July 15, 2017
Vietnamese cashew prices have eased over the last few weeks due to an influx of raw
material from Africa and a lull in demand. Most buyers still remain hand to mouth, with the
majority covered until August/September shipments. The question is though, when will
buyers re-enter and how far will they cover given the recent easing in the price. On the
supply side smaller processors are struggling to finance a new raw material purchase,
which is causing them to discount their kernel price in order to satisfy their cash flow needs.
This will continue to be an issue over the coming months as most packers are using
financing from Vietnamese banks. However, these banks have tightened up on their
lending terms given the volatility in the market. On the retail side we’re still yet to see the
major American retailers reflect the higher prices on shelf, which means demand may still
continue as is.
The one thing to keep in mind is that raw material prices out of Africa are holding up
relatively well due to Indian demand and traders holding long positions in the market. At
present the raw material isn’t trading at parity to the kernel price in Vietnam, therefore
processors are currently making a loss on nearby purchases. It may get to a point where
processing capacity in Vietnam is reduced to avoid loses, unless kernel prices rise of raw
material prices drop.