CASHEW INDUSTRY IN 2023: DIFFICULT BUT STILL OPTIMISTIC

Entering 2022, enterprises expected to gradually restore their production and businesswhenCOVID-19pandemic(2020-2021)ispushedback,buttheyfacedfurther difficulties due to Russia-Ukraine conflict. The political - economic - social situation in manycountriesfluctuatedinabaddirection…

Endof10yearsofcontinuousgrowth

The impact of Russia-Ukraine conflict caused a global food and energy crisis, high inflation in many countries and higher living costs, so people limited their spending. As a result, the purchasing power of non-essential foods such as nuts and seeds, includingcashewnutswereaffected.

Looking back to 2022, importers and processors were slow to buy raw cashew nuts in most periods. The cashew kernel market in general, especially the traditionalmarketofVietnamcashewindustry,declined.

According to the analysis of Mr. Nguyen Minh Hoa - Vice Presidentand Head of Policy Board of VINACAS in , Director of BIMICO Company, enterprises the major companie industry, especiallymanufacturings, needed andtolookbacktoseethatin2022,manufacturing processing did not decline, did not export volume decrease much, turnover decreased by USD but export 200-300 million. raw in Regarding cashew materials, early 2022, there was a shortage forecast but at the middle and the end of the year, it was showed that the average annual number of raw cashew nuts was never short. Because there was no shortagethe price , of cashew kernels was difficult to increase according to the law of supply and demand. The number in the of cashew kernels EuropeandUSmarketswasnotasshortasthatinprevious years, while another major market of Vietnam cashew, China, declined because this country maintained its ZeroCOVIDpolicyuntiltheendof2022.

Therefore, behind the figures in the report were countless that each enterprise difficultiesin the past year had to face. From the price of raw materials at USD 1,200/ton at the beginning of the of raw cashew nuts season, "apparent shortage when there was a situation of of raw cashew", price increased to USD 1,400/ton in the combination with increase in costs such as labor, materials, packaging, electricity…, which pushed the up price of raw cashew, while the selling price of cashew kernels decreased. As a result, in 2022, the cashew industry onlydid not meet the targets set not by the Ministry of but also Agriculture and Rural Development the efficiency in production and processing many of enterprises was or not high, except for zero some enterprises specialized in the export of cashew kernels. Most of pure processing enterprises hardly recorded profit survive.,hadtostruggleto

Ta Quang Huyen, Member of Standing

Executive Members' Board of VINACAS, Chairman of the Board of Directors of Hoang Son 1 Joint Stock Company (Binh Phuoc) said : “ For a long time, the world price of raw cashew has been quite stable, so many countries expanded cashew growing area, making raw cashew output increase faster than consumption demand. When the Russia - Ukraina conflict broke out, in order to reduce inflation, the US Federal Reserve (FED) repeatedly raised interest rates, the EU also took similar measures, the world cashew importers and wholesalers could not afford interest rates, so they limited or did not purchaseandstoreinstockasbefore.Alongwithinflation, due to an impairment in consumption, so for the first time my company has failed to grow in sales instead of an average increase of 20% per year for ten consecutive years".

Vietnam is the world's No.1 cashew processor, No.1 kernel exporter and also No.1 raw cashew importer, such three No. 1 have to create an actual advantage that is to do something to gain profits but not enterprises "do for free" while they are No. 1. With the current equipment and technology, the production cycle of cashew kernel processing factories in Vietnam is very fast, enterprises do nothavetobuyrawcashewattherateofaboveUSD1,000/ton.

According to VINACAS, 2022 terminated the period of export growth that lasted for 10 consecutive years (2011 - 2021) of Vietnam cashewindustry.

No shortage of raw cashew, so purchase at a necessary quantity

According to Mr. Bach Khanh Nhut, Standing Vice Chairman of VINACAS, Deputy General Director of Vinacontrol Vietnam, Chairman of the Board of Directors of Vinacontrol Ho Chi Minh City, cashew export situation in 2022 – 2023 period seemed to be more difficult than in 2019 – 2021 period. Cashew consumption was still slow, prices were difficult to increase. Sharing this view, Mr. Nguyen Minh Hoa said that he has not seen the "pink color" ahead.

