Home   >   NEWS & VIEWS   >   News

  • Vietnam’s cashew industry in pain

    Feb 18th, 2019

    THE average price of Vietnamese cashew has inched up on the global market this year, but the Vietnamese processing industry continues to face challenges. According to the Ministry of Industry and Trade’s Export-Import Department, an estimated 35,000 tonnes of the nut were exported last month for $286 million, an increase of three per cent in volume and four per cent in value from the previous month. The average price was up one per cent, a good sign for the industry since it usually dips in the first month of the year.

    However, prices are down 20 per cent from a year ago, and the slight price increase cannot be regarded as a trend yet, according to experts. The department said the global cashew market has not changed much. Many countries are now entering the harvest season but global demand is not increasing, and this would greatly affect the price, it warned.

    Fall in value

    Last year, Vietnam exported 391,000 tonnes for $3.5 billion, a 7.8 per cent increase in volume but a slight fall in value. But it was a bad year for the industry with huge losses and many cashew processing companies going bankrupt. The main reason was a sudden drop in global prices, which forced many of them to shut down. Vietnam is by far the largest exporter of the nut in the world. Industry insiders warned that prosperity is very unlikely in the short term. Despite being the world’s largest cashew exporter for the last 13 years, Vietnam depends heavily on imports of raw cashew since domestic supply only meets a third of the processing demand. So the biggest challenge remains sourcing raw materials.

    Experts said the problem of the cashew industry is similar to that of the pangasius industry in the past – too many enterprises, most of them small and looking for a quick buck.

    Competition for raw materials

    The Vietnam Cashew Association (Vinacas) said the production capacity increased rapidly last year leading to competition to buy raw materials and thus higher prices. The average price of imported raw cashew was $1,865 per tonne. Enterprises also competed to sell their products after processing since they needed money to repay bank loans and borrow again for the next season. The price undercutting and in many cases the failure to break even pushed many over the edge. Not only processors but also raw cashew importers faced difficulties since many of the former closed down and were willing to lose their deposits to cancel contracts. At an industry review meeting in mid-January the importers said they would raise the deposit amount from 10 per cent of the contract value to 30 per cent to hedge their risks.

    According to Vinacas vice-president Nguyen Minh Hoa, African countries have invested in cashew processing in the last few years but not efficiently. Thus, for at least another five years they would remain exporters of raw cashew. So cashew supply is set to remain abundant, and Vietnamese processors should not scramble to buy even if prices are high, he said. Instead, they should calmly monitor the market and buy collaboratively to get the best prices, he said.