In the early 1970s, the majority of global cashew production (68 percent of total) took place in African countries, in particular, Mozambique and Tanzania. Over the following thirty years, production trends shifted, with Asian countries emerging as the world leaders in cashew production. Today, India commands about 40 percent of the international market in cashew production. Other Asian countries, particularly Vietnam and Indonesia, are beginning to expand their production capacities. Currently, the four main cashew producing regions are India, Brazil, Nigeria and Tanzania. Figure 5 illustrates the global trends in cashew production over the last forty years.
Figure 5: Global cashew production (1961 - 2000) (tonnes)
World production of cashew nuts grew rapidly during the 1950s and 1960s, reaching a peak of 624 000 tonnes of raw nuts in 1973. Three countries - India, Mozambique and Tanzania accounted for the majority of this production, while smaller industries had developed in Brazil, Kenya and several other African countries. In 1975-76, there was a sharp decline in world production, which continued into the 1980s. This decline was largely due to decreased production in Mozambique and Tanzania, since production in India during that period remained static (Jaffee and Morton, 1995). The Table in Appendix A1 summarises trends in average global cashew production over a forty year period. During the late 1980s and continuing into the 1990s, production picked up and continued to increase gradually. In 2000, world cashew production exceeded 1.2 million tonnes. Asian and African countries produced 0.6 million and 0.4 million tonnes respectively.
Overall cashew production in Africa steadily increased during the 1950s and 1960s, until the mid-1970s when that continent was the prime producer of cashew nuts. The year 1975 was the start of a fifteen year period of decline in production throughout the continent due to a combination biological, agronomic and socio-political factors. The decline in prices at the end of the 1970s, combined with lower levels of production, dissuaded many farmers from improving cultivation techniques and replanting their cashew plantations (Andrighetti et al, 1998).
Since the early 1990s, production has recovered and has continued to increase steadily over the last decade. Today, Africa accounts for about 36 percent of world cashew production.
Historically, Mozambique and Tanzania were the main cashew-producing countries in Africa, with smaller amounts produced in a number of other countries. During the last five to ten years Nigeria has emerged as a leading producer of cashew nuts in Africa.
Table 4.1. Cashew production (tonnes) in African countries from 1961 to 2000.
Source: FAO, 2000
Table 4.2. Leading African producers of cashew.
Percentage of African and Global production (1961 to 2000).
Source: FAO, 2000
|% of Africa||8.1||12.8||12.2||17.9||21.8||43.8||52.5||53.2||54.8||62.2|
In the 1960s, Mozambique accounted for half of the world's cashew nut production and in the mid 1970s it was the leading world producer with 240 000 tonnes of raw nut production. The civil war from 1982-92 had serious repercussions on the industry, reducing production to a mere 23 000 tonnes per annum. With the return of peace to the country, cashew production has gradually increased again, but is still far below former levels (production in the year 2000 was only 35 000 tonnes).
In Mozambique, cashew nuts are grown entirely by small-scale farmers and subsistent families, mainly in coastal areas. A 1996-97 survey showed that 26 percent of all rural families have cashew trees, and 16 percent of rural families have more than ten cashew trees. Even ten percent of urban families have cashew trees. The importance of cashew in Mozambique was shown by a question on the 1997 national census, which asked: "Do you have any cashew trees?"
This huge decline in the cashew industry in Mozambique, coupled with the 1995 intervention by the World Bank that was aimed at rejuvenating the industry, has attracted a lot of interest from economists and development specialists.
From 1972 onwards, there has been a general decline in cashew production in Mozambique. However, during this time there have been good years when exports remained high. For example, in 1976 there were 21 100 tonnes of processed cashew kernels exported worth US$33 million and accounting for 23 percent of export earnings. In 1982 there were 16 700 tonnes exported, worth US$44 million and 19 percent of total export earnings.
Cashew remained Mozambique 's largest export until 1982, with the majority of the crop going to the United States. The industry involved millions of smallholder farmers and more than 10 000 processors, making it the fourth largest employer after the railways, sugar and textiles. But then cashew production fell sharply, and prawns became Mozambique's main export. Today, Mozambique only produces five percent of the world total, fewer than one million small-scale farmers are involved in cashew production and the processing workforce is less than 1 000 (Hanlon, 2000).
