Western African Cashew Processors Struggle Despite the Industry’s Huge Potential

Africa’s production and exports of RCN

More than half of the world’s cashews are produced in Africa. According to the International Nut and Dried Fruit Council. Western African countries are expected to produce 1.96 million tons of raw cashew nut (RCN) in the 2021/22 season - the world’s top producer, Ivory Coast, is expected to produce a million tons of RCN in 2021/22, followed by Nigeria (5th globally) at 240,000 mt expected for 2021/22.

While Western Africa is the largest production region for cashews, nearly all these nuts are exported in-shell, mostly to Vietnam and India, where they are deshelled and processed to be exported as cashew kernels. Many of these main RCN producing countries draw attention to the untapped potential of the processing industry, and how these countries can add value domestically and export a higher value product directly to the world’s largest cashew consumers.

As an example, over the 5 years ending 2020, Ivory Coast produced a total of 3.6 million mt of cashews, of which 3.2 million mt were exported as RCN. Over the same period, Ivory Coast also exported a tiny 50,795 mt of cashew kernels, which amounts to 226,000 mt on an RCN basis, but 40% of these still went to Vietnam, and only 20% to the US. The situation is much the same in most Western African countries, where virtually all cashews are exported raw, in-shell with no added value.

Vietnam has established itself as the world’s cashew processing hub. In 2020, Vietnam had an incredible market share of 57% of global imports of raw cashew nuts (RCN) and a 68% market share of global cashew nut kernel exports, according to data by ITC Trade Map. Considering the value added to these cashew nuts, by deshelling, roasting, flavoring, and further processing, the case made by Western African producers to process cashews domestically makes sense. According to the Vietnam Cashew Association’s (VINACAS) January import and export figures, Vietnam imported RCN at USD 1,352 / mt, and exported cashew kernels at USD 7,253 / mt, on an FOB basis. A common conversion ratio from RCN to kernels is 22.5%, meaning the unit value of these exports was around USD 1,632 / mt. While these are rough calculations, it does illustrate that processing these cashews domestically in Western Africa, would bring major economic benefits.

Another calculation to illustrate the value added by processing cashews is by using customs data from Ivory Coast and the world’s biggest buyer of cashew kernels, the US. According to ITC Trade Map, in 2020, the unit value of Ivory Coast’s RCN exports was USD 1,151 / mt. The unit value of US imports of cashew kernels was USD 6,708 / mt and using the generic 22.5% conversion factor, it comes to USD 1,509 / mt. While this does not include a calculation for logistics, currently many of Ivory Coast’s cashews first make their way to Vietnam, and then to the US, adding transportation costs.

Western African processing plants facing difficulties

The potential of the cashew processing industry in the major producing countries such as Ivory Coast, Nigeria, and Ghana has been a talking point for many years, however, nearly all plans have fallen flat. Many small startups have entered the processing market, but lack the capacity to buy in bulk. Government-funded projects are seldom efficient in developing countries, and this has also been the case in the cashew industry. Large investments are needed to modernize processing plants in order to be profitable.

According to a December article by Reuters, Ivory Coast aims to process 50% of the cashew crop domestically by 2025. Yet, in just the last two years, 5 processing plants went bankrupt. The main reason expressed for these failures was the competition coming from Vietnam and India. Another article by Reuters in February indicates that only eight out of the 20 cashew processing plants in Ivory Coast are operational, the other 12 being either bankrupt or non-operational due to financial issues. The government now plans to spend USD 20 million to try and help these failing cashew processors, but it remains to be seen if this will save the industry. Also, if there are 20 processing plants in Ivory Coast, and exports of cashew kernels averaged 10,150 mt over the last 5 years, on average these plants only processed 1,000 - 2,000 mt per year, hardly significant in the bigger scheme of things.

Nigeria could buck the trend

Similar situations play out across cashew-producing countries in Western Africa, but Nigeria, Africa’s second-largest cashew producer, hopes to turn the tables. According to Business Insider Africa, Julius Berger Nigeria Plc, one of the country’s largest construction companies, has entered the cashew market and will start the operation of its cashew processing plant in the coming months, towards the peak cashew harvest season in Nigeria. Little is known about the processing capacity of the plant, but having a company with a proven track record of success entering the cashew processing business is exciting nonetheless. Nigeria’s 2021/22 cashew production is estimated to be 240,000 mt. Currently, only 5% of cashews are processed in Nigeria, but that could change depending on the success of Western Africa’s newest processing plant.