Cashew industry facing tough year as costly raw nuts, wage hike shadows profitability

KOCHI: The cashew industry is facing a tough year as the high cost of raw nut imports and a rise in wages have cast a shadow over its profitability. The withdrawal of export incentive and currency fluctuations have left the exporters in a quandary despite the shipments reaching an all-time high of Rs 5,545 crore in 2014-15.
India, which imports over half of its requirement of around 15-16 lakh tonne of raw cashew for processing, is now facing intense competition from Vietnam in the purchase of raw nuts from Africa. “Vietnam pays $40 to $50 more per tonne than us for raw nuts from Africa though we have better relations with the latter,“ said Hari Krishnan R Nair, MD, Western India Cashew Company .With cheap labour and low domestic consumption, Vietnam is able to export most of its cashew production.

The price of raw cashew nuts has vaulted to around $1,400 a tonne with global demand.

India exported 1,34,322 tonne of cashew kernels, valued at Rs 5,545 crore, in 2014-15, recording 17% rise in quantity and 10% increase in value over the previous year. However, the country has been a net importer for the past several years considering the rising demand for raw nuts for processing.

The country imported 9,30,458 tonne valued at Rs 6,601 crore during the year. “The cashew processing, which was earlier limited to southern states and Goa, has spread panIndia, causing a severe crunch in supply . With domestic cashew production showing not much improvement, the country has been importing more raw nuts,“ said K Prakash Rao, managing partner of Kalbavi Cashews.

Though the Directorate of Cashewnut and Cocoa Development has estimated a 5% increase in production at 7,73,490 tonne, the exporters say , it is lower based on the arrivals.

At a time when the falling rupee has made imports costlier, the consumption of cashew is on the rise in the country , particularly as an ingredient in various food products. “More than snacks, it is as food ingredient that cashew is becoming popular. Cashew kernels are fetching better price of Rs 540 a kg, around Rs 40 higher than the international market price,“ Rao said.

As a result of the wage increase, many of the factories in Kerala have shut down.

“The reduction of (export) incentive from 5% to 2% will have a significant impact on the exports as, unlike the services sector, we are operating on thin margins,“ Nair said. The cashew exports last year showed an increase in value along with the volume surge. The unit value during the year had dropped 6% to around Rs 413 a kg.