The Crooked Cashewnut

I guess I must give credit for the title and subject of this blog to my dear friend Krishnan, who has never deviated in his reference to this wonder crop and its trade.

The Cashew Nut and its Kernel within has a crooked shape, and thus it's business too is never straight. We know that he doesn't mean that it is a 'crooked' or shady business, but that simple and straighforward business rules never seem to apply.  Market trends of this crop show little or no logic.

The African Cashew value chain moves from within Africa to India to the Consuming markets in the US & Europe.

In brief the chain consists of :-

- Plantation / Farmers ( be it wild, public orchards or organized private plantations),
- Traders ( Could be either plastic mug traders, bicycle traders, donkey cart traders, gele-gele* traders, pick-up traders, truck traders or warehouse traders - basically referring to the size of their trading capacity) 
- Exporters ( the serious ones in the trade,  year after year, or those profit searching - fly by night operators looking for a quck buck, or the pure currency champions - looking for export currency earning to balance their import exchange rates)
- Processors -Either Local or International, Either the mug/backyard processor or the non conventional bag by bag processor or the industiral - small, medium to large processor)
- Distributors/Marketeers & Consumers ( of the finished product)

Each one of the above - deals with this crooked nut - with not much of an idea of what actually influences prices of the raw material or the finished products.

The parameters that dictate raw material prices could be varied and most often external factors

Prices and Availability of Raw Material in India - This is a distant 'GOD' like parameter.  This parameter is always there, around you - can't see it, cant touch it - but if affects you. Traders and Brokers of the raw material call to say that India is short or long (not referring to anyones height for sure - but whether the raw material will be enough in India or not). If India is short, prices could go up or down and if India is Long, prices could go up or down!

The Weather in India, East Africa, West Africa or in Asia. A good monsoon in some places means a good crop( Prices could go up), but could also mean poor drying and thus poor quality (Prices could go Down).

Ivory Coast : No ivory trade here but IVC has just become the single largest hyper market for raw nuts.  400,000MT in one single country. Thus turbulence (not the flying kind) can affect markets. If IVC has tremors (not the Earthshaking type), buyers rush to Guinea Bissau, Senegal and The Gambia (since we're the next stop for the Raw material buying train (explained later).  Thus IVC with its low outturn, wet crop plays king-pin in determining prices in the last stop before Tanzania.

Diwali, Christmas & New Year : Festival time is when people want to eat Cashews.  Thus October/November in India and December in the US is when everyone wants their kernels for the sweets and Cakes.  Raw material availability well in advance to meet these festival requirements plays a role.  If a processor is short he pays more. If he is long, he pays less!!!

Vietnam : the fastest growing and most innovative processing nation. Vietnam buys and India cries. Indian processors have never in the past been challenged when sourcing raw nuts is concerned - never, until Vietnam pushed its way into making it a success story. If vietnamese buy, markets change. When they sell - markets change. When they default (which is what they're getting to do quite well and thus makes them virtual jokers in this crooked nut game) - markets change.  And none of this is visible to the ordinary trader. Boom - a market surge or collapse hits you before you can figure out how the Vietnamese say Ni-hao!!

The Gulf & Afghanistan Wars : When the US and Europe get into hard fought battles, whether or not they provide weary battle hardened warriors with Almonds, Pistachios or Cashewnuts - affects the kernel industry and thus the raw material trade as well.  However the problem is that raw material trade has happened about 60-90 days before those kernels are sold and thus one has no control over price at that moment. Whe the US goes to war, it would help if they let the raw cashew traders know a few months in advance - whether they would continue to buy kernels as nutrition for troops!

The US Economy and Recession : This has done funny things to the crooked nut.  While the US dropped purchases durng the recession, they actually bought more cashew kernels because prices dropped becasue of the recession - and since they bought more, prices went up . And since there was a recession, prices went down.  and so on and so forth.  If Alan Greenspan had been a little less liberal, we could have had a square cashew kernel and not a curved crooked one.

The Indian Marriage and Childrens Act : should have stipulated the quantity of Caju kathili (a diamond shaped sweet made purely from Cashew butter and sugar) each marriage  and birth of a child was entitled to for distribution.  The quantity of cashew brokens and bits consumed in India determines the preferred origin of the raw material.  Origins which have smaller grades or tougher nuts to process - have more brokens and this sometimes pushes the demand for weaker origins.  India being the largest consumer of cashew has a large influence on this crooked nut.

