In-Shell Cashews

The cashew market continues to face challenges with another month confirming a shortfall in crop yields. The unexpected crop shortage, after multiple years of stable production, has significantly impacted the supply side.

In the Ivory Coast, which accounts for approximately 50% of Africa's total cashew supply, crop arrivals did not improve in May. This prompted the local government to halt all in-shell trading activities to support local processors in securing enough crop. It remains uncertain when this export ban will be lifted.

In Vietnam, local crops have been reported to be over, with in-shell cashews either already processed or used for nearby commitments due to delays in in-shell arrivals from Africa. To fill any remaining gaps, local processors have turned to higher-priced Cambodian in-shells.

Kernel Cashews

Over the past three seasons, kernel prices have been trading at a disparity, leading to a significant correction in line with current in-shell prices. Despite this correction, margins for Asian processors remain very thin, suggesting that further adjustments may occur as the season progresses.

Many kernel processors are struggling to fulfill existing contracts, which were agreed upon at lower price points. This has led to cancellations or requests to postpone commitments to later months. Destination markets have been running tight inventories due to high interest costs and uncertainty about market direction. Hopes for a second flush to make up for earlier short arrivals did not materialize, exacerbating the situation.

Kernel prices have sharply corrected and increased to levels closer to parity with in-shell pricing. It remains to be seen how destination markets will react to these new price levels, which are significantly higher than the original commitments to end customers. Consequently, destination markets will play a crucial role in determining future price developments.

Bullish Trends

• Potential crop shortfall continues to loom.
• Local kernel processors struggle to find in-shells that meet the quality requirements of destination markets.
• Both processors and destination markets are operating with limited supply.
• The Ivorian export ban has further disrupted supply chains.

Bearish Trends

• A sharp rise in prices may lead to a temporary cooling-off period.
• Rapid increases in raw material prices could result in higher shelf prices, potentially affecting consumer spending in regions with weaker purchasing power.

Comment

The cashew market is navigating a complex landscape of supply shortages, price corrections, and regulatory impacts. The current dynamics underscore the importance of flexibility and adaptability for both processors and buyers. As destination markets respond to new price levels, their actions will be critical in shaping the market's trajectory in the coming months. Stakeholders should closely monitor these developments to make informed decisions and mitigate potential risks.

Source:Ofi