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Article: Combination of uncertain consumption outlook and accelerated automation for cashews
29 June 2020
This article is from our food commodities coverage dated
16/06/20.
Lockdowns have led cashew trends in Q1 and Q2, favouring the
acceleration of previous changes in the two key global processors:
Vietnam and India.
This new scenario was unfolding in 2019 and the Covid-19
pandemic has accelerated the change, according to the International
Nut and Dried Fruit Council (INC).
First, African suppliers are experiencing stagnant or falling
supply due to a combination of unfavourable weather and weak
exports to Vietnam and India, whose processors decided to slow
orders after low prices last season.
Ivory Coast, the main West African origin, is expected to fall
by 5.7% year-on-year to 740,000 tonnes of raw cashew nuts (RCN).
Meanwhile, Tanzania, the main East African supplier, may grow by
5,000 tonnes to 250,000 tonnes although its carry-over stock halved
to 117,000 tonnes after its massive sale to Vietnam in 2019 led by
the African government and the Vietnamese company T&T.
In addition, African processing capacity is still at minimum
levels. It reached around 110,000 tonnes of RCN in 2019, very far
from 3.7 mln tonnes processed by Vietnam and India.
Vietnam cut its imports of African RCN due to several factors.
First, falling prices of processed cashews in H2 2019 meaning a
slow digestion of stocked product as the Asian industry is a huge
machiner dependent on external supply to maintain a regular path.
Lockdowns in Q1 led to irregular exporting trends. International
sales fell by 20.8% y-o-y to 26,240 tonnes in January 2020, rose by
91%, 43% and one quarter, respectively, in February, March and
April to 27,870 tonnes, 47,240 tonnes and 45,940 tonnes and
slightly fell by 3% to 40,480 tonnes this May.
The US, mainly and the EU led these irregular trends. The Middle
East markets cut their imports during all the period as their Q1
and Q2 sales rely on the Ramadan festival campaign and pilgrimage
to Mecca, lockdowns leading to a sudden change also. The fall in
oil price has also played a key role.
This trend was led by the unexpected Chinese lockdown and a
sharp rise in US demand after concerns about sudden supply shortage
and panic-buying. May data reveals a hangover after huge orders… In
addition, Vietnamese and neighbouring Cambodian crops may reach
record volumes. Vietnam production is expected to be 450,000
tonnes, 29% more y-o-y, in 2020. Cambodian output continues its
gradual growth, encouraged by the Vietnamese processors and may
reach 250,000 tonnes of RCN, 19.0%.
As a result, the Vietnamese processors have succeeded in
reducing the country's dependency on the African outputs in Q2.
India is the largest global consumer of cashews and its domestic
market traditionally offsets negative global trends. However, the
domestic lockdown changed that.
Cashew is the key nut in the Indian market, used for all the
possible categories: snacking, sweets, Horeca, health food and
beverages, etc. However, small and medium processors have been
suffering a financial squeeze since H2 2018, slowing its
much-needed modernisation. The lockdown has accelerated investment
in automation by large and medium processors.
Conclusion
INC's panel of experts were unable to forecast a clear outlook
because Covid-19 and its consequences (lockdowns, halted processing
activity, sudden fall in purchasing parity, etc.) are leading to a
completely unknown scenario.
However, they were optimistic because the US, the EU and India,
the main global consumers are working to secure a robust
consumption strength as they are developing health products, new
savoury flavours, etc., following a trend similar to almonds,
hazelnuts or walnuts.