Education, Religion and Entertainment : In a similar vein an Education Bill should also dictate distribution terms of Caju Kathili on occassions when Indias close to 500 Million children successfully pass Examinations year after year. Tirupathi and other religious boards should have determinable quotas too for Cashew bits and pieces used in Laddoos & Prasad (the religious offerings).  Entertainment Bars, Restaurants serving Cashew snacks too - If we were able to determine the above Marriage, Education, Religious and Entertainment usage of Cashew bits - we could have a much better idea on stocks and requirements in India.

Bill and Melinda Gates and the ACA & IRD : Many years after Vasco da Gama brought this crooked nut to India and Africa, the pundits in the US (through the USDA and USAID) decided to take some credit for popularising the nut.  They either genuinely believed or initially convinced Africa that India was actually exploiting Africa by taking away its raw material. The primary reason for African raw material production to have boomed from a meagre 50 Thousand Metric Tonnes to a whopping 800,000 Metric Tonnes was conveniently forgotten.  This was not becasue of a boom in local processing, and neither because of a US Department of Agriculture presence, but because of a simple boom in population, weddings and children getting through school in India!! Consumption in India has driven processing in India. Currently processors in Africa, due to the multitude of other inefficiencies, are unable to pay growers a competitive price for the raw nuts. African processors have to compete with Vietnam and India on the kernels.  Though the apparent earning of Foreign Exchange is slightly higher when a country Processes kernels and successfully exports it, it is essential to understand that unless the factory is efficient and self sustainable, they will not be able to pay the producer a better price.  Thus the NGOs step in subsidise the crop, set up a factory only to help it close once the subsidy goes.  The report presented is that that they have successfully added value to the product and they get the Kudos of the Development World.  This has a reverse action on the markets and  - to satisfy their egoes that they now add value to the product. They take away value from a farmer and give it to a processor and the nation. The Farmer feeds the nation literally!!  Processing of the Crooked nut in Africa will be a success one day - when Africa consumes its lower grades or finds a market for it. When finance and energy are available at competitive rates. When the middle class and consumers grow.Till then it will be the NGOs and AID organisations that will claim moral successes in adding value to the chains. Hypermarkets and Supermarkets will promote fairtrade only to move the value addition benefits to a few farmers, while the gross margins and national development will be at the cost of the farmer -  the Farmer of the crooked nut!

Currency Exchange: The Euro and the Dollar dance a different tune.  The Dollar and the Ruppee dance the Samba.  West African sourcing is primarily done in Euro linkd CFAs. Stronger Dollar is good for Exporters buying in Euros and Selling in US$ and this pushes raw material prices higher. A stronger Dollar is bad for Indian/Vietnamese importers of Raw Nuts and thus pushes buying prices lower.  An exporter from India likes a strong Dollar.  Thus there lies another crooked mismatch!!

Shipping : The Corporate situation of Maersk and Delmas. If AP Moeller has a change of management policy that they so often have or if Vincent Bollore sees a better opportunity in China - Freight changes affect both the raw material prices and the kernel prices as well. A change of shipping route affects the quality and thus the prices too.

Elections in Bissau : For some unfathomable reason, the governemnt of Guinea Bissau always manages to hold its Assembly, Presidential or every other Elections (or power transition event) during the peak of the Cashew Season. Thus lending a twist of uncertainity to International availability of Bissaus much sought after raw nut. A delay in shipments from Bissau normally pushes market prices up. But delayed shipments means full warehouses and thus a lowering of prices in Bissau. And overflowing warehouses means lack of Cash turnaround and thus even more lower prices.  Overflowing warehouses also indicate poor storage conditions for crop in the bush as well as in the warehouse and thus likely deterioraiton of quality - and thus even lower prices.  All while overseas prices and demand goes up... Would you buy or sell?

In fact POLITICS in Bissau too affects world prices. Several Ministers and everyone who has a say in Government also has a say in the Private sector through a Chamber. Export duties , and general relaxing of personal activities results in calm
Rice prices : Rice is a barter item for Cashews and normally is a 1 bag for 1 bag. Thus irrespective of Kernel markets, at times a shortage in rice sends the Raw nut prices sky rocketing in Bissau - and by the time the kernel market corrects itself to this anomaly, a fuddled cashew trader is stuck with overpriced stocks.

The Bangladesh Jute Weavers Association : Strangely, when these guys go on strike or go slower on deliveries, Jute bag prices double or delay shipments of the raw cshewnuts - and thus could affect our already confused cashew trader!!

The Icing to the Cake of Factors influencing this Crooked nut are the Crooked Rumour Mongers!! Twenty four phone calls a day and they successfully move markets up or down - Momentarily, no doubt - but enough to twist buying and selling of a twisted nut.  These mongers complement another distasteful breed -"One bag Speculator Buyers" - who meander into markets, buy a single bag at twice the normal price and say that they'll come back for the rest. The rumours spread that a benvolent buyer is there. The saviour has come! And all selling stops! The whole market waits days for the return of their new found benefactor.  The serious buyer goes away dejected and losing money and patience. The unsuspecting trader waits a lifetime. Markets change. The trader is desperate and sells at a loss to the partner of the One Bag speculator. This modus operandi is quite popular with fly by night operators.

