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Cashew Market Update - April 23, 2020

The COVID-19 situation in Vietnam is improving and the alert status is now down one notch across most regions. We can now say there is less chance of a shutdown in cashew supply from Vietnam and we hope it remains that way.

West African countries have been affected to a various extent and as a result cashew supply, movement, and trading is impacted. Farmers were forced to stock inshells due to lack of buying support and are now seeing cashew prices going up. It remains to be seen if farmers will now be motivated to sell or hold back for further strengthening of prices.

Due to said lower trading volumes at the start of the 2020 season, shipments of inshells from West Africa to Vietnam/India for 2020 crop are lower by 30%. This has created a shortage of inshells in Vietnam as they have seen the local crop supply come down. Inshells firmed up further in the past week, by about $100/ton and with active buying interest. Kernel prices are also up by about 20c/lb. with limited selling interest.

We have heard that some countries in EU that have opened are ordering more nuts and the restocking demand will keep markets firm for some more time. This restocking demand may also affect the US as we see some states open for business…

Overall, unless we see a second round of COVID-19 spike, we can safely assume prices are unlikely to see March lows.

Possible Scenarios

Bullish

  • Restocking demand could be seen to drive up spot requirements of kernels
  • Vietnamese processors could run out of good quality inshells
  • Inshell prices are firming up and quality of inshells are dropping
  • Supply chain disruptions in inshells could lead to delayed availability of inshells to processors.
  • Kernel supply has reduced, and kernel prices are firming up
  • IVC crop seems to be lower than last year

Bearish

  • Limited buying activity in US market
  • A possible second round of COVID-19 spikes, like what we have seen in Singapore, could mean further lockdown and demand destruction
  • If the economy does not open up soon, unemployment increase can dampen nut demand
    1. The above factor is more pronounced in countries like India where consumption of nuts are mainly gifted or served in special occasions…. Indian demand destruction is not yet priced in.

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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