During 2014, we have been very irregular with our reports – main reason being that for most of the year, cashew market has been so quiet that it has been difficult to find something to write about !!!!
To start 2015, we thought we would attempt an analysis of how the cashew market has moved in the last 10 years… And this is the result of our efforts :
- 2005 – Prices moved within a narrow range of 2.55 to 2.35 FOB for most of the year and dropped to 2.10 FOB in the last quarter of the year. Average for 2005 was 2.325 FOB with a trading range of 21%
- 2006 – Throughout the year, prices moved in a very narrow range of 1.95 to 2.10 FOB. Average for 2006 was 2.05 FOB with a trading range of 7%
- 2007 – For most of the year, market was in 2.05-2.20 FOB range and moved up quickly to 2.65 FOB in the last quarter. Average for 2007 was 2.35 FOB with a trading range of 29%
- 2008 – This was an exceptional year (to say the least). In the first quarter, prices inched up from 2.65 to 2.95 FOB. Middle of the year, it jumped up to 3.60 FOB and drifted to 3.30 FOB by end of third quarter. In the last quarter, it crashed to 2.35 FOB. Average for 2008 was 2.975 FOB with a trading range of 53%
- 2009 – In the first quarter, market was stable around 2.30 FOB and moved up to 2.60 FOB in the second quarter. It was stable in the third quarter between 2.60-2.70 FOB and moved up to 3.00 FOB by end of the year. Average for 2009 was 2.65 FOB with a trading range of 30%
- 2010 – Market was volatile in the first quarter – moved from 2.90 to 2.60 and back to 2.90 FOB. In the second quarter it was moving around 3.00 FOB. Prices moved up to 3.40 FOB at end of third quarter and 3.80 FOB by end of the year. Average for 2010 was 3.20 FOB with a trading range of 46%
- 2011 – This was another landmark year for the Cashew trade. After a relatively steady first quarter (3.80 to 4.00), market moved up to 4.30 in second quarter and further to 4.70 in Jul/Aug before drifting to 4.50 during Sep and crashing to 3.80 in the last quarter. Average for 2011 was 4.25 with a trading range of 25%. As we said in one of our reports in 2010/11, the Cashew market was in uncharted waters (probably in the Bermuda triangle !!)
- 2012 – After 2 years of a roller coaster ride, cashew market took a breather in first half of 2012 trading around 3.50 FOB except for a short lived uptick to 3.75-3.85 FOB in May. Market started drifting downwards from mid/late Jun and was around 3.10 FOB at the end of the year. Average for 2012 was 3.35 with a trading range of 22%.
- 2013 – A year in which prices moved sideways. Market started the year around 3.30 went up to 3.50 in second quarter and closed the year at 3.35. Average for 2013 was 3.40 with a trading range of 6%
- 2014 – was more of the same with a slight up-tick in third quarter followed by unprecedented quiet in the last quarter. Market started the year around 3.30 and traded in the 3.30-3.50 range for most of the year except for a very very brief period in Sep/Oct when business was done around 3.70. Average for 2014 was 3.50 with a trading range of about 12%.
Summary of analysis :
| Year | Low | High | Average | Range |
|---|---|---|---|---|
| 2005 | 2.10 | 2.55 | 2.325 | 21% |
| 2006 | 1.95 | 2.10 | 2.05 | 7% |
| 2007 | 2.05 | 2.65 | 2.35 | 29% |
| 2008 | 2.65 | 3.60 | 2.975 | 53% |
| 2009 | 2.30 | 3.00 | 2.65 | 30% |
| 2010 | 2.60 | 3.80 | 3.20 | 46% |
| 2011 | 3.80 | 4.70 | 4.25 | 24% |
| 2012 | 3.10 | 3.80 | 3.35 | 22% |
| 2013 | 3.30 | 3.50 | 3.40 | 6% |
| 2014 | 3.30 | 3.70 | 3.50 | 12% |
Attached Excel Sheet which has gradewise prices on monthly basis from 2005 to 2014 will be an useful resource for further analysis.
Some observations from our side :
A) First observation is that there is NO PATTERN – annual or seasonal – for Cashew price movements !!
