Cashew processors take a hit as global prices zoom

Written by Rajesh Ravi | kochi | Updated: Jan 31 2011, 06:45am hrs
Rising price of raw cashew nuts are causing concerns for the Indian processing and export sector.

With some African countries like Nigeria holding back raw nuts and demanding higher prices for them, Indian and Vietnam processors are left with no options but to increase the prices of cashew kernels, which in turn could affect consumption.

Nigeria has almost doubled its raw nut prices in the last few days. Tanzanian nuts are over and now Ivory Coast and Benin are the source for good quality nuts, P Nandakumar, a trade consultant said.

Pratap Nair of Vijayalakshmi Cashews told FE that raw materials prices are very high and not viable for processors.We cannot buy and process cashew at such high prices. Indian export volumes have declined in the current financial year due to the low supply of nuts from Africa, he said.

Last year, output dropped in India and Vietnam. Due to adverse weather condition in most growing areas raw seed production was down by 15-20% in 2010. Prices of raw cashew are very high, Pratap said.

Although there were fears that consumption of cashew and other nuts would be hit by the global recession, but it was not so. There was reasonable growth in Europe and US, which grew by 5-8%. India, China and the Middle Eastern markets have registered double digit growth, he said and added that Asia, China and West Asian markets are the new growth engines of nut consumption.

Pankaj N Sampat of Mumbai-based Samsons Trading Co said says that there has been a sea-change in the geographical distribution of cashew consumption. India has been the largest consumer of cashews for some years and in the last 2-3 years, consumption in other Asian countries has also been growing fast whereas consumption in traditional markets has been flat or showing small growth in some segments, he said.

Asian market is a spot market where price changes are passed on to final consumer almost immediately,he added. This has meant that their buying prices have to be dependent on the Asian spot market prices. This phenomenon has changed the structure of the cashew market and dynamics of price movements, Pankaj said.

Supply will continue to be tight for a few months. Supply prospects and demand trends for 2011 are uncertain. All eyes now are on the three big crops coming form India, Vietnam and West Africa which will start arriving in a few weeks. So far there is no adverse news from any origin, Pankaj said. We expect a lot of volatility for coming months depending on news about crop prospects and a steady market around current levels for next few months, unless there is big negative news from the demand side, he added.