Most of Mozambique's cashew processing factories were opened during the colonial era and then abandoned in the late 1970s. Two factories owned by the Anglo-American Corporation of South Africa stayed open until 1981 when de facto sanctions were imposed on Mozambique by South Africa. After independence from Portugal in 1975, the factories were run by a state holding company. Great emphasis was put on improving wages and working conditions, particularly for the women who made up half the workforce. The new state managers were able to keep the factories running, but there was no new investment. Inevitably the machinery began to wear out. Many factories are in rural areas, where transport and electricity supplies were affected by the war. In 1989, a serious programme was initiated by the government, to privatize small and medium size businesses. In the early 1990s the World Bank pushed for privatization of larger companies, and by 1999 virtually all government-controlled parts of the economy had been privatized. In 1997, there were 15 operational cashew factories, with an installed capacity of 144 000 tonnes of raw nuts but an actual capacity to process 75 000 tonnes of raw nuts per year. This was more than had been commercialized by smallholders in any year since 1981.
Historically, Mozambique was prohibited by law to export raw (unprocessed) cashew nuts until the capacity of the local processing industry had been met. In the 1960s, however, there was some export of raw nuts to India (then the second largest producer of cashew). In 1992, Mozambique replaced its export ban with an export tax on raw (but not processed) nuts. There was an informal agreement with the owners of the newly privatized companies that they would be given a period of protection while they rehabilitated and modernized the factories. In April 1995, the government changed the export tax on raw nuts to 25 percent on sales up to US$600 per tonne and 70 percent thereafter. But for the 1995-96 season, it set the export duty at a flat 26 percent, and further specified that it would fall to 20 per cent the next year, followed by annual drops to 16, 12 and 8 percent (by 1999-2000) where it would remain. This revised policy was never implemented, however, due to the 1995 intervention of the World Bank (Box 4.1).
Box 4.1. World Bank policy and cashew processing in Mozambique.
| Since 1995, the World Bank has insisted that protection be removed from the local cashew processing industry. In effect, this meant that raw cashew nuts were exported to India for processing by hand, rather than sold to the Mozambican factories.|
The World Bank justified this liberalization of trade by insisting that it protected the interests of the smallholder farmers who harvest the nuts and who would receive a greater percentage of the cashew price. But as predicted by industrialists, the converse was the case. With next to no competition from the local factories, the exporters of raw nuts have been able to push prices down.
In an attempt to revive the local cashew processing industry, authorities in Mozambique have put an embargo on the export of raw nuts to India. For years, the exporters have competed with the local industry, inflating the prices of raw material and making it impossible for the local industry to thrive. It was evident that trade liberalization was seriously hampering the local efforts at rejuvenating this industry, therefore, with reluctant World Bank approval, the Mozambican government raised the surtax on raw nut exports from 14 percent to 18 percent. The local industry maintained that this tax was still insufficient to save the factories and demanded a total prohibition on export of raw nuts. Currently most of the cashew processing plants are closed and over 8 500 workers have lost their jobs (Panafrican News Agency, 2001).
There is good reason to believe that cashew has the potential to regain substantial importance for Mozambique and other developing countries because;
Certain constraints however need to be overcome:
In terms of global production, Tanzania ranks fourth after India, Nigeria and Brazil. Over the last four decades, Tanzanian cashew production has shown considerable fluctuation (Table 4.2). Between the 1990-91 and 1999-2000 seasons, cashew production has increased six-fold from 17 000 tonnes to 106 500 tonnes. It is estimated that this upward trend will continue for the near future, reaching about 130 000 tonnes in the 2000-2001 season.
Various factors are responsible for the past decline in cashew production. The ‘villagization’ policy of the Tanzanian government in the 1970s, aimed at moving people from their original settlements to communal villages, contributed to some extent to the decline in cashew production, since most farms were abandoned as the villagers were moved to new settlements. The low yields of the 1980s were associated with factors such as poor crop husbandry, pests and diseases, and low producer prices which discouraged many farmers from investing in the crop.
At the beginning of the 1990s, trade liberalization policies, combined with improved crop husbandry, improved tree stock and more investment in research activities, resulted in an improvement in both cashew production and the cashew industry in Tanzania.
Currently, the majority of cashew production in Tanzania is carried out by small-scale farmers in mono- or mixed production systems. An estimated 280 000 households, covering an area of 400 000 hectares, are involved in cashew production. The government is actively supporting farmers in upgrading their current farming systems and practices in order to improve the condition of the trees and maximize agronomic potential. Current yields are about 3 kg per tree, but under optimum conditions, yields of 8 kg per tree are expected.
In recognition of the potential importance of cashew nuts in Tanzania, the Cashew Nut Board of Tanzania (CBT) was established by the government in 1993. The main roles of the CBT are to regulate and promote the quality, marketing and export of raw and processed nuts, and to advise the government on matters affecting cashew nut production and marketing.
