17 APR 2018
Cashew kernel prices came down significantly during March with some processors selling W320 as low as 4.25 FOB for prompt and nearby shipments. Prices have moved up a few cents during April but still lower than the levels traded during Jan/Feb. Differential between the lowest and highest offer at any given time has widened considerably.
Current range of prices is W240 from US$ 4.75 to 5.00, W320 from US$ 4.40 to 4.85, W450 from US$ 4.35 to 4.60, SW from US$ 4.30 to 4.50, Splits from US$ 4.15 to 4.40 and LP from US$ 3.50 to 3.75 FOB
RCN prices also declined during March - lowest levels were 200-300 dollars lower than the highs of Jan / Feb. Now, prices seem to have bottomed out and there is a slight pick up in the last 2 weeks. Current prices are in the range of US$ 1900 to 1950 for IVC, around US$ 2000 for Ghana, around US$ 2050 for Benin and US$ 1900-2000 for other origins (Burkina, Togo, Conakry etc)
The current RCN prices are lower than the peaks of Nov 2017 - Feb 2018 but higher than the range in which majority of the 2017 crop was traded.
The current kernel prices are lower than the peaks of mid 2017 and near the bottom of the range traded during 2017.
As noted before, RCN prices have moved up about 60-70% in the last 3 years where kernel prices have moved up only 30-35%
Overall, supply of kernels in 2018 is likely to be the same as 2017. Vietnam & Cambodia will have bigger crops than they have had in last 2-3 years but the earlier expectation of huge crops in these 2 origins has been tempered down from 600-650K to about 450 or max 500K. There is some concern about crop in some areas of India. No adverse news from West Africa but kernel yields are certainly lower than normal at this stage of the crop. This is a trend we have been seen for the last few years - African crops are bigger but kernel yields are lower.
Vietnam has been slow in buying in West Africa. One reason is the higher purchases from Tanzania in the last quarter of 2017 coupled with bigger crops in Vietnam & Cambodia. Other is reluctance of processors to pay the very high prices quoted in Feb / early March in the face of slow kernel market. Large processors have been buying in the declining market. In the last couple of weeks, there are signs of more processors starting to buy.
Indian processors have bought reasonable quantities in West Africa mainly because low purchases in East Africa meant stocks were low. They will probably continue to buy if prices remain around current levels.
Kernel buyers have been comfortable with their strategy to buy small quantities for nearby shipments as prices have been coming down. As there is no concern on supply, they have not felt the need to take any large forward covers - especially when the processors are asking significant premiums for deliveries beyond couple of months.
The fact that not much kernel business has been done for second half 2018 shipments is a double edged sword. It means that processors will need to sell at regular intervals to maintain inventory & cash flow levels. It also means that buyers will have to buy at regular intervals to have enough product to deliver to roasters and roasters to retailers. The problem could be if the RCN prices do not come down further (or go up) without an increase in kernel prices 0r kernel activity. Processors would reduce RCN buying and this could result in reduction of conversion & kernel availability for some periods although RCN availability may be okay.
We have seen more than once that cashew market can do what very few expect, BUT
Our feeling is that in the coming weeks, RCN prices will stabilise around current levels or move up a bit. If that happens, processors will be forced to increase kernel prices as their margins are already under pressure with current prices. And that may lead to an increase in kernel activity if buyers see the market turning.
Although we do not expect prices to move up too much, we would not be surprised if W320 are trading around the high of the current range. Unless something big happens, downside is limited.
Would appreciate your feedback + comments on supply prospects & demand trends and your views on market trend in coming weeks and second half of 2018
Pankaj N. Sampat
Source: SAMSONS TRADERS