Impact of global trends on the international value chain of cashews Presented by:
Hari Nair
Western India Cashew Co. Pvt. Ltd., India mail@wenders.com
Overview
Value Chain of African Cashews
Trends in Cashews
Grower – Processor – Roaster – Retailer Production – Cultivated as a low-maintenance crop Processing – Shelled & peeled manually into kernels Consumption – As a sophisticated snack
Harnessing Trends to increase farmer value
The Cashew Value-Chain Africa Africa
India India
Growing Growing Collection Collection Transport Transport Drying Drying Jute JuteBagging Bagging Port PortCosts Costs Shipment Shipment
Import Import Shelling Shelling Peeling Peeling Grading Grading Quality QualityControl Control Inert InertPacking Packing Shipment Shipment
RCN RCN $650 $650 CK CK $3,000 $3,000
RCN RCN $1,000 $1,000 CK CK $$ 4,500 4,500
USA USA // EU EU Import Import Warehousing Warehousing Roasting Roasting Packing Packing Promotion Promotion Logistics Logistics Supermarket Supermarket Consumption Consumption RCN RCN $2,500 $2,500 CK CK $11,500 $11,500
RCN RCN==Raw RawCashew CashewCK CK==Cashew CashewKernels. Kernels.RCN RCNEquivalent Equivalentof ofcashew cashewkernels kernels==4.5 4.5times times Price Sources: Price Sources: Africa: Africa:Trade TradeEst.; Est.; India: India:Export ExportPrices, Prices,Customs; Customs; USA: USA:Retail RetailPrice PriceAve Avefrom fromIRI IRI2006. 2006.
World Cashew Production 2.00 1.80
Quantity in M.Tons
1.60 1.40 1.20
East Asia E.Africa W.Africa Vietnam Brazil India
Low Crop caused high prices in 98-2001 This spurred growth in the crop 2 years later.
1.00 0.80 0.60 0.40 0.20 0.00
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 Year
Source: The Cashew Export Promotion Council of India and Trade estimates
World Cashew Production 2.00 1.80
Quantity in M.Tons
1.60 1.40 1.20
East Asia E.Africa W.Africa Vietnam Brazil India
Prices fell from 2000-2004 Low prices stop crop growth Two years later
1.00 0.80 0.60 0.40 0.20 0.00
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 Year
Source: The Cashew Export Promotion Council of India and Trade estimates
Trends in Cashews - Production
The world cashew crop doubled since 1998.
W. Africa and Vietnam: Explosive growth
Prices moved in a 30% range. Vietnam grew with much higher productivity.
India, East Africa and Brazil: much slower Prices went up in 2003-04, despite a much larger crop-base than in the late 90s. Sudden price-fall in 2005-06, because growth of 2004-05 was not absorbed at higher prices.
The African Value-Chain
Cultivation
Small farmers. Low incomes. Credit-requirements not met. Low yields - 1/8 of possible yields – no crop inputs. Pricing uncertainties – political/commercial
Production has been growing phenomenally.
Ivory Coast: >50K MT in ’96 to 250K MT in 06 Prices have still held up – in comparison with other hi-growth tropical agricultural products.
Trends in cashews - processing Average Value of Raw Cashew Import to India $1,600
Average Value of Kenel Export from India Equated @ 1:4.5 yield
$1,400
1337
$1,200
1163
$1,000 $800 $600
1067 930
955
927 869
718
1077
1038 947
869
695
695
906
871
1110
865
675
609
$400 $200 $0 1996- 1997- 1998- 1999- 2000- 2001- 2002- 2003- 2004- 200597 98 99 00 01 02 03 04 05 06
Source: Indian Customs
The Indian processing value-chain
Organized cluster of factories with about 500,000 people in a small rural region. Works with a 30-35% Value Addn.
No other comparable int’l product processing. Subject to International price-movements.
Partner for growing African cashew production.
Ready buyer for cashews round the year. Has managed shipment uncertainty. Able to process varying product on pro-rating.
Trends in cashews – Processing India Price pass-through is visible. Local market has developed. Vietnam has become a significant processor Prices, quality, costs and exports rival India Africa – significant logistics advantages over India. Should the farmer subsidize the factory? Develop scale to avoid discounting.
The US-EU Value-Chain Importer Importer
Roaster Roaster
Import Roasting Import Roasting Warehousing Salting, Warehousing Salting,Flavouring Flavouring Credit Packing Credit Packing Price Insurance Promotion Price Insurance Promotion Quality Branding Quality Branding replacement Logistics replacement Logistics Long-term Long-termprices prices
Retailer Retailer Logistics Logistics Warehousing Warehousing Real RealEstate Estate Merchandising Merchandising Promotion Promotion Price-banding Price-banding
USA / EU Value-chain
Costs & Margins comparable with other snacks. Tight Chain. Price-fluctuations reach consumer. Supermarkets stock many alternative snacks. Roasters have choice
Five other nuts, mixes of nuts and many other savoury snacks.
