Cashew nut prices will hardly increase dramatically if the total supply of raw cashews remains too large.

This is the view that many cashew businesses agreed with at the cashew dialogue session at the Vietnam International Cashew Conference 2024 on February 27.

Vicious cycle when cashew nut prices remain unbalanced with raw cashew prices

According to Mr. Vu Thai Son - Chairman of the Board of Directors of Long Son Joint Stock Company (HCMC), from 2018 to the end of 2023, the export price of cashew nuts will decrease from 9 USD/kg to 5.8 USD/kg.

Raw cashew prices also decreased but decreased slowly and remained higher than the cost of processed cashew nuts.

Many businesses buy large quantities of raw cashews at the beginning of the season to process at a price of 1,100-1,200 USD/ton. However, when exporting, the price of cashew nuts is lower than the processing cost. The more businesses process, the more they lose when exporting.

In 2023, the price of cashew nuts will drop sharply, causing businesses to lose more money by processing and exporting. Photo: Nguyen Vy

There are raw cashew import enterprises that have signed contracts in advance and accept to forfeit their deposits to cut losses. There are also enterprises that have purchased raw cashews from the beginning of the season (at high prices) and cannot help but process them even though the selling price of cashew nuts is lower than the cost price, because the quality of raw cashews stored for a long time decreases.

And once the cashew nuts have been processed, the business is forced to sell them to cover costs and repay the bank loan for the purchase of raw cashews.

Importers and roasters are reluctant to buy unless the price drops. Thus, the price of cashew nuts gradually declines. This vicious cycle has continued for the past few years. By early 2024, many factories had to accept selling WW 320 at $2.30/lb.

Mr. Tran Huu Hau - Deputy General Secretary of the Vietnam Cashew Association (Vinacas) acknowledged that many businesses, although not yet balanced with the selling price of cashew nuts, continue to buy raw cashews for storage.

The reason is due to the psychology of evaluating the quality of raw cashew nuts at the beginning of the season, selling at a high price, leading to competition to buy.

If you buy raw cashews in the middle or end of the season, the quality will be low, not to mention the amount of raw cashews will be depleted, so the price will increase, and the business will be less effective.

Raw cashews imported from Cambodia arrive at a cashew enterprise's storage area in Tay Ninh . Photo: Nguyen Vy

The current reality is contrary to this thinking because the source of raw cashews is always abundant. The area of ​​cashew growing areas in Africa and other countries is increasing rapidly, causing a sharp increase in output.

Ivory Coast alone, the country with the world's leading area and output of raw cashews, has increased from 680,000 tons/year to 1.25 million tons/year; Cambodia has increased from 200,000 tons/year to 650,000 tons/year.

Lessons from other industrial crops show that rapid growth leads to an imbalance between supply and demand. And when more instability appears, the imbalance in the entire supply chain becomes more evident.

Reducing pressure on cashew prices

Mr. Ta Quang Huyen - Director of Hoang Son 1 Joint Stock Company ( Binh Phuoc ) said that the price of cashew nuts has continuously decreased since 2017. This is the result of an oversupply of raw cashew nuts.

According to Mr. Huyen, cashew nut prices will only stop decreasing when the pressure from raw cashew nuts stops increasing. Because in reality, global cashew nut consumption is still increasing, except for a few localized decreases. Evidence shows that in 2023, the entire Vietnamese cashew industry's exports increased by 24%.

Processing cashew nuts at the factory of Hoang Son 1 Joint Stock Company (Binh Phuoc). Photo: TL

Whether 2024 will be the end of the cycle of deep price reduction, many businesses cannot know yet. "But certainly, as long as the total supply is still large, the price of kernels will not increase suddenly," said Mr. Huyen.

Mr. Phung Van Sam - Chairman of the Board of Directors of Hanfimex Vietnam Group Joint Stock Company said that in 2022 and 2023, many businesses, despite cutting costs, still could not avoid the situation where the price of human resources was lower than the price of raw materials.

However, the cashew market in 2024 will be "easier to breathe" than in 2023. However, businesses need to be alert enough to choose the right "drop point".

"That means buying the right raw materials at the right time; you should not sell cashew nuts at any price, and you should not sell long-term contracts when the raw price is not balanced with the kernel price," Mr. Sam advised.

According to Vinacas, global raw cashew production in 2023 exceeded 5 million tons. It is forecasted that in 2024, raw cashew production will still increase by 10-15%. Domestic processing capacity can meet the demand, but cashew kernel consumption is unlikely to be fully absorbed.

Vinacas recommends that it would be better if businesses reduce or slow down the purchase of raw cashews to ease pressure on cashew kernel prices. Photo: Nguyen Vy

Mr. Nguyen Minh Hoa - Vice President of Vinacas, said that the amount of cashew nuts exported by Vietnam in 2023 was more than 645,316 tons, but the turnover was only more than 3.58 billion USD.

Meanwhile, in 2021, the turnover reached nearly 3.75 billion USD although the amount of exported cashew nuts was only 609,260 tons. This proves that the business did not operate effectively last year.

According to Mr. Hoa, it is time for businesses to no longer process and export at all costs. To do so, each business must change its thinking and actions when doing business.

"It would be better if businesses reduce or slow down the purchase of raw cashews. Thanks to that, the amount of cashew nuts on the market will be stable, and in the short term, it will prevent the price from falling," Mr. Hoa shared.

Source: https://danviet.vn/gia-dieu-nhan-se-kho-tang-dot-bien-neu-tong-cung-dieu-tho-van-qua-lon-20240227171136379.htm