The cashew nut market, which is already experiencing the highest price in nearly five years, will spike higher as the demand from US and Europe is outpacing supply from the major growing regions, particularly Vietnam, India and West Africa.
Market price for cashew is estimated to move up to record levels due to the combination of severe droughts and heavy rains in these supply areas saw a reduction in both crop yields and quality earlier in the year, Lady MJ Santos, Founder and CEO of MJS Commodities, a supplier of raw cashew nuts and many other commodities, said.
Global demand for cashews has been growing faster than any other tree nut, including almonds, hazel, pistachios and walnuts, and that spike in popularity is putting a strain on the global supply, which could cause a shock in prices for processors and consumers.
Cashews are the US and Europe’s favourite nut, but the mostly poor farmers who grow them often bear the greatest risk in the trade. Not only a popular snack, the nut is also a key ingredient in a range of foods such as biscuits, snack bars, cereals, sauces and puddings.
Bloomberg reports demand has grown by 53% since 2010, and outstripped production in at least four of the past seven years.
Vietnam, the world’s largest exporter, suffered its worst drought in nearly 100 years with record low river flows, and a range of food crops have been decimated. Over the past year, an unusual dry spell has left 2 million people in the country with acute water shortages and 18 of 63 provinces were in a state of emergency as of May, according to the United Nations Food & Agriculture Organization. As a result, Mekong Delta and elsewhere in Vietnam has cut output of its major agricultural exports including rice, black pepper, coffee and seafood.
This year’s cashew harvest in Vietnam is down by 11%, and prices in that country have already gone up by as much as a third, according to estimates from a growers’ group, which mean trouble ahead stateside: the U.S. is the biggest importer — bringing in about a quarter of all cashew shipments — with folks eating them as snacks or using them to make protein bars and cashew milk.
Vietnam is the largest producer of cashew nuts — responsible for 28% of world production. However, Vietnam also imports shelled cashews, which are processed at large plants in the country and re-exported. Consequently Vietnam accounts for 42% of the world’s processed cashew nut exports. Many of the cashew nuts imported by Vietnam originate from West Africa, which is still experiencing severe droughts that could also affect next year’s crop.
“There’s been no year like this year,” Nguyen Duc Thanh, chairman of the Vietnam Cashew Association, told Bloomberg.
He says prices will probably stay high until the next harvest comes in early 2017.
Although Vietnam exports about 58% of the world’s cashews, the country isn’t totally dependent on its own growers: about two-thirds of the cashews it processes were grown somewhere else — like West Africa, which has seen a big jump in production — and are then processed in Vietnam.
That being said, high demand is still putting stress on the processed nuts market, with export prices jumping 22% this year through August, Thanh said, and other experts say global demand will keep rising this year, against supply that will remain flat or slightly below last year.
While increased output from Africa may offset lost supply in Vietnam, rising demand is still impacting the market for processed nuts. Export prices on average have jumped 22 percent this year to $7,809 a ton in August, Thanh said, citing data from Vietnam’s Ministry of Industry and Trade. Shipment prices averaged $9,000 per ton on an FOB basis in Ho Chi Minh City on Oct. 30, he said.
The festival season, which generally sees a heavy demand for finished cashew in the local market, has not brought cheer to the Indian cashew processing units either.
In India, the price of raw cashew nuts has gone up this time by 40 per cent.
Raw material is not available locally in sufficient quantity forcing the Indian processing units to import it from Tanzania, Ghana and other East and West African countries. There also the prices have gone up abnormally. Moreover, the increase in import duty enforced this year from 4.36 to 10 per cent has dealt a deadly blow to the Indian cashew industry.
India produces 6-7 million tonne of raw cashews per annum and was, until recently, the leading supplier of kernels to the global market.
Lower supply of nuts in Vietnam, India and West Africa has made raw nuts very costly. Average price of kernel has moved to $4.75 to 4.80 per pound for W320. But demand is seen robust and ahead of supply even at this high price.
“Raw materials are overpriced and entry of new processors in Africa and India have further worsened the market for processors”, Pratap Nair of Vijayalakshmi Cashews, one of the oldest and largest cashew-exporting houses, said.
“The current price level is likely to extend for quarter and depending on the demand it may move up further,” he added.
In the April-September period, cashew shipments from India dropped 25 per cent in volume and 13 per cent in value terms, as imports of RCN have seen a substantial decline during the first five months of 2016-17, marking a continuation in the downward trend in exports of the nut. Total imports by India fell by 32 per cent to 5,00,329 tonnes.