Tanzania’s president John Magufuli has asked for a 94 percent increase in cashew nuts to protect farmers. With this move, Magufuli decided to buy about 220,000 tonnes of cashew nuts from farmers after private companies refused to buy at such high prices. Tanzanians will consume all the cashew nuts they produce if they can not sell, the head of the country said. Traders argue that this could lead to a global supply shortage. Vietnam and India may be the first to suffer.
Prices of cashew nuts in two major cashew processing and exporting countries, India and Vietnam, will be pushed up by the new Tanzanian policy. And no country harvested cashew nuts at the same time with this country so the risk of supply shortage is greater.
Following the way of raw nut prices, kernel prices are also tending to rise, and orders from Western countries have been higher in recent days. The future of Tanzanian production is uncertain but the decision of the Tanzanian President clearly puts the market under pressure with a likely decrease in supply in the coming months which was quite unexpected.
Beyond the situation in Tanzania which clearly causes an increase in the price, it seems that the demand for cashew kernels is finally making a comeback. Market players also testify that medium-term orders have resumed with kernel importers seeking to cover the first quarter of 2019 or even in some cases for the first half of the year.
A significant rise in raw nut and kernel prices in the coming months? It is more uncertain. There are still around 100,000 MT of raw cashew nuts available in Côte d’Ivoire and around 50,000 MT in other West African countries. In addition, the rainy season was very good in West Africa and we are seeing a good start of flowering which could lead to an early harvest for the third year in a row. In India and Vietnam, the rainy season was very close to normal. If no late weather event happens, the outlook for 2019 production in the Northern Hemisphere will be clearly on the rise.
And let’s not forget that production in West Africa is growing very fast. According to some Ivoirian stakeholders, this year’s production would have exceeded 850,000 MT, more than our forecast which is still 825,000 MT well above the official figures. By 2019, the 900,000 MT mark will probably be exceeded.
Let’s hope for the sector that this month is the beginning of a period of stabilization at slightly higher price levels than in previous months but without giving way to a disproportionate bullish bubble.