Market Insights|3 min read|July 16, 2018

[Tridge Market Update] Raw Cashew Nut Supply Shortage and Price Fluctuations Continue

Vietnam, the world’s biggest cashew nut processor and shelled cashew nut exporter, has failed to stock up on raw cashews to process and export.

Low Stocks of Raw Cashew Nuts: Import Down by 46%

Vietnam, the world’s biggest cashew nut processor, has failed on stocking up on raw cashews to process and export. Although Vietnamese processed cashew nut export reached USD1.9B, a 25.2% rise from the previous year, the imported raw cashew nut supply was only 363,000 tonnes, short by 46%. According to the Vietnam Cashew Association, Vietnamese processors was able to secure only 653,000 tonnes of raw cashews, of which, 370,000 tonnes was supplemented by domestic supply and purchases from Cambodia through border trade. It is reported that as of June 2018, only 80% of cashew processors are in business, the others on a halt due to severe lack of raw materials.¹  

In the 1990s, Vietnam shifted its profit structure from exporting domestically grown RCN, raw cashew nuts, to selling processed nuts with its raw ingredients imported from countries such as Nigeria, Cote d'Ivoire, and Kenya. Since the Vietnamese government’s investment in building cashew nut manufacturing factories, Vietnam’s cashew processing industry has flourished. Vietnam has been heavily relying on raw nuts imported from Africa for its low price. There has long been a concern about this heavy dependence on African crops, and the Vietnam Cashew Association is now seeking to divert from Africa for a new supply chain.

The African Governments Strive to Revive the Cashew Industry.

Although Africa has been the dominant RCN supply chain in world cashew nut market, the industry itself has been stagnant with farmers not making profits. The problem lies in two factors. First, raw cashew nuts, as opposed to processed cashew nuts, have low economic value. Raw cashew nuts, or in-shell cashew nuts, must go through a series of processing step for human consumption and to achieve commercial value in the market. Many African nations, however, lack raw cashew nut processing machines. There have been many efforts to increase the domestic workforce to shell and process raw nuts manually by human labor, but the effort failed to meet the surging global demand for processed nuts. Thus, for years, African farmers had been exporting raw nuts in bulks at a low price to big processors in Vietnam and India. 


Featured: in-shell, or raw cashew nuts.

The lack of effective farmer-to-manufacturer system, in addition, has been limiting cashew farmers from profiting from the crop. Price regulations of cashew nuts in the global market have long been in the control of the big processors in Vietnam and India, leaving African farmers to simply follow the price trend. Therefore, establishing a profitable supply structure and a firm processing infrastructure of African RCN have long been many African governments' mission. 

Africa is moving toward a self-sufficient cashew industry.

Major cashew producing African nations like Kenya, Nigeria, and Cote d'Ivoire have been striving to expand its products in the European market with product brands that convey "authentic," organic and unique essence. The European Union countries have recently released a new long-term funding plan to support African cashew farmers and the industry, fueling Africa's movement toward self-sufficient nut industry. The participating EU members, Slovakia, Poland, Czech Republic and Hungary will invest in increasing cashew factories with up to 2,4000 tonnes capacity. Moreover, Ivory Coast stated that they will be able to process 100% of their raw cashew nuts from 2020. With African producers' to establish a firm cashew processing line, it is forecasted that in the long-term, raw cashew nut export to Vietnam will decrease by 35%.  

New Market Opportunities for Vietnamese Cashews, but Low Raw Materials Hold Back

The price of processed nuts fell in May.

There are several accounts of the plunge in processed cashew price. First, the competition among processing companies led to price significant price accommodations. The small to mid-size companies had accommodated its price lower than the market price, in an attempt to win the market with competitive prices. According to the Vietnam Cashew Association, the small processors sold nuts at a price range of USD9.16-USD9.27/kg, whereas the market price was high at USD9.49/kg. The unsettling market circumstances led to the overall downfall of Vietnamese processed cashew in the global market. Also, a rapid emergence of cashew processing companies had also led to price plunge as the result of overproduction in the local market. The price fall created an even more dire condition. To fulfill the deficit, cashew processors sought to increase their output, ultimately leading to a shortage of raw cashew nut stocks. The low price lead to even higher demand, depleting raw cashew supply even more.

Vietnam seeks to lessen its dependency on African raw cashews.

The trade war between China and the U.S², specifically in the nuts sector, may bring new market opportunities for Vietnam.³ With the U.S almond export at risk due to U.S.-China trade war, Vietnamese cashew may replace almonds exported to China. Although the forecast for Vietnamese processed cashew nuts is bright, securing an abundant raw material supply must first be met. According to VINACAS, Vietnam is in need of over 1.1 million tonnes of raw cashew nuts to catch up on its average production amount. With African import forecast remaining murky, Vietnam is now turning to Cambodia.

VINACAS and Cambodia’s Ministry of Forestry has agreed on establishing a long-term relationship between Cambodia’s cashew farm and processors in Vietnam. There lie greater benefits for Vietnam to import RCN from Cambodia than African nations in terms of logistics, quality control and quantity secure. VINACAS will fund up to USD66,600 from 2018 to 2022 to build a cashew plantation area of 500,000hactare in Cambodia.⁴ 


Contact Us:

Editor: Wonjung Yun / wonjung.yun@tridge.com

Sourcing Team Expert: Elly Lee / eunjeong.lee@tridge.com

Or request for quotation through: https://www.tridge.com/inquiry


References

1. “Cashew Nut Exports Increase, but Processors Face Shortage of Raw Materials.” Vietnamnews.vn, vietnamnews.vn/economy/450045/cashew-nut-exports-increase-but-processors-face-shortage-of-raw-materials.

2. Chang, Eunyoo. “Global Soybean Trade Suffers from the US-China Trade War - Tridge.” Global Trading Platform Tridge, 11 July 2018, www.tridge.com/stories/global-soybean-trade-suffers-from-the-us-china-trade-war.

3. “How Does American Trade Affect Vietnamese Agricultural Products?” Vietnam Cashew Association, 12 July 2018, www.vinacas.com.vn/index.php?route=common/news/details&news_id=2250.

4. Sokhorng, Cheng. “Ministry Has Big Plans for Cambodia's Cashews.” Phnom Penh Post, Post Media Co Ltd 888 Building H, 8th Floor Phnom Penh Center Corner Sothearos & Sihanouk Blvd Sangkat Tonle Bassac 120101 Phnom Penh Cambodia, 31 Jan. 2018, www.phnompenhpost.com/business/ministry-has-big-plans-cambodias-cashews.




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