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Cashews March 03, 2022

The market of cashewnutkernels continues to be unbalanced, illogical, out of wack, or whatever term one wishes to put to it. The prices of kernels are totally not reflecting the current RCN prices and this creates volatility, uncertainty, and potentially a value chain which is not sustainable on the long term.
Current kernel prices are too low and it is not 100% clear why those ‘low’ prices are offered as RCN is not available yet. 3 possible reasons are mentioned:

  1. Processors in Asia are offering lower kernel prices to attract orders. The orders are needed to obtain finance for new RCN purchases.

We have seen similar actions in the past, and depending on how RCN prices ended up, this caused more or less dramatic kernel action later in the season (some 5 years ago, around July is became clear there was global unbalance in RCN supply and kernel prices sky-rocketed. This was one of the worst reactions seen in a long long time and caused the entire value chain to lose out).

  1. Speculation that current uncommitted RCN stocks will be sold at lower levels when new crop is showing up in volume.
  2. Increasing global RCN production – more availability especially driven by Cambodia crop growth and some African growth – prices of RCN to come down and then balance out at today’s kernel prices.

So far 2 & 3 do not materialize. The current uncommitted stocks are in the hands of strong stockholders who are independent and not under pressure to sell at discounted levels. In fact, it is likely in their interest to keep prices of RCN at current levels or even try to increase prices.

Generally on the crops :
News on the new crops becoming available on the Northern Hemisphere shortly (approx. 75% of total world supply) is not super positive. Most crops are delayed and weather conditions have not been ideal. La Nina affects -unseasonal rains- most probably caused some damage and crop size on particular Vietnam and Cambodia seems lower vs earlier estimations.
East Arica crop was also not showing growth, and West African crops are expected to be fair at best where the Eastern part of West Africa is somewhat delayed and the Western side looks good for now.
The realistic scenario for the moment looks like a similar production volume as last year.
And if Vietnam and Cambodia are delayed indeed, one is left to see if the last crop can still come in, as rain will typically start again and might reduce or nullify the last crop (3rd crop which typically can be 10% of total volume).

With regards to demand we are positive. Over the past decade (on average), we have seen a stable growth. India, one of the biggest consumers in the world, was down in consumption in 2020 and 2021 due to Covid but is expected to pick up again in 2022.

To summarize, supply in 2022 will be (in the most positive scenario) equal to 2021 but demand has grown on the back of the low prices and is likely to grow this season too.
So if there is a stable supply of RCN, and stocks in Asia are limited, it might be a tight balance.
What in the end is important for the sustainable growth of the industry is to see steady growth in RCN volume and steady growth in the kernel market. That will encourage all parties in the chain. This of course is totally opposite to the interest of trading companies that need volatility to make a margin on the ups or downs of the prices.