Commercial cashew processing in Tanzania began following the independence of that country. In the early 1960s, a private company known as African Cashew Processors Company Ltd established a simple manual processing plant in Dar es Salaam, and in 1965 the first mechanical processing factory, incorporating Italian technology, was installed. This was soon followed in 1968 by a second plant that used Japanese technology. In early 1979, the National Development Corporation (NDC) established seven hand processing factories, two in the Coastal region and two in Southern regions. These manual processing factories were part of the National Cashew Company Ltd. As production from the factories increased, the government was prompted to build five new factories, all with Italian technology. These twelve factories have a combined processing capacity of 112 000 tonnes. In the 1980s, the rapid decline in production of cashew nuts resulted in the closure of all twelve factories.
All twelve factories require some investment and refurbishment to bring them back into use. The Cashew Nut Board of Tanzania (CBT) is investigating the possibility of initially re-opening four of the factories so that they can be leased or sold to private processors. The government of Tanzania has declared a national policy to encourage the local processing of cashew nuts with the objective of processing the entire crop locally. This policy is in line with similar policies adopted by other major cashew producers – Brazil, Vietnam, Kenya and India (Cashew Nut Board of Tanzania, 2000).
Prior to embarking on a programme of upgrading processing facilities, countries such as Tanzania (and other exporting countries such as Nigeria, Guinea Bissau and Indonesia) might be advised to consider the advantages and disadvantages of processing locally or exporting the raw nuts to India for processing. In making this judgement several factors must be considered. An analysis by Newafrica.com (2000) sets out the parameters. The article considers that the value added by processing easily exceeds that of exporting raw nuts and therefore recommends that nuts are processed locally rather than exported.
During the past decade, the production of cashew nuts in Nigeria has increased almost six-fold from 30 000 tonnes in 1990 to 176 000 tonnes in 2000. Prior to this, production was relatively static at 25 000 tonnes over a 25 year period from 1965. As in the case of other developing countries, Nigeria has recognised the potential economic value of cashew and has made a concerted effort to improve production of the crop.
Other African producers of cashew are listed in Table 4.1. During the 1970s, Kenya produced appreciable quantities (over 22 000 tonnes) of cashews, but unlike its neighbours, has never recovered production since the decline in the 1980s. Guinea Bissau, The Ivory Coast and Benin are now emerging as important producers of cashew in Africa (Table 4.1).
Cashew production in Asia currently accounts for about 50 percent of global production. It has held this prime position for almost twenty years, reaching over 60 percent in some years. The world cashew market was previously dominated by African countries, with Asian cashews accounting for about 30 percent of the world total.
India has long been the main cashew producer in Asia, accounting for between 70 and 90 percent of total Asian production (Table 4.3). During the 1970s and 1980s when African production was on the decline, production in India continued to grow at a steady rate. India now accounts for about 40 percent of world cashew production.
During the 1990s, Indonesia and Vietnam emerged as important cashew producing countries within Asia, helping to boost Asia’s position as a prime producer. Increased production in these two countries is responsible for reducing India’s share of total Asian production from 90 percent at its peak in the early 1970s to just over 70 percent today. Production in Thailand, Malaysia and Sri Lanka has increased steadily over the past forty years.
Table 4.3. Cashew production (tonnes) in Asian countries from 1961 to 2000.
Source: FAO, 2000
For a long time, cashew was not considered to be a serious crop in India. Rather it was grown as a wild crop on land that was unsuitable for other crops. It was frequently grown as a source of fuel or to prevent soil erosion rather than as a cash crop.
In India, cashew is produced in the coastal regions of the states of Kerala, Karnataka, Goa, Maharashtra, Andhra Pradesh, Orissa and Tamil Nadu. The state of Kerala accounts for approximately 50 per cent of cashew production in India. Kerala has a centralized procurement system and much of the processing is done on an outworker basis by families. Although Kerala only accounts for about 25 percent of the total area under cashew, yields in this state are relatively high when compared to those in other states. Estimated cashew productivity in Kerala is 900-950 kg raw cashew nuts per hectare, which is almost double that in the rest of India.
Cashew is predominantly a smallholder crop in India – about 70 percent of cashews are grown by small-scale farmers. The remaining 30 percent are grown under re-forestation programmes. Cashew yields in India average around 1.5 kg of nuts per tree. In Kerala average cashew yields are about 5 kg per tree, which is substantially less than the potential yield of 10-15 kg per tree under optimum conditions. The poor quality of raw cashews has been a long-term problem for the cashew processing industry in India. The main reasons for poor quality are incorrect harvesting techniques, unsatisfactory drying of raw nuts and inadequate storage of dried nuts.
