels. Buyers do not seem to be willing to pay high prices because they are not confident about of demand in coming months, he said.
Trend of thinner forward books makes the market vulnerable and any sudden move by shellers or buyers sways the market with sudden dips and spikes. This volatility makes long term planning more difficult. The outlook for the rest of the year continues to be hazy, Pankaj Sampat added.