The Cashew Club of Kollam : Am sure they will dispute this - but discussions held in the exclusive bar of the exclusive Cashew Club in Kollam can make paradigm shifts in kernel and raw nut trade.  A few whispers inbetween a few sips of some of the best distillates available, in any venue that members of this august club meet, cause Tsunami like reactions - waves and troughs that resemble the crooked curves of this tasty nut.

The Pundits : Not the pony-tailed, forehead striped religious types here. The experts who know how to predict the futures of this Crop. The very intellignet Gujarathi or Sindhi - new in the business but already expert types or the seasoned Malayalee or the American kernel trader - everyone knows what everyone doesnt know. And what they say doesnt mean anythng - but it changes the way the market behaves.

The West & East Africa Integration Ploicy : Traders of raw material in East Africa migrate to participate in the trading season in West Africa and Like wise Traders from West are setting up bases in East Africa - thus with this cross cultural interface - free flow of buying practices - influence the Cashew buying train around africa.

The Cashew Buying Train : India has perfected the art of year round sourcing in a unique manner.  Dec/Jan - meets the end of the East African and Indoneisian season and buyers buy local crop in India . In Feb/march they reach West Africas armpit in Nigeria, move westward to Benin/Ghana and then to the hypermarket Ivory Coast. The Gambia, Senegal and Bissua from April, May to August are the next destinations of this group of predominant Malayalee inspectors and thier mixed breed of traders/businessmen. Malayalees, Gujarathis, Karnatakaites, Andhra-ites, Maharashtrians, Tamilians, Punjabis and more recently Oriyas.... The list of trader origins is endless. The train then moves back to East Africa and Indonesia for Nov/Dec/Jan and then the cycle continues. .

Labour : Kollam, the bastion of processing for many years - now resonates with many languages. On my last trip, was surprised to hear several groups speaking bengali, marathi, oriya....labourers - migrant workers have lent another angle to processing prices. New labourers work for lesser but are inefficient at processing smaller kernels. Thus a Senegalese origin  processor loses labourers and Tanzanian origin gets cheaper abundant labourers.

Cholestrol - Good & Bad : The current fight between the Almond board and the Cashew Export Promotion Council may have winners and losers. But the presence of Cholestrol in the argument - helps keep the price of kernels fluctuating.

FACTORS THAT MAY INFLUENCE THE TRADE AND PRICES IN THE FUTURE :

Does Water exist on the Moon : Put together with the fact that Malayalees are the first to migrate anywhere and if there exists water on the Moon, then we can have a corner Nair shop as well as grow cashew trees on the Moon.  This will grossly change the way Cashew business is done in the future.

China : With the speed and efectiveness Chinese are multiplying overseas (The Chinese Govt has a ban on Chinese multiplying at home - max ONE CHILD Policy - But encourages growing chinese influence overseas by either exporting citizens in bulk to virgin Africa or by turning a blind eye to the One Child policy for Overseas residents - as long as they dont inist on Chinese nationality for their overseas biologically increasing numbers) - It will be not long before Chinese will get into the Raw nut trade (NOT LONG... Infact it's begun!!! A dear friend of mine - George, is the first. I have sucessfully done some rawnut business with him) and very soon they will rush into the processing game - be it in Africa or China - and this will drastically change the ways of trade of the crooked nut.  The Chinese will devise a method to clone the Cashew with Maize and we may have kernels growing out of Cobs!

Thus on an end note, if one were able to master all the above and keep in view global weather conditions, Ash eruptions (not referring to arguments by our own bollywood belle - but the volcanic type from Iceland), Oil prices and Oil slick conditions, Halliburton stocks, Dick & Donalds whereabouts and activities, etc.etc. and then relate all this information to the Global economic situation (especially to that in Greece, Pakistan, Comoros Islands, Haiti and Spain) and then finally weigh Ahmedinejads Iran Export Policy on Pistachios, then one could easliy master the price trends of the Cashew Raw nut versus the Cashew Kernel.

Ram Mohan
In a moment of 'crooked' yet light humour
Guinea Bissau May 2010.

* Gele-gele : a 20+year old van converted to a bulk human transporter - with a minimum of 5 legs, few goats/pigs or chicken, 5 charcoal or cashew bags etc etc that need to be outside as the Gele-gele moves.(See Pic above)
NOTE : No figures and facts in the above blog are accurate. Consume them at your own risk!