Cashew segment banks on higher sales in the EU

Thursday, 22/06/2017 18:00
The Vietnam Cashew Association has forecast exports for 2017 to rise 3.4% in volume and 5.6% in value against the figures for 2016 to USD3 billion on the back of higher sales in the European Union for the year.

Photo for illustration (Source: vov.vn)

Nguyen Duc Thanh, Head of the Vietnam Cashew Association, said he expects the country will ship roughly 360,000 metric tons of products to foreign markets in 2017 making it the largest exporter in terms of volume for the 12th consecutive year in a row.

The forecast is largely dependent on continued improvement in sales in the EU, which accounted for approximately 94,000 metric tons of sales at USD766 million in 2016, or about 27% of exports for the whole of last year.

In the first five months of 2017 leading up to June, the total exports by processors operating in the country have been estimated at 112,000 metric tons valued at USD1.1 billion, Mr Thanh noted.

It should be pointed out here that if one were to run the math and extend sales for the remainder of 2017 at the same clip they ran in the first five months they would likely tally in at only USD2.64 billion for the year, far short of the forecast USD3 billion by the association.

However, more importantly, as Mr Thanh accurately stated, material shortages are squeezing earnings as processors in the country imported more raw nuts in the first five months of the year than they plan to sell in foreign markets for the entire 12 months of the year.

Some 68,000 metric tons (428,000 less 360,000) to be exact, which leads to the obvious conclusion that producers are meeting most their export requirements with imported nuts and likely meeting a good portion of domestic sales with imports as well.

In the first five months of this year, the association estimated that processors imported some 428,000 tons of raw materials mainly from Tanzania, Cambodia and the Ivory Coast at USD835 million, up 74.6% in volume and 125% year-on-year.

According to Mr Thanh, the key to sustainability of the segment is not gross sales in terms of volume of product sold overseas or even gross sales in terms of absolute dollars - but increased earnings on those sales - in lucrative markets such as the EU.

The EU market has increased from just 64,000 metric tons of sales in 2014 to more than 94,000 metric tons, or 27% of the total exports of the country in 2106, with the Netherlands and Germany the main trading centres.

There had been an expectation by many that with a Vietnam-EU free trade agreement coming into force in 2018, sales and earnings would rise commensurate with a lowering of import tariffs brought about by the trade deal.

However, given the substantial reliance by the segment on imports of raw nuts, it is highly improbable the rules of origin pursuant to the trade accord would allow for any tariff reduction.

The over-reliance on imports by the segment also makes complying with the strict food safety requirements of the EU more difficult and likely that losses on rejected product by food safety and pest inspectors will continue to mount and eat away at the meagre earnings of farmers and processors.

In July, Mr Thanh unveiled that the Association has plans to launch a massive advertising and promotional campaign in the EU with special emphasis on the markets in the Netherlands, Germany and Belgium.

Our overall strategy, noted Mr Thanh is to focus on capturing a larger share of the organic market for cashews, which is a growing trend in the EU, and one for which there is a much higher earning potential./.

CPV/VOV

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