Rally in cashew mkt likely on low stock, high demand

Written by Rajesh Ravi | Kochi | Updated: Dec 1 2009, 04:55am hrs
Lower inventory with major buyers and lesser availability may to trigger a rally in the cashew market. Traders said with supply coming only from two producers, Tanzania and Mozambique, processors are scrambling for raw nuts adding to the firmness of the market.

With big retailers tending to cover only for shorter period, the pent up demand from all sectors could trigger a rally until the major producers like India, Vietnam and West Africa enter the market in March, traders said.

The first quarter of 2010 will be a decisive period. If buyers feel that consumption would be back to normal like other commodities, their demand would be significant, Pankaj Sampat of Samsons Trading told FE. Export shipments from all origins have been about 10% lower in 2009. Considering that importers and users already started reducing inventories from mid 2008, this means that current inventories in importing countries are very low, even after accounting for lower consumption.

The indications are good and point towards a good year for cashew. If the general good feeling in all other sectors reflects in the cashew trade, we could see a firmer market, Pratap Nair of Vijayalakshmi Cashews told FE.

If demand in first quarter is strong, prices will remain firm and could even move up further. If activities in the first quarter remain limited to small top-up buying, the market could ease a bit with crops coming in from major sources, Pankaj said.

Traders were expecting the market to rebound during September in the backdrop of a supply crunch. With sellers refusing to lower their prices, trading during September and October was low and quiet.

According to industry experts, buyers in Europe, Japan and Australia do a major portion of their buying for the next season during September and October. US buyers also stock in advance for Christmas and other festivals. Cashew, a premium commodity, has been the worst hit in the global recession with consumption slowing down.

Pankaj feels that the trade dynamics in cashew has changed because of recession. Big retailers are not only keeping lower inventory, they are covering for lesser time. This would lead to increased volatility in 2010 due to mismatch of buying and selling needs he added. Consumption in the Indian market has really matured in the last few years.

Domestic demand is seen increasing and it is very attractive for traders. This is reflected in the increasing import of raw cashew in spite of a fall in exports, Nair said. Indian consumption could be a trigger point in the global trade in coming days given the huge size of the market and the growing retail sector, he added.