Shelled kernel import into Vietnam
What we should also address is the fact that on top of the RCN imported, there are also the shelled kernel imports into Vietnam which through to May 2020 reached a total of 22,618 mt. These are kernels which were produced elsewhere (mainly IVC) but which still need to be peeled. Vietnamese productivity on peeling is much higher in comparison to for instance IVC and/or Tanzania which is why producers in these countries ship the shelled kernels to Vietnam for peeling. After peeling, these kernels are graded and packed and exported again as Vietnamese cashew kernels! Please note that 22,618 mt of shelled kernels is the equivalent of approximately 100,000 mt of RCN so one could argue that Vietnam imported 531,182 mt of RCN instead of the mentioned number of 431,182 mt.
Important to mention is the fact that the Vietnamese Custom & Tax authorities are considering applying import taxes for this semi-processed product since it is not 100% raw cashew nuts. Nothing has been decided yet, but rumors are that the tax imposed on these shelled kernels may be between a minimum of 5% and a maximum of 20%.
As far as kernel exports are concerned, Vietnam exported 42,747 mt in May 2020 which is 2,46% more than a year ago in May. The total for the period January-May 2020 now stands at 190,024 mt, which is 19,23% higher than last year during the same period. The USA imported 14,078 mt in May 2020, which is an increase of 12,61% to May 2019. Total for the USA for Jan-May 2020 stands at 63,255 mt, which is 34,91% higher than the same period last year. China continues to import less than last year; May showed a figure of 4940 mt which is down 26,79% to May 2019 and the total now for Jan-May 2020 is 13,422 mt which is a decrease of 35,63%. So, whereas the USA imported thus far 34,91% more than last year, China imported 35,63% less than last year. That does not cancel each other out since the total quantity imported by the USA is much bigger than that of China. EU & others imported 23,729 mt for the month of May which is an increase of 5,61% to May 2019. This year Jan-May 113,347 mt imported which is an increase of 23,69% in comparison to Jan-May of 2019.
India imported a total of 331,056 mt RCN in the period Jan-May 2020, which is considerably more than last year, an increase of 51,8%. Covid-19 infected cases still rising in India especially in major cities such as Mumbai, Delhi and Chennai. Nevertheless, the easing of lockdown continues which also means that many processing factories are opening again or some processing factories are able to increase their production. Export figures of kernels are hard to come by, we only have the export figures for the month of February available, which showed a 20% increase in comparison to February 2019, however India went into a nationwide lockdown on March 24th which also meant ports were closed. The general feeling is that the exports of kernels from India are less than last year and with the domestic market also being very quiet, we wonder what happened to all the RCN they imported.
Prices / prediction
The kernel market is still very quiet especially on the nearby. As mentioned in our last report, roasters are covered, pipelines are filled, stocks in the USA as well as the EU are abundant and Vietnamese shippers are still desperately looking to sell June, July, August. Prices for W320’s for the nearby positions range from UD 2,70 per lb (non-BRC) to USD 2,90 per lb FOB from BRC shippers depending on who you talk to. Worth noting at this moment in time is that despite the quietness in the market, prices have pretty much stabilized around these levels now for some time.
Medium and long term however are a little more difficult to predict. If we go back to the quantity of RCN thus far exported from IVC to Vietnam, one could argue that there is still a lot of cargo waiting to be shipped so even medium term there is, as far as the supply side is concerned, nothing to worry about. However, the news from several sources is that the quality of the cargo available in IVC is not good. Sources are reporting that at best the outturn is 45 lbs and deteriorating further. Exports of RCN from Guinea-Bissau have started or are about to start and whereas the quality is much better, prices are considerably higher than the prices of the cargo Vietnam imported thus far.
On the consumption side there is also a lot of uncertainty. Covid-19 is still very much a factor with some new or renewed clusters around the world. Are the new clusters already the second wave or are these still part of the first wave? If we for instance look at what is happening in Beijing, we see that authorities are closing down larger parts of the city again in order to get a grip of the new outbreak. Is this a harbinger of what will happen elsewhere again if new or renewed clusters appear? Will authorities shut down (parts of) countries again and will we go back to the situation we have seen the last 3 months?
The world economy is slowing down in most of the consuming countries which is why we are already expecting consumption of the more expensive cashew nut to be negatively affected. A second wave would obviously be devastating; first of all, for the loss of even more lives and secondly for the world economy which could affect the cashew market even further.
Anyway, current prices are, as far as we are concerned, excellent levels to start buying for the later positions. Downside for the later positions continues to be limited.