AFRICASHEW450 2014-2015 SEASON MARKET

ANALYSIS AND PROJECTIONS

Cashew Market Outlook

By: Jim Fitzpatrick

The new cashew crop cycle has launched in Indonesia, closely followed by Tanzania and Brazil. The

crops of the southern hemisphere currently account for less than 20% of the global crop; however, since

they grow during West Africa, India, and Vietnams off-season, their importance to processors should not

be underestimated. This year, Indonesian nuts are once again trading for high prices, reaching nearly

$1,700, due to their impeccable quality resulting from good processing techniques and a KOR of 53-55

lbs. Perhaps more surprising is the Tanzanian market: resellers are paying upwards of $1,600/ton for

relatively low volumes. These early season prices, especially in Tanzania, will not likely be sustainable

over the mid-term in the current kernels market. Vietnams stock position is quite tight; by mid-

September, kernel exports had already reached 211,000 tons, exhausting the domestic supplies, and

imports reached 435,000 tons. Indian processors may be better-off due to a successful season in West

Africa; however, that does not mean that we should not expect some intervention from Indian processors

topping-up to maintain this leverage through the lean season.

The southern crops coincide with important demand events, too. In India, the worlds largest consumer,

Diwali is the most important seasonal demand period, while the Christmas/New Year season is the busiest

of the year in the USA and Europe. Demand continues to grow quickly in India, moderately in North

America, and fairly slowly in Europe. The combination of demand trends in the consuming regions makes

for a positive outlook overall, which is only likely to recede in times of high price volatility. In 2015,

there is no reason to expect that demand will trend any differently from 2014.

Looking at the supply side, it is clear that high-quality cashew crops in all origins will be required to

maintain the market supply/demand balance. The current outlook for the southern hemisphere looks better

than last year due to an improved crop in Brazil, despite some concerns about the Indonesian crop. In the

past, prices would be greatly affected only when two or more of the three major cashew-growing regions

had production problems; however, in recent times, a single region can set prices alight.

Some things change, but some things remain the same. As we discussed in the last monthly report, 2014

has not been a remarkable year for processing in Africa. Again in 2015, Indian and Vietnamese

processors are projected to buy an excess of one million tons of in-shell cashews for domestic processing.

This trend continues in spite of the fact that prices paid to farmers in Africa have increased in recent

years. The cost of processing in India (and especially Vietnam) is very difficult to compete with, but

African farmers also bear the burden of paying for the transportation of the nuts they grow to processing

locations. How long can this be sustained in a world which is increasingly conscious of environmental

and social impact? Have you ever wondered just what would be the local impact of processing in African

countries? Or what is the carbon footprint of that one million-plus tons crossing the oceans every year? Or

what are working conditions in cashew processing plants across the world? No? Maybe we should,

because one of these days our customers will.

Back to the market this week, prices have slipped back a bit, but nowhere close to the bottom of the

range. Buyers will have to build cover for the first and second quarters of 2015, but good market

management as seen in recent years should prevail. Price developments, if any, are more likely to be

driven by supply factors, with Vietnamese buyers likely to compete in East Africa this year and strong

competition for Indonesian RCN likely to continue as usual.

Harvest developments in Indonesia and Brazil will be followed with interest, as will the Tanzanian

auction. US imports in the last quarter will prove very interesting, as will restocking activity in India. The

price of broken cashews will remain a subject of discussion. An argument for higher kernels prices based

on tight raw material can be made, although higher RCN prices do not necessarily mean higher

international kernel prices. It will certainly be an interesting season!

Country Reviews

EAST AFRICA

KENYA

Kenyas upcoming 2014-2015 cashew campaign expects to see many changes from previous seasons. Under a project involving the Kenyan government, research

scientists, processors, and producers, aging cashew trees will be replaced, farmers

educated, credit made more available, and market access improved. The scheme

involves distributing 180,000 seedlings every year for the next five years, training

producers to better manage their harvested nuts, and forming farmers associations to facilitate better access to credit for inputs. Partners in the initiative include the

Ministry of Agriculture, the Kenya Agricultural Research Institute (KARI), the

African Cashew Alliance (ACA), and the Cashew Growers Association.

