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  • Volatility in cashew prices raises supply chain breakage risk

    Jun 1st, 2024

    At a press conference on the afternoon of May 31, Mr. Nguyen Minh Hoa, Vice Chairman of the Vietnam Cashew Association (VINACAS), warned that African raw cashew exporters have been defaulting on contracts due to significant price fluctuations over the past month (an increase of nearly US$500 per ton). This situation poses risks of disrupting the global cashew supply chain by the end of the third and fourth quarters of 2024 and early 2025. If this situation occurs, it could lead to legal disputes between Vietnamese cashew processing businesses and international importers, roasters, and supermarkets when they are unable to deliver goods as per signed contracts, thereby affecting their reputation and resulting in a loss of market share.

    According to VINACAS, the recent decision by Ivory Coast, the largest supplier of raw cashews to Vietnam, to temporarily halt exports has caused shipment delays. Currently, many shipments of raw cashews are arriving late and in smaller quantities than contracted, leading Vietnamese processors to face a shortage of raw materials. Raw cashew containers currently in transit are being offered at higher prices. However, in order to fulfill their contracts and protect their reputation, Vietnamese businesses are compelled to purchase these cashew containers at higher prices because they have already signed long-term contracts for processed cashews.

    The International Nut and Dried Fruit Council (INC) forecasts a global decline in raw cashew production by approximately 7 percent due to adverse weather conditions. This, coupled with Ivory Coast's temporary halt in raw cashew exports, has caused significant market volatility.

    Mr. Ts Quang Huyen, CEO of Hoang Son 1 Corporation (Binh Phuoc Province), noted that some traders in Ivory Coast are exploiting the situation by hoarding stock and raising prices, which has prompted other businesses to do the same, creating significant challenges for Vietnamese companies. His company signed a contract early in the year with a West African partner for 52,000 tons of raw cashews but has merely received 25,000 tons so far. The remaining quantity is being offered at higher prices and lower quality.

    Mr. Cao Thuc Uy, CEO of Cao Phat Company, mentioned that while they had anticipated some issues, the current rampant price increases were unforeseeable. The price of raw cashews has surged by 40-45 percent, whereas that of processed cashews has only climbed by 30-35 percent. It represents the biggest challenge ever faced by the Vietnamese cashew industry.

    To mitigate potential negative developments, Mr. Bach Khanh Nhut, Permanent Vice Chairman of VINACAS, stated that the Association's Executive Committee has established a task force to meet with the government and relevant ministries (Industry and Trade, Foreign Affairs, and Finance) to seek support and resolve difficulties. They are also working with the Department of International Cooperation to send official letters to several West African countries, requesting the lifting of the temporary export ban on raw cashews. Previously, VINACAS had sent letters to the Ivory Coast Cashew Exporters Association, reminding businesses to adhere to their signed contracts. For importers of processed cashews, Vietnamese companies facing raw material shortages should proactively negotiate and communicate with their partners to ensure understanding and support under the current circumstances.

     

    Furthermore, the Association will compile a blacklist of raw cashew partners who intentionally breach agreements to alert the entire industry and collectively refrain from future transactions with them. Legal action might be pursued against West African companies failing to fulfill their obligations for authorities to enforce measures against non-compliant shipments upon arrival at Vietnamese ports.

    Moreover, VINACAS has urged the Ministry of Agriculture and Rural Development to implement suitable policies for the domestic cultivation of cashew trees, along with initiatives to enhance seed quality and productivity.

    Presently, domestic raw cashew production only satisfies 10 percent of processing plant demand, approximately 3.5 million tons per year, with the remaining 70 percent needing to be imported, of which 70 percent originates from West African countries.

    By the end of May 2024, cashew export turnover reached $1.55 billion, up 19.3 percent compared to the same period in 2023.

     

     


    Source: https://en.sggp.org.vn/
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