After a muted period in the the Global Cashew Industry, recent turn of events seem to have caught all stakeholders involved in the cashew value chain off guard. Sharp spike in Raw Cashew Nut (RCN) prices and Cashew Kernels prices owing to lower production numbers coming out of all Raw Cashew Nut (RCN) producing regions all over the world along with almost 0 carry in from earlier years seems to have brought this situation.
To further break it down, the sudden change can be attributed to the following factors:
> Miscalculated Production Estimates – The last three years have been very good for crop producing regions with all RCN producing countries recording all time high volumes. This along with numbers released by officials earlier this year especially from the West African region indicated continuation of the same trend. However, with the latest trends coming in the crop is estimated to be down by 15% globally. This has has caught processors from India and Vietnam totally off guard and created a short covering demand from them, which has propelled RCN prices by a whopping 20% over the last month.
> Delayed Season – Due to drought-like weather conditions prevailing all over the world the first crop in most regions was delayed. Historically, due to the muted RCN prices over the last 3 years most processors in India and Vietnam had reduced their RCN stocks to Just-in-Time Inventory basis. Now due to a delay in the season along with estimated lower crop volumes, the processors have been forced to cover themselves which has further fuelled the RCN prices.
> Policy Uncertainty – For instance, Benin is yet to officially announce if it will allow RCN exports, going by earlier seasons, export licenses are handed over to a handful companies once local processors have procured RCN for themselves. However, as mentioned with a delayed crop and lower volumes this year, it is still unclear whether RCN exports from Benin will be possible this year. Usually Benin exports over 1,50,000 MT every year, this policy uncertainty has meant the processors have shifted to Other countries such as Ghana and IVC for their requirements creating more demand in those regions. IVC recently also has paused farmers from trading with traders based out of Abidjan citing RCN shortages for local processors
> Hoarding – West African Raw Cashew Nut traders are anticipating major RCN shortage for the upcoming Indian festival season and thus are holding crops at the origin and waiting for further price increases to maximise their profits. It is believed farm prices haven’t risen as much as FOB prices and considerable stocks are being held foreseeing future shortages. Typically when the prices rise 2X of the % or shortages I.e if the shortage is 15% prices rises are around 30%.
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