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MOZAMBIQUE

Mozambican political leaders renewed their commitment to improving agricultural

productivity as a response to protests against food and fuel price increases in September.

The government has invested US $50 million over the last five years to improve the

performance of the cashew sector, including establishing 18 factories operating across

the country. Mozambican cashew nut production is therefore expected to reach a

capacity of 120,000 tons per annum by 2015.

TANZANIA

In Tanzania, a five-year cashew development plan is already in motion to distribute

10 million cashew trees by the 2015-2016 growing season. Between November 2013

and February 2014, 1.5 million cashew trees were distributed, and another 10,000

seedlings will be provided to farmers in 43 districts during the 2014-2015 season.

Three regions Dodoma, Singida and Morogoro have invested in improved seeds,

hoping to improve profits in the long-term. Research indicates that the improved

nuts produce nuts which are comprised of more than 52% kernel within the pod and yield between 15 and

20 kg per tree per annum (as compared to local breeds, which produce 3-5 kg of nuts per tree per year).

The Tanzanian marketing season of raw cashew nuts was launched on August 20, 2014 but first

shipments will not be made until November.

WEST AFRICA

The 2013-2014 cashew campaign in West Africa finished in August 2014. Thus, farmers have shifted

their focus to other other crops to take advantage of the rainy season. In most West African cashew-

producing countries, the various actors in their respective cashew sectors have been assessing the 2013-

2014 campaign in order to prepare for the challenges and opportunities for the upcoming 2014-2015

cashew season.

BENIN

The cashew industry in Benin is thriving, due in large part to the implementation of targeted

strategies during the last cashew season. Stakeholder groups effectively organized and

worked together to combat challenges through a specialized monitoring task force. The

Beninese producers association FENAPAB (Federation Nationale des Producteurs

dAnacarde du Benin) also prioritized training and supervising their members.

However, Benin also experienced some setbacks in the last campaign, including losses in

cashew sales due to the lack of standardized measurement units; lack of cooperation and delegation

among stakeholder groups; fluctuations of prices; inadequate funding allocated to the sector; and poor

rainfall in some regions of production.

To combat some of these obstacles, a number of plans are in motion to better harmonize the sector. Many

stakeholders hope to organize group sales of RCN, improve the inter-professional Monitoring Committee,

better maintain warehouses through added funding, and increasing transparency of information.

Benin is projected to experience a good 2014-2015 cashew season. In some regions of Benin, about half

of the cashew plantations are over 12 years old and are relatively well-maintained. More than 21,000

cashew plants were distributed to new orchards in the Zou-Collines, Donga Borgou, and Atacora regions.

Currently, all of the production areas are experiencing the ideal amount of rain and approximately 50% of

farmers are implementing good agricultural practices. Furthermore, FENAPAB provides trainings with its

partners, African Cashew Initiative (ACi) and ProAgri2, on proper plantation maintenance, pest

management, and proper harvest and post-harvest practices. The estimated yield for the 2014-2015 season

is approximately 120,000 MT of raw cashew nuts.

BURKINA FASO

Burkina Faso faced some difficulties in the 2013-2014 cashew season such as

procurement of RCN in large quantities, establishment of lasting relationships

among producers organizations, and inconsistency of cashew kernel prices compared to raw cashew nut prices. However, many improvements were

made to the sector during this campaign: maintenance of high-quality stocks

(average KOR 46-48 lbs); availability of market information to quell rumors;

and good overall production.

At the end of the 2013-2014 season, the National Union of cashew producers developed a three-year

strategy, backed by the government of Burkina Faso, aimed to organize the sector and support cashew

production, including a joint effort with key partners to provide training sessions to its members on good

agricultural practices. Despite no reported official governmental distribution of plants or seedlings,

scattered and uncontrolled seedlings have been collected and re-planted to increase production.

