<p></p><p>The BIG news in the Indian Cashew Market is the 9.55% Duty on Import of RCN into India. Although this may not have any significant impact on the cashew kernel market, it will make things difficult for Indian shellers who are already burdened with high processing costs and lower RCN availability. Impact will be more for those catering to domestic market but exporters will also be adversely affected as it is not easy to operate under Duty Refund / Duty Exemption schemes. Strong efforts are being made for re-consideration but outcome is uncertain. <br></p> <p>Current kernel prices are W240 from 3.75 to 3.95, W320 from 3.50 to 3.70, W450 from 3.45 to 3.55, Splits from 3.10 to 3.25, Pieces from 2.90 to 3.10 FOB <br></p> <p>Crop is late in many origins. Arrivals are slow, but expected to pick up by end of March. If rains are also delayed, crop size will not be affected. <br></p> <p>RCN prices have come down a bit from the high levels of Jan/Feb but are still not in parity with kernel prices. As we mentioned in our report of 13FEB2016, RCN prices in Jan/Feb 2016 were about 10% higher than 2015 average which was already 15-20% higher than 2014 prices. <br></p> <p>If RCN prices don’t come down or kernel prices don’t move up, shellers will be reluctant to buy any large volume of RCN. Their margins were under pressure during 2015 as there was no commensurate rise in kernel prices (margins will be non-existent or negative with present prices). Note : If there is no reversal of import duty, Indian processors buying ideas will have to be still lower !! <br></p> <p>On the kernel side, the market has been very steady during Jan/Feb and continues to be so in March. Some business is being done in all markets but off-take is slow and there is resistance to offers at higher levels. Some buyers seem to be well covered for next few months. Some others who need to buy do not think it necessary to pay premium for forward cover – they are content to buy nearbys. <br></p> <p>Looking at recent decline in prices for others nuts, there is a feeling that cashew prices should also soften. Cashew prices did not go up when prices of other nuts went up in the last 2 years. They have been moving within a very narrow range for the last 4 years despite a significant increase in RCN prices in last 2 years. We cannot expect any decline from current kernel price range unless RCN prices come down to 2014 levels (at least). <br></p> <p>Although outlook for 2016 supply looks comfortable, there could be squeeze in kernel supplies for few weeks due to late crops and reduced RCN buying by shellers if disparity continues. For some reason, if RCN prices don’t come down to reasonable levels, we could see a difficult market in second half of the year.</p><p>Pankaj N. Sampat<br></p><p></p>