Export of cashew kernels continued to drop on weak demand due to the economic slowdown in the major consuming countries, mainly the US. Shipments during April-July fell to 36,084 tonnes from 42,426 tonnes during the same period last fiscal. There has been a drop of Rs 161.70 crore in terms of value. The average unit value remained at Rs 266.94 a kg.
Unlike in the past, the dealers in the overseas markets are not investing in inventories and they are, in fact, covering only what is needed. "The situation is quite unpredictable," some of the major processor exporters in Kollam told Business Line.
VIETNAM Competition
At this juncture, competition from Vietnam is also responsible for the drop in Indian exports, they said. According to them, the Vietnamese cashew industry has grown significantly. Its production of raw nuts has also increased substantially. High productivity, coupled with mechanisation there, has led to low cost of production and that, in turn, has made its prices competitive in the US market.
"Thus, economies of scale work in its favour," the exporters pointed out. The best option to compete in the traditional and non-traditional markets, especially in such a scenario, is to promote branded and value-added Indian cashews and cashew products in attractive packs at competitive prices. "Such a step will not only enhance our exports both in terms of volume and value but also raise more employment opportunities at home," Dr K.A. Retheesh, Managing Director, Kerala State Cashew Development Corporation told Business Line.
Ever since the country started exporting cashew about eight decades ago, it has been exporting only bulk cashew kernels. "Then, we were the only players, producers and exporters, and now there are new entrants such as Vietnam with good quantity of kernels to compete with us in bulk sales. The situation has changed and we have to be innovative with new products, if our presence is to be maintained in the world market," he added.
Domestic demand
Meanwhile, other industry sources said that in terms of quality, Indian cashew is superior and consumers who have tasted it once might not shift their preference. Only the affordability of the consumers, given the liquidity crunch faced by the end users, might be contributing to the current decline, they claimed. Cashew is not an essential food item and hence some users might have given it up for the time being or switched over to cheap alternatives, they said.
At the same time, Indian cashew processors make good profits from the huge Indian domestic market, which absorbs almost 50 per cent of the cashew kernels produced in the country by units both in the organised and un-organised sectors. Prices here range from Rs 300 to Rs 1,200 a kg for different gradings. There is a moderate rate of growth in demand also, they pointed out.
The volume of raw nuts imported every year would reveal that a good portion of cashew kernels from these raw materials is sold in the domestic market.
On an average, around six lakh tonnes of raw nuts are imported and an almost equal quantity of it is produced indigenously. The recovery rate is almost one kg kernel from four to five kg of raw nuts. Imports during April-July 2009 have shown substantial increase to 3,63,990 tonnes valued at Rs 1,331.55 crore ($317.34 million) at an average unit value of Rs 36.58 a kg, from 2,65,624 tonnes valued at Rs1,029 ($211.37 million) at an average unit of Rs 38.63 a kg in the corresponding period last year.
An industry source attributed the significant rise in imports to availability of raw nuts at low prices in certain producing countries in Africa, such as Ivory Coast and Guinea Bissau, and the anticipation of a potential short crop and consequent price rise in Tanzania, which produces comparatively good quality raw nuts with high recovery rate and hence with prices always higher.
Source : Business Line