Cashew are promoted only when great value.
Demand falls when prices move out of a band 2006 demand fell after prices went up 30%
US consumption of Tree-nuts 1.5
Almonds grew from 1999
Almonds Walnuts Cashew+minor nuts 1
Lbs
Pecans Pistachios
0.5
0 1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
Source: USDA Trade Data
US consumption of Tree-nuts 1.5
Almonds
Cashews started growing in 2001
Walnuts Cashew+minor nuts 1
Lbs
Pecans Pistachios
0.5
0 1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
Source: USDA Trade Data
2005
US consumption of Tree-nuts Almonds fell in 2004-06 because the crop stagnated
1.5
Almonds Walnuts Cashew+minor nuts 1
Lbs
Pecans Pistachios
0.5
0 1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
Source: USDA Trade Data
US consumption of Tree-nuts 1.5
Cashews fall in 2005 despite crop increase Not yet picked up despite lower prices.
Almonds Walnuts
Cashew+minor nuts 1
Lbs
Pecans Pistachios
0.5
0 1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
Source: USDA Trade Data
2005
Nut Consumption trends High growth item For nuts, a pause in their growth If consumers could design the perfect nut… it would be organic (for purity), low-sodium (for better health), private label (value prices). While equivalized units have grown in three out of the past four years, there are signs of consumer price resistance… AC Nielsen, April 2006
Nut Consumption Trends Health-driven growth What's giving nuts their sales energy?
A magnet to the nutrition-inclined - they're high in protein, fiber, calcium and iron, with many fats, the good kind… packers are adding new flavor varieties such as black pepper cashews…
people may be thinking of nuts as a "healthier" salty snack, and the category appears ready to gain snack share and a more prominent role in meal recipes. AC Nielsen, April 2006
Nut Consumption Trends Piggybacking on other nuts
Among the major tree-nuts, all except cashews are grown in developed countries. Almonds, pistachios, walnuts and macadamias give very high $ yields to the farmer. All of them have organizations with funds to conduct promotions and health-research. Nut-consumption grew because of their efforts. Cashew demand grew with other nuts, but will only do so as long as prices are attractive.
Increasing producer-value Sequential development 1. 2.
Reduce waste – Dry the product. Make the turns quicker.
3. 4.
Improve the Product - min 30% out-turn Grow the crop.
5. 6.
Infrastructure and Finance
Increase yields – from 300kg / HA to 1 MT Plant more.
Increase product-value – drive consumption Add value at Origin
partner customers, choose niches.
Partnerships for Development
Leverage Partnerships & increase value in Africa. Government and Private
Farming – better tree-yields, out-turns, size of nuts.
ICAR in India, FAO, etc.
Infrastructure – Logistics. Up-country and Ports. Procurement – Banking, Micro-credit, Certifications. Processing – Rural factories, Machinery, Training. Promotion – Contribution from African Aid Agencies.
Partnerships for Development
The US FDA approved a health-claim for other tree-nuts which excludes cashews. Only with category promotions and health research, can cashews grow as a commodity without price-shocks. NGOs could help raise resources for such research and lobby for cashews.
Increasing producer value
30-50% value-creation possible in RCN.
Farm practices: 2 MT/HA demonstrated. Quality: Out-turns, Size of nuts, Defectives %.
Logistics inefficiencies
Drying of RCN – Success of Tanzania thru training
Reduces farmer value as costs are high
Government Policies
Promotes monopolies, restrictions. High Taxes reduce farmer-value in tight value-chains.
Increasing producer-value
Good drying of Raw Cashews can increase value by 10-20%. Farmer education – do it early. Farmer credit – holding capacity. Up-country collection centers. Trader / collector training. Yields and Dryage. Commercial – wet is heavier Drying Facilities at port. Last control point.
Increasing producer-value
No Lot-mixing. Single origin = better yield Prompt transport and shipment. Inland transport – trucks. Port infrastructure – costs, deterioration. Port storage, drying, inspection facilities. Container availability. Enough Dry-bags in containers. Weekly sailings and shorter transit.
Increasing producer value
Government Policies – nurture the business. Good crop forecasts – aids Marketing plans. Crop Promotion – Low export-taxes. Infrastructure – reduce systemic costs. More exporters – better farmer prices. Security.
Takeaways
African RM Price > 25% of Retail Price.
Value-based promotion.
Therefore demand is price-sensitive. Price-increases can cause misery when demand falls.
Nut consumption is growing – invest in the crop
Better value for Origin than other African crops. Fluctuations due to tight value-chain.
Value-add, but not at expense of growth.
NGOs in Africa, pls help to market cashews
Thank You
Hari Nair Western India Cashew Company Pvt. Ltd., India www.wenders.com