Thus far, about 20 to 30% of Burkinabe orchards have been cleaned and maintained, but more will soon

follow. The Haut-Bassins have the best percentage in terms of orchard maintenance.

The cashew trees are progressing normally, largely due to a good rainy season, and new plantations ready

for harvest will contribute strongly to improving farm-gate prices this year. From late July through

October 2014, rainfall was increasingly widespread across the country. Projections are estimated between

35,000 and 40,000 MT of raw cashew nuts for the 2014-2015 campaign.

Contributions from Maner Oufraogo, Master Trainer from Burkina Faso.

COTE DIVOIRE

The previous cashew campaign (2013-2014) was good overall, with the countrys total annual production estimated to have risen to more than 550 000 MT of RCN

with an average KOR between 47-49lbs.

It should be noted that the Ivoirian governments establishment of the new Conseil du Coton et de lAnacarde (CCA) has contributed on one hand to the regulation and coordination of the cashew sector, and on the other hand to development of the

farming sector.

Thus, we have noticed greater price stability at the farm gate, a slight improvement in the RCN quality,

and also an increase in the number of local exporters of cashew. Unfortunately we also witnessed a low

level of processing, a lack of coordination between different group of actors, and also that many

producers had difficulty obtaining jute sacs.

Improvements have been planned for the new 2014/2015 campaign. Although there has not yet been any

distribution of seedlings, nor any establishment of new orchards, nevertheless some efforts are underway,

with the Centre National de Recherche Agronomique (CNRA), the Fond Inter-professionnel pour la Recherche et le Conseil Agricole (FIRCA) and CCA building a scion garden of improved cashew varieties which will be used in the years ahead to renew Ivorian orchards. Also, we are expecting the

granting of buyers licenses to begin in late October. The forecasted total production of the new campaign is up to 600,000 MT.

As for the rainfalls, they started rather late this year in areas of production, but were plentiful and regular

when they arrived. Therefore, the production process might be long and late in the coming year. Although

farmers are trying to set up new techniques of good agricultural practices, much remains to be done in

many orchards which are still poorly maintained. Some NGOs are presently engaged in providing actors

trainings, and the CCA has also initiated a program to educate farmers. An agreement has been signed

between the CCA, FIRCA and ANADER for the creation of a dedicated Council for all cashew

producers.

In conclusion, we observe that cashew sector in Cote dIvoire is booming as well as in almost all the cashew producing countries in West Africa, and it is now attracting the attention of both the government

and private-sector stakeholders. We hope to see a boom in the sector in the coming years.

GHANA

In Ghana, the last campaign was characterized by effective contribution and help from the

Ministry of Food and Agriculture, and from the African Cashew initiative (ACi).

Improved planting material was made available (cashew clones, grafted seedlings); a

research institution became active (CRIG) and an educational radio program was

launched. The campaign saw high demand and a high market price for RCN.

Currently rainfall has slowed, is expected to terminate by the close of October 2014, but

in the northern region there is some speculation from meteorologists indicating some

showers in the next month. The erratic distribution of the rain in the 2nd

and 3rd

quarters of

the year delayed the establishment of new plantations, and also affected the uptake of the improved

cashew planting materials, as some farmers were afraid that after transplanting the new plants would die

without adequate soil moisture. ACi through its Matching Fund supported the production of 100,000

cashew clones at the CRIG sub-station in Bole, which have been distributed to interested farmers in Bole,

Sawla/Tuna/Kalba, Bimbilla, Wulensi, Yendi and Damongo districts, all in the northern region, and

Kintampo North & South, Wenchi, Tain and Drobo districts in the Brong Ahafo region.

Nevertheless, owing to high demand and good RCN market price experienced during the 2014 season,

and also the intensive farmer training sessions organized within cashew growing areas, plantations have

been well kept. Canopy substitution is gradually catching up, and this year the amount of top-working

was very encouraging. With this level of enthusiasm about farm maintenance, 2015 cashew production

can be expected to increase.

