Failing to cash in on cashew demand

Written by Rajesh Ravi | Updated: Oct 29 2011, 09:03am hrs
Munching cashew nuts may not be easy on the pocket, but globally more and more people are realising that cashews are good for health and so, in a nutshell, cashew trade is looking at a healthy growth. The demand for cashew nuts has been growing consistently over the last five years, led by increasing consumption in India, China and West Asia. In fact, India is now the largest consumer of cashew nuts in the world.

According to a report on the global cashew industry, India was a prominent supplier of nuts to the American market and commanded 50-60% of the market share. However, Indian exports have been declining over the last six to seven years due to intense competition from Vietnam. In 2007, Indian share of the US market slipped to just 33%. Brazil has also slipped behind from 30-40% market share to 20-25% due to the emergence of Vietnam, which has gained market share at the expense of the two.

Experts say that the emergence of Vietnam has changed the dynamics of the global cashew trade. US imports from Vietnam has increased to 45 million kg, which is 36% of the total imports in 2007 from less than 100 tonne, or less than 1% of all imports in 1994 and 1995 . Competitiveness of Indian cashew industry lags because of its reliance on imported raw cashew kernels and the scattered non-mechanised processing sector that depends on labourers.

India has to import more than half of its requirement of raw cashew due to poor productivity. The productivity is three to four times lower than that of Vietnam. However, Vietnam has hardly 10% of the worlds cashew farming area but it produces 34% of the worlds cashews. On the other hand, India has the largest share of land under cashew (24%) but has a share of only 19% of the total production. The productivity of Vietnam is 2.8 tonne, while the average productivity in India is only 663 kg per hectare.

As the economies of India and China are projected to grow steadily over the next few years, cashew consumption will also rise simultaneously. The growing realisation that cashews are in fact a healthy addition to ones diet, an increasingly health conscious society will continue to fuel growth of cashew consumption, Pratap Nair of Vijayalakshmi Cashews, one of the oldest and largest cashew exporting house, said.

India is the worlds largest cashew consumer with estimates ranging from 1,70,000-1,90,000 tonne, said Pankaj Sampat of Samsons Trading. The next biggest consumer is the US, with consumption of approximately 1,25,000 tonne. Consumption in the traditional markets of US, Europe, Japan, and Australia has been stagnating or showing small growth while consumption in other Asian countries has been growing, he said. The global cashew trade is estimated at around 5, 13,750 tonne on kernel basis in 2010. India is the largest producer and processor of cashews in the world, with export of 91,559 tonne of cashew kernels valued at R2,598 crore and 11,364 tonne of cashew nut shell liquid at R31.85 crore in FY11.

The prospects for the Indian cashew industry look bright. The concerns over euro zone debt crisis and fiscal deficit in the US may keep the cashew market volatile in near term. However, once these issues blow over and the fundamentals of demand and supply kick in, markets will stabilise, Nair said. But the major challenges facing the Indian cashew industry is in achieving self-sufficiency in supply of raw cashews and increasing processing costs, he added.

The Indian cashew industry requires about 15 lakh tonne of raw cashew annually but the domestic production can cater to only less than half of this quantity. For the balance, India has to rely on imports of raw cashew from West Africa, East Africa and Indonesia, Nair said. India may face more competition in the future for market share and be forced to buy kernels from African countries at higher rates, he said.

The nation also loses on the processing sector as the growing wage bill of the labourers puts it at an disadvantage compared to Vietnam and Brazil, where the industry is mechanised and consolidated. Wages in the Indian cashew industry has gone up by 35 40% this year, significantly increasing cost of processing. However, wages have moved up only by 10 15% in Vietnam, our strongest competitor in the international market, Nair said. Despite an increase in wages, the sector still faces labour shortage. Therefore mechanisation of cashew processing is now becoming a necessity. Many processors have started installing kernel-peeling machines and efforts are on to develop an efficient automatic-shelling machine, he added.

There is good scope for growth of the cashew trade but we need to increase production to provide confidence of stable supplies. Increasing production should be the top priority. Apart from the assistance to small-and medium-sized farms, it is probably time to start acting on organised large-scale farming, Sampat said.