<p></p><p>The Cashew Market has been at a cross-road for most of May, waiting to see which signal turns green - right or left !! <br></p> <p>In a market that has been very quiet, offers (and some trades) in Week 20 and 21 have been in the range of W240 from US$ 4.25 to 4.45 / W320 from US$ 3.95 to 4.15 / W450 from US$ 3.85 to 3.95 / Splits from US$ 3.25 to 3.40 / Pieces from US$ 3.00 to 3.15 FOB for shipments upto Sep/Oct.. No business reported for later positions but as usual, offers for far forwards are few cents higher than current range. <br></p> <p>Let us have a look at what has happened so far in 2016 : <br></p> <p>- Jan & Feb were quiet. Supply situation was comfortable. Buyers were able to buy required volume without difficulty. Although sheller margins were under pressure since mid 2015 because 2015 RCN prices were higher than 2014, they were not able to increase kernel prices due to comfortable situation. They were just able to make both ends meet by selling for nearbys at prevailing prices. Prospects for 2016 crop were looking okay and there was no reason for buyers to consider covering forwards at the higher levels that are usually asked by large processors for later positions. <br></p> <p>- On Feb 29, Government of India announced an Import Duty of approx 10% on import of RCN. There are some schemes for refund, exemption etc but overall this makes life difficult for Indian processor and adds to cost of doing business. It was expected that this would lead to softening of RCN prices. On the contrary, RCN prices started moving up from middle of March !!! <br></p> <p>- Immediate cause for increase in RCN prices was that arrivals were slower and later than expected raising concern about the size of the crop. Reports of lower out-turn at the beginning of the season in most areas added to the fears and induced continuous buying at increasing prices. <br></p> <p>- Late arrival of RCN meant reduced processing in Feb & Mar resulting in tightness of kernel availability + delays in kernel shipments to USA & Europe. Buyers were forced to pay higher prices to secure supplies to meet delivery commitments for 2nd quarter. Added to this was the apprehension of lower kernel availability through 2016 due to short crop + lower out-turn. This fuelled spiral of one price increase leading to another. <br></p> <p>- Between mid-March to early-May, W320 moved up from range of 3.55-3.75 to 4.05-4.20. Most of the business during this price rise was for nearbys but some “ caution “ buying was done for later positions also. <br></p> <p>- During May, market is taking a breather. Prices for RCN as well as kernels have come down a bit - not much. Waiting for trigger to be pulled to make a move. <br></p> <p>Now, a look at what we can expect in the coming weeks : <br></p> <p>- It appears that although the crop is adversely affected, the impact may not be as bad as feared. In most regions, volumes may be same as last year while some regions may see reduction of 10 to 20%. Although there are reports of some higher out-turn stocks showing up in some regions, average out-turn is definitely going to be lower. We are seeing a trend of reducing yields in many origins since last 3-4 years and this needs to be watched in coming years <br></p> <p>- RCN prices have come down from the peaks of April 2016 but are still high compared to 2015 average and much higher than 2014 average. So, it would not be realistic to expect any significant decline in kernel price although we might see a dip from current levels when supplies pick up in 3rd quarter. Dip cannot be large because the high price paid for RCN will not allow shellers to sell at much lower levels. <br></p> <p>- At the same time, we don’t see much chance of any big jump in prices. There is an unspoken fear that if the prices go up too much, it would seriously impact demand leaving the hot potato in the hands of the most vulnerable parts of the chain (shellers and RCN traders / growers). <br></p> <p>- As RCN arrivals into India & Vietnam are picking up from May, shellers will need to keep selling on a regular basis. Similarly, there will be a need for continuous buying as many of the buyers do not have any significant cover for Sep/Oct forwards. Also, Aug-Nov/Dec is the peak consumption period in most markets (especially the biggest consumer - India - which is a “spot” market) <br></p> <p>- Like many other commodities - and specially tree-nuts - we feel that we will see cashews moving up to a higher than historical price range. After having moved in a 3.00 to 3.50 range for a long time, the new “ normal “ could probably be 3.75 to 4.25 with “ comfort “ zone around 4.00 dollars. <br></p> <p>- The next 6-8 weeks will give us a fairly clear picture of availability for the next 6 to 9 months and the average in-shell cost. What happens with kernel prices in Aug/Sep will have an important bearing on off-take for last quarter of 2016 and first half of 2017.<br></p><p></p>