Cashew industry falls on hard times

Cashews processed at Long Ha Factory in southern Binh Phuoc Province's Phuoc Long District. Many companies in the cashew industry are facing losses and bankruptcy as they face stiff challenges caused by low prices and banking pressures. — VNA/VNS Photo Ha Thai

HCM CITY (VNS) — Many companies in the cashew industry are facing losses and bankruptcy as they face stiff challenges caused by low prices and banking pressures, according to the Viet Nam Cashew Association.

Nguyen Duc Thanh, vice chairman of the association, said exact figures about cashew processors and exporters in deep trouble were not available, but "it must be 50-70 per cent."

"Prices has fallen sharply. In addition, inventory is high. Meanwhile, they need to get the money back to pay bank loans. So they are forced to accept losses," Thanh told Viet Nam News.

This year, banks were refusing to issue Letters of Credit (L/Cs) for cashew processors and exporters, making it difficult for the latter to do business, said another industry insider who did not want to be named.

The association has reported that the current price of raw cashew was just VND18,000 (US$0.85) per kilo, a year-on-year decline of 30 per cent on average during the first nine months.

Due to falling prices, export turnover has not significantly increased compared with last year as traders cannot afford to sell what they had purchased at higher prices earlier.

In the first nine months of this year, the country shipped 160,000 tonnes of cashew worth US$1.08 billion, according to the association.

The US, China and the Netherlands have remained the biggest markets for Vietnamese cashew.

The association forecast that cashew export would continue to decline in the final quarter of this year due to low supply.

"In the final quarter, there will be no supply. Companies have no raw material to process and export, so exports will fall by around 50 per cent for sure," Thanh said.

In the beginning of this year, the association had targeted an export turnover of $1.5 billion for 2012. It has since reduced the target to $1.2 billion, $200 million less than last year.

Demand from importers has been low, the association said. It said that most companies were unable to sign contracts with partners in the EU, the US and even China.

Meanwhile, cashew exporters are facing challenges caused by material shortages as local farmers have cut down cashew trees to plant another crops.

This means local firms have to import an estimated 400,000 tonnes of raw cashew instead of around 300,000 tonnes in previous years.

With many companies joining the industry, lured by the potential for high profits, proper management has been difficult to ensure stable quality and prices, the association said. — VNS