The cashew market is seeing a decrease in kernel demand and an increase in RCN demand. Currently, the most active kernel buyers are Middle East and India markets. Strong Indian domestic kernel demand has enabled Indian processors to pay up for West African inshells, and therefore contributing to an increased inshell pricing. Inshell prices are also finding support from delayed arrivals and poor harvest estimates due to poor weather. It is constantly raining in Cambodia and Vietnam; hence the markets expect a lower harvest from these countries. Poor crops are also rumored from India and several West African countries.
The slow pace of arrivals, with the delayed harvest is giving a feeling that the overall crop will be short for this year. We are entering a phase when harvest will be at its peak across most major origins, and we will know in the coming weeks if the demand for inshells will continue. In addition to these issues, we are also seeing high freight cost, which is contributing to an escalating inshell cost for shellers in Asia. The rates from West Africa to Asia has increased severalfold from this point last year.
As stated earlier, buying activity in kernel markets remains subdued, especially in main destination markets such as the US and EU. We foresee both destinations to come in the market soon as their overall coverage levels remain low beyond Q2.
On the other hand, there is too much uncertainty surrounding how consumption will continue considering the impact of inflation has had on the cost of living. Will nut demand remain resilient as they continue to prove their worth of being a healthy and indulgent snack?
Overall, kernel processors see cost escalation due to inflationary pricing of inshells and cost of processing and transportation. Processors face lower selling prices of kernels. We will have to wait and see if the industry will continue to process inshells at maximum capacity or if they will hold back until kernels come back to parity. To reach this parity, should kernel prices move up or should inshell prices fall?