As COVID-19 affects more cashew growing countries, we have seen Africa going ahead with more restrictions, limiting in-shell trading. India continues to be locked down and trade and domestic demand has collapsed

Vietnam also implemented measures to curtail movement, but factories continue to work. The unorganized sector was shut down. This has impacted some kernel processors, but the majority of the industry continues to remain operational. The good news is the number of new cases has reduced.

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With the shutdown ongoing, shipments of in-shells have slowed down from Africa and we see that the Vietnamese shellers are using up local in-shells from Cambodia and Vietnam. If we assume 100,000 tons of last year’s carryover inventory of in-shells in Vietnam, plus 450,000 tons of 2020 production from Vietnam and Cambodia combined, then the total in-shells available to the local shellers is about 550,000 tons. This corresponds to about three to four months of processing capacity. If there is no further purchase and shipment of in-shells we will see kernel supply come under significant pressure by the end of May. We have seen increased activity in in-shell trading and in-shell prices have strengthened, which is consistent with the above analysis.

On the demand side, we have not seen any spurts in demand.  The pantry stocking was a one-time activity and there has been no follow-up consumption increase reported. All major markets: India, USA, EU, China, and the Middle East are all under lockdown/shelter in place which is lowering demand. Prices may come under further pressure, or at least not improve from current lows if the demand situation does not improve.

Possible Scenarios

Bullish

• Vietnamese processors could run out of good quality in-shells.
• In the last few days, interest to buy in-shells has increased and in-shell prices have strengthened.
• We could see an increase in demand if economic activity opens soon - we have seen Chinese buyers starting to get active.
• Shelf price of cashew nuts are still reasonably high and have room to drop, which could trigger additional consumption.
• The IVC crop seems to be lower than expected.
• Vessel delays and supply chain issues could cause disruptions in the availability of kernels in the destination.

Bearish

• Limited buying activity in the kernel market.
• Prices could come down further if demand in the US/EU continues to be lower

Please take care and stay safe and healthy

If you have any comments or suggestions, please write to me at ganesh@olamnet.com

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