September 22, 2019 07:20

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Has the cashew industry overcome its difficulties?

15:55 | 23/08/2019

VCN - The cashew industry is gradually growing more optimistic, with favorable factors both in terms of raw materials and prices that are expected to create prosperity for the industry in the last months of 2019.

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Raw material is no longer a big concern for cashew enterprises. Photo: Nguyen Hien.

Opportunities

Last year was difficult for cashew enterprises due to lack of raw materials, meaning firms had to compete fiercely to buy raw materials while prices continued to rise. Many of them had to shut down because they was unable to buy materials for processing. Meanwhile, the price of cashew kernels for export fell, causing enterprises to suffer heavy losses.

In this context, the Tanzanian government purchased 250,000 tons of raw cashew for temporary storage, causing raw materials to become scarce. In addition, the industry worried about the risk of the Tanzanian government selling a large amount of raw cashew, dragging the price of cashew kernels down.

However, the risk from Tanzania was controlled after Tan Long Group purchased 176,000 tons of raw cashew in Tanzanian temporary storage. Previously, the company had imported about 40,000 tons of raw cashew from West African countries. Truong Sy Ba, Chairman and CEO of Tan Long, explained his participation in the industry is to “find opportunities in danger” and to create a balance with foreign businesses.

According to Truong Sy Ba, Tan Long is able to buy a half a million tons of raw cashew for reserves, but it only purchases over 200,000 tons, so the capital source is still completely under control. Mr. Ba also pledged not to sell large quantities of raw cashew to the market to avoid affecting Vietnam’s export price. It will regulate to benefit Vietnam's processing plants. Tan Long also said it would buy all 200,000 tons of raw cashew in Tanzania's new crop.

Thus, the quantity of raw cashew of Tanzania has brought many advantages for Vietnam’s cashew industry. According to the Vietnam Cashew Association (Vinacas), Tan Long's cashew purchase will reduce difficulties for Vietnamese processing enterprises, especially small businesses which account for more than 60% of the market share. Businesses will be more stable and be able to regulate the quantity of cashew kernels, contributing to increases in price. This will help to establish an adjustment valve system of raw materials for the world market.

Mr. Pham Van Cong, President of Vinacas, also said that the purchase of 176,000 tons of cashew from Tanzania by Tan Long is a good transaction for both Vietnam and the world cashew industry. Through this transaction, the Vietnamese cashew industry has increased its power in the global market. For a long time, although holding the top position in exporting cashew, the Vietnamese cashew sector mainly depends on foreign enterprises, so it is always pressed both in input and output, with absolutely no power in the global market and unable to decide the price.

Sunshine after rain?

Regarding the positive signs of the domestic cashew industry, Mr. Tran Van Hiep, Vice Chairman, Head of Vinacas Trade Promotion Department said that after a difficult year in 2018, in 2019, the number of commercial enterprises of raw cashew in the market has decreased. Large enterprises in processing have focused on the main field, instead of participating in the international raw material market as before. Thus, there is no longer indiscriminate competition to buy materials. Instead, enterprises have focused on analyzing the market and making a thorough assessment before importing raw materials as well as before selling cashew kernels.

The positive signs of the market shows that buyers have returned to buy cashew kernel for the short and long terms. According to Vinacas, the price of cashew kernels was going up from the bottom of US$3.05 in April 2019 to US$3.35-3.40 (average price of large factories). There are even orders for the first 8 months of 2020. However, while sellers expect higher prices, buyers have not yet accepted them. Vinacas expects that the price of cashew kernel and raw materials will be stable and increase in the future. From these factors, Vinacas expects that cashew exports this year will grow by 10%, reaching 450,000 tons instead of the estimate of 430,000 tons.

However, Mr. Hiep also noted that the price of cashew kernels is influenced by many factors, especially the price of raw cashew. The purchase and sale of raw cashew is not only purely commercial but also political, so it is difficult to predict. Meanwhile, African countries want to keep producing.

Regarding the shift of processing from Asia to Africa, some experts said that firms should be wary. According to Mr. Hiep, Vietnamese enterprises should not be too concerned. As the processing quality of Africa is not good, many FDI enterprises will continue to invest in cashew production and processing in Vietnam. Some enterprises which used to trade raw cashew kernel have invested in processing in Vietnam, such as Ecom Trading, which has rented the Valency processing factory. Big corporations like Germany's Artco are also building processing plants which will to go into operation in the near future.

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However, Vinacas still recommends that Vietnamese enterprises need to strengthen deep processing to have a stable market and better prices because production and competition of cashew will become more and more difficult.

By Nguyen Hien/ Kieu Oanh