Cashew nut prices increasing on tight supplies

Excessive heat and drought conditions linked to climate change have affected cashew production throughout Africa and Asia, while processing plants in India have been shuttered due to rising labour and other costs.

Vietnam suffered its worst drought in nearly a decade resulting in the cashew crop down about 10% this year compared to a typical year, resulting in growers demanding and getting much higher prices.

The International Nut and Dried Fruit Council has forecast worldwide production of cashews for 2016 to dip by about 4% to 708,000 metric tons with both the quality and quantity of the crop declining as well.

Consequently, prices have shot up on the global market by about 20% to roughly US$4.20 a pound, said the speakers and it is likely the shortages and higher prices will carry over into next year as well.

Vietnam and India are the two largest producers and exporters of cashew nuts. The two countries process raw nuts that they produce as well as the raw material they import from Africa, including the Ivory Coast, Tanzania and Benin.

The poor yields meant that packers in Vietnam, who had overcommitted their sales, were forced to delay shipments. This in turn caused a shortage on the European market, further driving up prices.

Traders are now nervous about the cashew rally, noting that the higher prices will most likely incentivise more production for next year, leading to a sharp fall in prices, said the speakers.

The high prices are likely to worry cashew buyers including large US and EU supermarkets and other retailers and food processors who use cashew nuts for a range of foods including biscuits, cereals and sauces such as pesto.

On the demand side, they forecast reduced demand from large retailers, who will next month start tendering their purchase orders for 2017 at current prices, which will force them to reduce the quantities they contract for.

A decent crop next year combined with reduced purchases could set up next year’s market up for a drastic drop in sales prices, which could result in massive losses for growers in Vietnam if they are not careful.

Meanwhile, nut lovers may take comfort from the expected bumper almond harvest in California, which on average produces about 80% of the world’s supply. Almond prices have dropped 50% from last year.

Almonds are now the cheapest tree nut, priced between US$2.25 and US$3 a pound depending on the grade, compared with cashews, pecans, Brazil nuts, walnuts and pistachios that are all above US$3.50.

This is a complete 180-degree-turnround from last year, said the speakers, adding that they expect good sales of almonds for 2017 as supermarkets will start substituting almonds for cashews in their tenders due to the lower sales price.