Two-thirds of the world cashews are not processed in the countries of their source. So just how do those cashews find their way to your cocktail party?
Cashews, those kidney-shaped nuts so welcomed at cocktail parties and in chicken dishes, represent an odd bit of global trade. It’s in many ways a throwback to a time when agricultural products were processed far from their source. Only in this case, the trade connects developing Africa with developing Asia, before being shipped to eager consumers everywhere.
“Two-thirds of cashews in the world are not processed in the countries where they’re grown,” said David Rosenblatt, president of the Richard Franco Agency, a New Jersey-based food brokerage that specializes in cashews.
Worldwide production of cashews amounts to about 2.5 million tons annually. Cashews originally hailed from Brazil, but these days, just about half the world’s crop is grown in Africa and that harvest is expanding rapidly. The Ivory Coast is by far Africa’s biggest producer, and its production is increasing at about 10% a year. Guinea Bissau, Benin, Tanzania, Mozambique and Nigeria produce major crops as well.
While Africa is the dominant producer, it shells and processes only about 10% of its crop, according to the African Cashew Alliance. Globally, almost 90% of all cashews are processed in India and Vietnam. True, both of those countries grow cashews. But they process far, far more and at a much lower cost. And that’s where these trade links come in.
The Nuts Need to Breathe
Check ship movements these days and you’ll note both bulk and container carriers steaming from places like Cotonou, Benin or Abidjan, Ivory Coast, to Cochin and Tuticorin, India or Ho Chi Minh City, Vietnam. Their cargo is raw, unshelled cashews. Lot sizes range from 500 tons to 5,000 tons. Traders pay $1,000 to $2,000 a metric ton.
Even with the collapse of break bulk rates, containerized cargo is cheaper, said Santhosh Sankaranarayanan, who runs Swathy Enterprises, a cashew trader based in Kollam, India. He compared a bulk shipment from Guinea Bissau four months back that priced at $115 per ton. If shipped by container, the cost would have been $80 at most, he said.
However, because cashews grow in a wide swath of Africa, traders must still resort at times to shipping these raw nuts break bulk, from whatever port is available. That’s especially true in a country like Guinea Bissau, which lacks adequate containerized port facilities, Sankaranarayan explained. But it also reflects a need to rush shipments instead of waiting, sometimes for months, for container ships to sail, Sankaranarayanan said. “When they get the money together, they need the cargo as soon as possible,” he said.
But he added shipping break bulk isn’t necessarily by choice: “Most processors prefer containers, with break bulk, there are a lot of difficulties.”
He listed pilferage as the biggest downside.
There are also advantages, however. Moving by bulk can help reduce spoilage.
After cashews are harvested, they should be laid out in yards and dried so the moisture content is reduced to a level that prevents the nuts being spoiled during shipment. The problem is that many farmers growing the nuts in regions of Africa aren’t sophisticated. Quality control is lacking. So, some traders demand the raw unshelled nuts be shipped in bulk.
“They’re transported in a way nuts can breathe. That’s why break bulk is used,” said Rosenblatt, who’s been in the cashew trade for almost 40 years.
Portuguese traders introduced cashews to Goa more than 400 years ago and the crop spread from there. Modern-day processing is based in the southern city of Kollam, about 85 miles south of Cochin port and 130 miles west of Tuticorin port. Kollam hosts at least 400 small and medium-sized factories that vie for processing business and its port serves as an export hub. Cashew processing factories have sprouted up in other southern Indian cities as well, including Mangalore, which also serves as a growing port for cashew trade. The port of Krishnapatnam, in Andhra Pradesh on India’s east coast, is coming on strong as well.
Processing includes steaming, cracking and shelling drying, peeling and sorting. Once processed, the nuts are vacuum packed and always shipped by containers.
India is the world’s largest consumer of cashews, with demand on the rise as the country’s middle class grows. Cashews are favored as snacks and used extensively in sweets. While India remains as well the world’s largest single producer and Indian farmers grow cashews in a wide swath of the southern half of the country, domestic supply isn’t nearly enough for a growing appetite. At the same time, India’s processors have built up factories that have capacity far in excess to their local supply. So, they’re vying for nuts not only for domestic consumption, but for re-export.
According to Sankaranarayanan, most Indian processors prefer to sell domestically. “It’s easy money, higher prices, they’re more comfortable with the domestic trade.” But higher labor costs and a higher price for the raw cashews themselves are squeezing many of the smaller processors. Some have closed their factories.
“It is becoming more difficult,” Dinesh Chandran agreed. Chandran owns the Chandra Cashew Factory, also based in Kollam. Chandra Cashew sources its cashews from both India and about a half dozen countries in Africa and exports worldwide. The factory employs 900 workers, but Chandran said he has no choice but to mechanize. “Vietnam is cheaper and more mechanized,” he said. “We have to do the same. We have to invest.”
Vietnam is coming on strong. While the country began to grow cashews only in the past three decades or so, it now produces almost 20% of the world’s supply. But domestic consumption remains relatively small and the Vietnamese consider cashews an export crop. Vietnam now processes more than one-third the world’s supply, often in large factories. Raw nuts come from Africa, as well as from neighboring Cambodia shipped overland by truck and from Indonesia.
Vietnam ships processed cashews globally and is now the biggest exporter to the United States. Vietnam also exports some processed nuts to India, much to the chagrin of the Indian industry.
African countries have attempted to press for more localized production, arguing that processing increases the value of the commodity by about 35%. Some producers have opened factories in return for growing concessions. But the results have been pretty much uniformly poor. Several factories have shut down after just a few years of operation. Processing costs are double those in Asia. In late January, local press quoted the National Cashew Association of Nigeria as saying the multinational commodities producer Olam will close its cashew-processing factory, the country’s largest. The factory is now operating at less than 30% installed capacity. Olam didn’t respond to an email requesting comment.
“I have yet to see anybody [processing in Africa] who’s profitable,” said Rosenblatt.