According to one of our ACA/ACi Master Trainers, Mr. De Clerq Mensah, an extension officer in Bole in

the Northern region of Ghana, producers activities are estimated to be 60% for establishment of new

plantations, and 40% spent maintaining existing plantations. The reason given for this balance is that it is easier to use new techniques at the outset - e.g. improved planting materials, field demarcation,

transplanting - than to correct and maintain existing plantations.

The upcoming cashew campaign (2014/2015) can definitely be expected to be handled well, with further

new initiatives to be implemented: an advocacy campaign will be undertaken to attract more producers

and other stakeholders into the cashew sector; a new scion bank will be established in the eastern

corridor; and improved cashew planting material will be produced and distributed to producers.

GUINEA-BISSAU

The past cashew season (2013-2014) in Guinea-Bissau has been encouraging:

we noticed that the sector has become increasingly well organized, and that

actors were receiving trainings on good agricultural and business practices.

The government also participated in the success of the season, fixing a floor

farm gate price of 250 FCFA/kg in order to encourage farmers and to better

organize the marketing of raw cashew nuts.

However, we also noticed a low production volume this season compared to

last year. According to one of our partners on the ground, weaknesses in the past cashew campaign

included: uncontrolled marketing of nuts on the border at the beginning of the campaign; production

delays; tax evasion; and diversion of capital. This suggests a need for strengthening border controls,

monitoring of the campaign, and coordinated interventions.

Nevertheless, the upcoming campaign (2014-2015) is full of encouraging signs, as the level of farmers performance has benefited from technical support on good agricultural practices. In addition, a good rainy

season is expected compared to last season. The government of Guinea-Bissau is working with cashew

sector stakeholders with the aim of better organizing the sector and helping it develop.

It has been observed that cashew plantations in some areas are getting older and must be renewed; Guinea

Bissau will have the support of the World Bank on a project for the private sector aimed at improving the

business environment in the cashew sector linked to agribusiness.

NIGERIA

The 2013-2014 cashew campaign in Nigeria finished by early August, and

offers a number of useful lessons for next years campaign. We have noticed a good quality of RCN with average KOR of 47-49 lbs, with good weather and

plentiful buyers making this a very good season for farmers.

This past campaign however did have many weaknesses, such as the non-dried

cashew nuts declining to a poor quality of 40-42 lbs by the seasons end. According to one of our partners on the ground, Mr. Azeez Ayodele, some

farmers showed a degree of laziness in drying their RCN, and sold it directly to the buyers at farm gate.

In terms of production perspectives, there is not yet any distribution of new plants underway, but some

new investors and businesses are beginning to get into the Nigerian cashew industry and are preparing

themselves for the upcoming season 2014-2015.

Farmers in Nigeria are presently experiencing high rainfall in all the producing regions, which is expected

to end by the end of October; this is not expected to have any negative impact on the cashew trees, as in

all the regions cashew will start flowering by December and the marketing season is expected to start by

February 2015. With the ongoing training sessions on good practices in farming management conducted

by ACA trainers, the expectation for next season is very high: farmers now have a better understanding of

farm management, and better quality and high yield can be expected in 2015. The National Cashew

Association of Nigeria (NCAN) and Technoserve are also engaged in the training. Farmers are very

enthusiast and confident in attending such training sessions; the hope is that they will now successfully

implement all they have learnt.

In addition, farmers are planning to form a standard cooperative society to enable them gain access to

finance for farm upkeep. Moreover, according to one processor in Ogun state, there is a plan in

development for all processors to come together under one umbrella, to enable them to have a stronger

position in the market. The National Cashew Association of Nigeria (NCAN) and Technoserve, an

industry NGO, are also engaged in the training of good agricultural practices to Nigerian farmers.

The Nigerian authorities are also getting involved in developing the cashew sector in Nigeria, as seen by

the the following actions taken for the upcoming season:

- Kwara state government is planning to establish a single selling centre for raw cashew nuts next season;

- Kogi state government has approved a new cashew research center for Kogi state University, covering cashew production, and the processing of cashew nuts and by-products.