From 2005 to 2007, kernel prices were stable / soft during second and third quarters when Northern Hemisphere crops are harvested – this is logical because these crops contribute nearly 75% of the world production.
2008 was an exceptional year when the trading range was 53%. Prices jumped about 25% in few weeks in second quarter (during the peak harvest season) due to delays & defaults and crashed by over 30% in few weeks in last quarter due to the global financial crisis.
In other 6 years, kernel prices moved up (or were at least steady to firm) during the Northern Hemisphere crops
B) In most of the years, trading range has been 20 to 30% (except for 2008 – 53% and 2010 – 46%). Last two years (2013 & 2014) have been the longest period when trading range was around 10% (exception was 2006 when trading range was 7%).
C) The rally in kernel prices from 2.70 in March 2010 to 4.70 in July 2011 was the longest (period) and biggest (value). Most of it was gradual and based on a supply shortage accentuated by delays in movement of RCN from Africa to India & Vietnam coupled with strong growth in Asian demand. But, the big jump in price from 3.70 in March 2011 to 4.70 FOB in July 2011 was the last straw on the camel’s back. It had disastrous impact on cashew usage in the 2 main importing markets. Prices crashed from 4.70 in July 2011 to 3.70 in Dec 2011. During 2012 there was gradual drift in price from 3.60 to 3.10 by Dec 2012 (except for a brief spike from 3.40 to 3.80 in Apr-Jun 2012. Over a period of 18 months (from Jul 2011 to Dec 2012), the market gave up 80% of what it gained in 15 months (from Mar 2011 to Jul 2011).
D) During 2013 and 2014, market has been moving sideways in the 3.20 to 3.50 range except for a brief period in Sep/Oct 2014 when business was done in the 3.50-3.70 range
E) There were 2 big crashes in the last 10 years for different reasons. The crash in 2008 was due to the global financial crisis. The crash in 2011 was because of “demand destruction” due to the very high prices. In all the other years, cashew prices have been moving up or down gradually with periodic spikes and dips. The long term trend has been upward shift in the trading range as we will see at the end of this report.
F) In the last few years, there has been a power shift on both sides of the cashew market – supply and demand. India is no longer the largest supplier to the world market – that position has been taken by Vietnam for kernels and West Africa for RCN. On the demand side, USA & EU continue to be large buyers but they have been overtaken by Asia which is now the largest consuming region (India is the largest consuming country). This has altered the market dynamics – relative power of each region to determine market trend has changed. It is now much more a spot & nearby market – activity in many more origins and markets influence the price than in the past.
G) Another interesting aspect has been the price differential for broken grades. Historically, Splits have been at a discount of less then 50 cents per lb to W320 and Pieces have been 10-15 cents below Splits. This differential widened to over 1 dollar between W320 & Splits and over 50 cents between Splits & LWP during 2012, 2013 and first half of 2014. This was a combination of (1) lower usage due to the very high prices in 2011 and (2) increased availability due to mechanisation of processing. Improvement in processing did bring down the production of brokens but it took some more time to use up the built up inventory. By middle of 2014, differentials started to narrow and now we are back to traditional levels !!!
H) If we remove the aberrations of 2008 and 2010/2011, we will see that cashew market has moved in following range :
2.00 to 2.50 from 2005 to 2007
2.50 to 3.00 from 2008 to 2011
3.00 to 3.50 from 2012 to 2014
2.50 to 3.00 from 2008 to 2011
3.00 to 3.50 from 2012 to 2014
What will be the range for 2015 ???
In the last few years, RCN prices have moved to a higher range and there is increase in processing costs also. There is very little growth in production and there is steady growth in usage due to relatively stable prices (compared to other nuts). We expect that range in 2015 would be slightly higher – say 3.25-3.75 or (even 3.50-4.00 if there is good buying interest in the first quarter leading to steady RCN prices during 2015).
WOULD APPRECIATE YOUR COMMENTS, VIEWS, THOUGHTS FOR A BETTER UNDERSTANDING OF THE MARKET PROSPECTS
SOURCE: SAMSONS
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