Cashew heads north on buying support

KOCHI, MAY 1:

The cashew market witnessed an upward trend last week with prices climbing up a couple of more rungs in the ladder. The rise was 10-15 cents a kg for different grades.

Business was done for W240 up to $4.05 a lb; W320 up to $3.60; W450 up to $3.40; SW320 up to $3.35; LP up to $2.20/lb (f.o.b.).

Buying interest last week outstripped selling interest. At the end of the week, most shellers withdrew and the few, who were offering were quoting 5-15 cents higher than the last traded levels, Mr Pankaj N. Sampat, a Mumbai-based dealer told Business Line.

Indian domestic market, he said, continued to be quiet but stocks in consuming centres are being used up.

With prices increasing, stockists may soon have to start building inventories before the peak consumption season beginning July, he said.

In fact, during April, kernel prices have moved up by 10-12 per cent, while raw cashew nut (RCN) prices have moved up by 12-15 per cent. Most of the increase in kernel prices has been due to concerns of RCN supply and resultant covering of shorts for nearby positions by kernel buyers, he pointed out.

There does not seem to have been any significant forward business although there have been some enquiries and limited trades for third quarter shipments.

The US and the EU buyers seem to be reluctant to buy for distant positions despite the supply side concerns because they are not sure whether demand will pick up in the second half of 2012, after a 15-20 per cent decline in the last two quarters.

Feeling is that if the prices move up further, there could be less interest from retailers in a product, which has seen extreme volatility in the last 15-18 months. Also, they hope that RCN arrivals will improve in May and prices will ease.

RCN PRICES UP

RCN prices also continued to move up and in fact, the primary reason for the increase in kernel prices in the last three weeks has been raising concerns on supply side. Price movement has been from $1,225-1,250 a tonne to approx $1,350 a tonne for Tanzania, from $1,050 to $1,225-1,250 for Benin and from $875-900 to $1,025-1,050 for Ivory Coast(IVC).

Price increase there has been despite reduction in kernel yields. Apart from the lower crop and yields in IVC, possible delays in movement of Guinea Bissau RCN is also causing concern, he said.

The next six weeks will be crucial, he claimed. Although currently, supply concerns are pushing the market up for both RCN and kernels, things could change if arrivals pick up during May. If that happens, that would be a sobering effect on the market which would then settle around the middle of the current range.

“Our feeling is that there is some room for higher prices if demand picks up. The downside – even from the current increased levels – is limited considering that supplies will be somewhat less than 2011 and there should be some pick up in demand in the second half – at least in Asia, if not in the US and the EU.

If arrivals do not pick up in May, the fears of a big shortage in IVC will be proved right. This will lead to a further increase in RCN prices leaving little chance for any decline in kernel prices even if the demand is slow,” Mr Pankaj said.

Since the market is very delicately poised, prudent course for both shellers as well as buyers would be to take some position for the next few months to avoid being caught with a thin book if market moves against them.

By late May/early June, supply prospects should be clearer and there should be some indication of demand trends. Based on that, he said, people will consider longer cover but unless supply recovers significantly, 6-12 month position taking will be difficult for both sides.

Source: http://www.thehindubusinessline.com/industry-and-economy/agri-biz/article3373837.ece