Why does the cashew industry continue to adjust down its export forecast for 2023?

Concerns about cashew quality

According to the report of the Vietnam Cashew Association (VINACAS), in the first 6 months of the year, the cashew industry exported 279,000 tons of cashew nuts of all kinds, with a turnover of about 1.6 billion USD, an increase of 9.49% in volume and 7.65% in value, but the average export price of cashew nuts was only about 5,717 USD/ton, a decrease of 1.73% compared to the same period last year.

Cashew industry continues to adjust down export forecast for 2023

Mr. Bach Khanh Nhut - Vice President of Vietnam Cashew Association (VINACAS) - said that in the past six months, Vietnam's cashew industry has faced many difficulties, mostly due to objective factors such as: geopolitical crisis; tightening monetary policies of central banks, global inflation, low purchasing power in key markets, global consumers reducing spending...

Citing feedback from members and customers, Mr. Bach Khanh Nhut said that many raw cashew purchase contracts signed with Asian customers had to be renegotiated in price or buyers requested price support, reduced collection... from the seller.

In the context of general difficulties, according to VINACAS, delayed delivery or poor quality of raw materials are the main causes leading to the above incident.

One of the reasons given by VINACAS is that African countries are gradually moving towards self-production and processing of cashew nuts (similar to what factories in Vietnam are doing), so the African raw materials imported to Vietnam are often low-grade raw cashews. Importing enterprises store goods in warehouses for a long time, leading to a decrease in the quality of processed cashew nuts.

"Recently, VINACAS received complaints from European importers, reflecting the decline in the quality of cashew nuts from Vietnamese businesses and many shipments containing live insects," Mr. Bach Khanh Nhut shared, adding that maintaining product quality is a vital factor for the Vietnamese cashew industry, because many previous advantages no longer exist, and competitive pressure from African countries is growing stronger every day.

Another reason mentioned by VINACAS is that according to businesses' feedback, the plant quarantine procedures for imported raw cashew shipments currently take a long time, causing the storage time at the yard to be prolonged, increasing the costs of businesses.

Therefore, VINACAS leaders recommended that the Government continue to consider issuing policy adjustments to limit the import of semi-processed cashew nuts; actively remove credit obstacles, promote trade to find new markets...

“Decreased purchasing demand and longer than normal inventory holding times will lead to questionable quality of raw materials when they reach buyers at the end of 2023,” Mr. Bach Khanh Nhut raised the issue.

2 scenarios for the cashew industry from now until the end of the year

Not worried about the cashew nut supply problem in the last months of the year, according to Mr. Bach Khanh Nhut, currently the amount of raw materials is quite abundant, processing enterprises do not have much pressure to buy and store raw materials compared to previous years, most of them have enough goods needed for production until the end of the fourth quarter of 2023 and the first quarter of 2024.

According to cashew businesses, due to weak purchasing power in key markets, cashew businesses will face difficulties in business operations in the first half of 2023. The trend of buying small quantities of goods on the spot is dominant during this period, leading to a difficult drop in selling prices, but it is also difficult for prices to increase dramatically like in previous periods.

In the period from the last 6 months of 2023 to the first quarter of 2024, the growth of the cashew industry continues to face many difficulties and challenges. VINACAS also built 2 scenarios for this industry.

Accordingly, in the “good” scenario, businesses that stimulate demand and accelerate consumption will help reduce inventory in major markets such as the US and Europe, while boosting demand at the end of the year. However, increased quality control in key markets will make it difficult for low-priced, poor-quality cashews to reach these markets.

In the “bad” scenario, the global economy continues to decline, cashews are not an essential commodity, so the demand of “end consumers” will continue to decrease.

However, the biggest challenge for the cashew industry today is still the issue of purchasing raw materials. For example, the “capital” of cashew raw material areas, Binh Phuoc province, has not developed its cashew growing area but has been narrowed due to farmers cutting down and destroying cashew trees to switch to other crops.

According to VINACAS, in 2022, the cashew area in the provinces of Binh Phuoc, Dak Nong, and Dong Nai will be significantly reduced, with Binh Phuoc alone having decreased from 175,000 - 180,000 hectares previously to 150,000 hectares.

This has led to dependence on imported raw cashews from Africa and Cambodia. It is worth mentioning that many cashew processing enterprises have had to "live a miserable life, die a miserable death" when raw material prices are high, while processed cashew prices have decreased.

Especially the situation where cashew processing enterprises compete to buy raw cashews at too high prices. Meanwhile, in the face of prolonged fluctuations in the world market, to get rid of goods, many enterprises lack solidarity, compete with each other, and lower prices, so they are forced by buyers to sell at low prices, leading to output prices being lower than input prices, making it difficult to avoid losses.

Not to mention the import-export risks of domestic cashew businesses when working with new partners in Africa and the Middle East.

Faced with difficulties from both internal and external markets, VINACAS continues to propose adjusting the cashew export turnover in 2023 to 3.05 billion USD. Previously, VINACAS requested to adjust the export turnover target from 3.8 billion USD according to the plan of the Ministry of Agriculture and Rural Development to 3.1 billion USD.

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