Spending on non-essential foodsuchascashewnutsisforecastto continuetodeclineinalongtime.Mr.

Ta Quang Huyen commented: “ In 2023, cashew kernels in major markets are in surplus. With high interest rates, world traders do not rushtobuycashewkernelswhenthey do not know consumption force. With high interest rates, customers do not buy much, pushing inventories to Vietname cashew processing enterprises. While domestically, bank interest rates are 1.5 - 2 times higher, which means that all inventories in Vietnam will be subject to a double financial cost compared to them in 2022. In my opinion, the high financial cost in combination with the fact that importers do not buy and store, although the industry faces many difficulties every year, will make 2023 become an extremely difficult year.

Mr. Tran Van Hiep - Vice President and Head of Foreign AffairsandTradePromotionBoardof VINACAS, General Director of My An Co., Ltd said that it may have to wait more to see how the market was. Cashew kernel prices were at the lowest level. The prices last year were low, while the prices this year were even lower. Therefore, enterprisesshould not rush to sign raw cashew import contracts when the price and can not be is still high balanced to the export price of cashew kernels. Therefore, it is necessary to balance reasonable input - output pricesso that it is profitable, avoids losses like in previous years. In addition, pay attention to closelyinspecting the quality when importing raw cashew to avoid the risk of being mixed with raw cashew nuts from theold crop in 2022, due to the large number of raw cashew nuts in the old crop currently in stock from Africa, India, and even Vietnam'sbondedwarehouses.

According to Mr. Nguyen Minh Hoa, Vietnam is the world's No.1 cashew processor, No.1 cashew kernel exporter and also No.1 raw cashew importer, such three No. 1 have to create an actual advantage that is to do something to gain profits butnotenterprises"doforfree"while they are No. 1. With the current equipment and technology, the production cycle of cashew kernel processing factories in Vietnam is very fast, enterprises do not have to buy raw cashew at the rate of above USD 1,000/ton. They will purchase at a necessary quantity because this year there is no shortage of raw cashew. Input materials account for over 85% of production costs. If calculated by cashew kernel price of USD 2.6/lbs (0.45kg), in order for the manufacturing to achieve efficiency, the price of raw materials must be at least USD 200/ton lower than the current price. The current kernel price being sold at USD 2.5 - USD 2.6/lbs is ahead of the raw material price.

In terms of production costs, besides the increase in bank interest rates, the cost of packaging and transportation workers also increased, which means that total production cost this year almost doubled. In this context, some enterprises took the initiative in reducingproductionoutput.

Although in 2023, FED is likely to raise interest rates at a very low rate or not much, US enterprises may reduce salary, due to the decrease in working hours, income of workers will decline. Those are the factors that make cashew kernel prices fall this year. Therefore, processors are not in a hurry to buy rawmaterials.

According to VINACAS Information Council, in 2023, cashew production and supply chain in the world and in Vietnam will continue to face many difficulties and challenges. The issue of inflation, economic recession, the State Bank of Vietnam's credit tightening policy, USD/VND exchange rate fluctuations, decline in consumption, increasing processing costs have a strong impactonthegrowthofthecashewindustry.

In the same opinion, but Mr. Vu Thai Son, Member of Standing Executive Members' Board, Deputy Head of Foreign Affairs and Trade Promotion Board of VINACAS,ChairmanofBinhPhuocCashewAssociation, Chairman of the Board of Directors - General Director of Long Son Joint Stock Company, has a more optimistic viewwhenthinkingthat:Itistruethattherearedifficulties in the cashew kernel consumption market, but in 2023, thereisacorporation,afteraperiodofstronglybuyingraw cashew to "hold" the market, that has currently "let go". Domesticcashewprocessingfactorieshaveopportunityto buy raw materials from Cambodia and Africa at a more reasonable price. Therefore, cashew processing activities in 2023 will be "brighter". Because if Vietnam cashew processors can buy raw cashews at the reasonable price, the chance of success will be higher. However, Vietnam cashew farmers in 2023 may not be able to sell at the same price as in 2022, because it is likely that the overall price ofrawcashewwilldecreasemorethanthatin2022.