In-Shell Cashew Prices on the Rise

In the first half of the month, in-shell cashew prices continued to climb due to several key factors, including a crop shortfall and lower yields. The Ivorian government's export ban remained in place, albeit slightly adjusted, ensuring that only local processors in Ivory Coast could meet their requirements for the entire season.

Contract Defaults and Price Sensitivity

A significant driver of the price increase has been the defaults on existing contracts, as in-shell traders could achieve 50-60% better value by re-trading the same quantity. Although this is not a sustainable practice, the sector has always been highly sensitive to price fluctuations. The next in-shell crops from the Southern Hemisphere (East Africa, Brazil, Indonesia) represent just 15-20% of global production. It remains to be seen how these crops will enter the market starting in September, given the current supply tightness and government interventions.

Kernel Markets Follow Suit

The kernel market has mirrored the trend of in-shell prices, with limited availability pushing prices to multi-year highs. Defaults on kernel contracts, initially closed at lower levels at the start of the season, have continued. Kernel processors are operating with low, and sometimes negative, margins. Daily discussions with end customers often involve postponements or cancellation requests of earlier contracts.

Price Stabilization and Future Supply Gaps

In the second half of the month, prices stabilized due to better in-shell arrivals and even slightly decreased. However, the sentiment remains unchanged, as supply gaps are expected to persist due to earlier government interventions. This will likely increase the number of active periods of coverage and sustain the spot market.

Consumption and Market Drivers

Consumption numbers continue to show healthy growth, and the supply of kernels is expected to remain tight for some time. Therefore, destination markets will likely be the key drivers of price developments in the near term.

Bullish Trends

• Quality Drop: Overall quality has significantly decreased compared to the same time last year.
• Short Supply: Both processors and destination markets continue to operate with limited supplies.
• Southern Hemisphere Uncertainty: The bullish trend in in-shell prices and uncertainties could impact the opening of the Southern Hemisphere season.

Bearish Trends

• Price Softening: Prices softened during the second half of the month; it remains to be seen if this trend will continue.
• Industry Adaptation: The industry must determine if it can digest such a large price increase in a short period to justify new price levels across the board.

The cashew market is currently navigating a complex landscape of rising prices and supply constraints. Stakeholders must remain vigilant and adaptable to these market dynamics, as the interplay between supply, demand, and government interventions will continue to shape the future of cashew pricing and availability.

Source: Ofi