Cashew Prices Surge Amidst Crop Losses: Market Insights for 2024

In recent months, the global cashew market has experienced significant turbulence, driven primarily by severe crop losses and subsequent supply shortages. This article provides a detailed overview of the current market dynamics, production challenges, and price trends affecting the cashew industry. We'll also highlight the key factors influencing cashew prices and what traders can expect in the coming months.

Rising Cashew Prices Due to Crop Losses

Impact of Drought on Production

The cashew industry has been severely impacted by drought conditions, particularly in leading producing countries such as Vietnam, Côte d'Ivoire, and Benin. The El Niño weather phenomenon has caused exceptionally dry conditions, resulting in substantial crop losses. Vietnam, one of the major exporters of cashews, has reported a 20-25% reduction in crop yields. Similarly, Côte d'Ivoire, the world's largest producer of raw cashew nuts (RCN), has seen a 20% drop in production.

Escalating Raw Cashew Nut (RCN) Prices

The reduction in crop yields has led to a significant increase in RCN prices. Previously priced at USD 980-1000 per metric ton, RCN prices have surged to USD 1600-1700 per metric ton, representing a 60% increase. This price hike has been exacerbated by supply chain disruptions and the inability of suppliers to fulfill existing contracts. Consequently, many Vietnamese cashew processors have defaulted on their contracts due to the high costs and limited availability of RCN.

Export Market Dynamics

Vietnamese Cashew Exports

Despite production challenges, Vietnam's cashew exports have shown remarkable growth. According to the Vietnam Cashew Association (Vinacas), monthly exports in April reached 65,000 metric tons, valued at USD 350 million. For the first four months of the year, total exports amounted to 216,000 metric tons worth USD 1.2 billion, marking a 32% increase in volume and a 21% rise in value compared to the same period in 2023.

The United States remains the most significant market for Vietnamese cashews, with exports reaching 52,000 metric tons from January to April, a 35% increase from last year. Exports to China have more than doubled to 31,500 metric tons, while shipments to the Netherlands stand at 13,700 metric tons.

Price Trends in Export Markets

Interestingly, while RCN prices have risen, the average export price for cashew kernels has declined by 8% to USD 5,370 per metric ton. This trend is attributed to well-covered buyers in the US and EU who are in no rush to purchase at higher prices. However, expectations are that export demand will pick up in the second quarter as regions like Asia increase their purchasing activities.

Indian Cashew Market

In India, cashew kernel prices have also experienced fluctuations. As of the latest reports, W240 cashew kernels are trading at USD 8,535 per metric ton, while W320 and W450 are priced at USD 7,885 and USD 7,170 per metric ton, respectively. Lower grades such as LWP and SWP are trading at USD 6,540 and USD 5,875 per metric ton.

Market Outlook and Future Trends

Supply Chain Challenges

The cashew industry continues to face significant supply chain challenges. Côte d'Ivoire's investment in local processing facilities has impacted RCN exports, and Benin has imposed an export ban on RCN since April 1st. These factors, combined with the rising cost of RCN, have led to a highly volatile market.

Price Projections

Analysts predict that cashew prices will continue to rise, driven by ongoing supply shortages and increased demand from various regions. The W320 cashew prices are expected to surpass USD 4.50 per pound, with some transactions already occurring at USD 3.50 per pound. Buyers in the US and Europe are now looking towards Indian-origin kernels, which are also in limited supply.

Conclusion

The cashew market is currently navigating through a period of significant volatility due to crop losses and rising RCN prices. For traders and industry stakeholders, understanding these market dynamics is crucial for making informed decisions. As the market continues to evolve, staying updated on production trends, export activities, and price fluctuations will be essential for navigating the challenges and opportunities in the global cashew industry.