Lower supply of raw nuts from Western Africa and higher consumption in Asian countries is driving the cashew kernel market firmer.
Prices are higher by 30-40% on year-on-year basis but consumption has not fallen due to robust demand from the Asian markets. Processors and traders are wary of contracting huge volumes and prefer to buy when needed.
Pankaj Sampat of Samsons trading told Fe that, the last 9-12 months have been exceptionally difficult for everyone in the cashew business and it appears that it will continue to be like that for few months more. ?Till supply-demand balance is restored and a new trading range is established, the uncertainty will continue to keep the market on the boil,? he said. ?There continues to be regular buying from some market or the other every few weeks. Every buying spell is taking the prices to a new higher level,? he added.
?Third quarter of the year will see good demand from India and West Asia due to the festivals. Also, we can expect continuation of the pattern of periodic buying by the traditional markets as most buyers do not have forward cover and will need to buy at regular intervals,? Pankaj Sampat said.
Indian cashew production, which accounts for more than a fifth of the global production, is slated to come down during 2010-11 due to atypical rains and erratic temperature in the producing region, officials of the Kochi-based Directorate of Cashew and Cocoa Development said.
According to the data provided by the agency, Indian production during 2009-10 stood at 6.13 lakh tonne. During 2008-09 it was around 6.95 lakh tonne and 6.6 lakh tonne in 2007-08. India has to import more than half of its requirement of raw cashew due to the poor production.
Unseasonal rains in Vietnam are also causing concerns. Drying is a problem and this will affect kernel yield. Crop size may also be lower if rains do not stop. This could lead to squeeze in kernel supplies in the second quarter. India and Vietnam account for more than 50 % of the global cashew production.
Pankaj feels that at the moment, there is nothing on the horizon to warrant a large, sustained decline in prices. ?Supply-demand balance will not be restored until there are at least two good crops.