The number of cashew processing units in India has increased rapidly over the last four decades, from 170 in 1959 to over 700 today. Over two-thirds of the processing units are in the State of Kerala, while the remainder are scattered throughout the other producing states. Together these units have a processing capacity of over 800 000 tonnes per year and provide employment to over 500 000 people, 95 percent of whom are women (Nayar, 1995). The industry is dominated by small-scale, single-owner or family-owned businesses.
Cashew has gained significant economic and social importance in India as a major foreign exchange earner. In 1992-93, India exported 53 436 tonnes of cashew kernels valued at US$160 million. In the same year, a further US $0.8 million was generated through the sale of 4 258 tonnes of cashew nut shell liquid.
In the 1980s and 1990s, India rapidly expanded its cashew production, to become the world's largest producer and now accounts for about 40 percent of global production. Processing capacity increased more rapidly than production, so Indian imports of raw nuts increased rapidly, reaching 203 000 tonnes in 1996 (of which 41 percent origninated from Tanzania and 13 percent from Mozambique). In recent years, an increasing number of non-African countries have also supplied raw nuts to India. The decline in African production in the 1970s and 1980s, resulted in a rapid decline in imports into India. Alternative supplies of raw nuts were obtained from Vietnam. According to India's 8th National Development Plan, agricultural production should match processing capacity by the year 2000.
The beginnings of India’s international trade in cashews date back to after the First World War. This trade expanded rapidly in the 1920s with the introduction of improved packaging materials for long distance transit. By the start of World War II, cashew nuts had become the second most important traded dessert nut after almonds, and have remained in this position for the last fifty years (Jaffee and Morton, 1995).
Cashew is the only major plantation crop that is not regulated by an autonomous board. Other plantation crops, such as tea, coffee, cardamom and rubber all have efficient and autonomous boards, and as a result have experienced much faster growth in productivity than cashew. Cashew is one of the most neglected plantation crops in India despite its status as a major source of foreign exchange.
The international price of Indian cashew kernels has fluctuated widely over the last decade.
Indonesia has long been the second largest producer of cashew in Asia. Production has picked up over the decade, when it doubled from 30 000 to 60 000 tonnes. Some of the Indonesian production is exported to India for processing.
Cashew production in Vietnam has increased quite rapidly over the last decade. Vietnam now accounts for about 6 percent of total Asian production, and is the third largest cashew producer in Asia. Previously, many of the raw nuts were exported to India for processing, to make good the short-fall that India experienced when East African supplies dried up. Now, however, Vietnam has about 60 processing plants, with a capacity of 220 000 tonnes of raw nuts. Annual cashew production is often less than this and Vietnam has become an importer of raw nuts from East and West Africa and South East Asia.
Sri Lanka has a very small share (around 2-2.5 percent) of the Asian cashew production market. Some of the cashews are processed locally while the remainder are exported to India for processing.
Cashew is a crop with good potential for the Australian tropics, particularly in the Northern Territory and Queensland, where agro-climatic conditions are suitable for its production. Australia currently produces about 25 tonnes and imports about 5000 tonnes of cashew a year. There is potential therefore to increase production to meet domestic demand. The cashew industry in Australia is at an infant stage, with three plantations - one in north Queensland and two in the Northern Territory. Expansion of the industry will necessitate a good supply of high yielding plants.
The Australian government is supporting a large cashew research programme (at the Commonwealth Scientific and Industrial Research Organisation - CSIRO) to develop high yielding hybrids adapted to the local conditions.
Australia has no shelling facilities. The raw nut is exported to China for shelling and returned to Australia where it is sold either as raw kernel or further processed into value added goods such as chocolate coated, salted or honey coated nuts (O’Farrell, Blaikie and Chacko, 1998).
Brazil is the main cashew producing country in the South and Central American continent. A handful of Central American countries also produce minor quantities of cashew nuts (Table 4.4).
Table 4.4. Cashew production (tonnes) in South and Central American countries from 1961 to 2000.
Source: FAO, 2000
|Total South America||176018||45466||168721||102913||119226||78394||23002||22813||16178||11945|
Brazil currently holds third place in global production of cashew, after India and Nigeria. Overall, production has tended to increase gradually over the last thirty years, but at times (1988 and 1983 especially) has plummeted (Table 4.4), mainly due to periods of drought.
Brazil recognized the economic value of cashew cultivation at the beginning of the Second World War, when there was a considerable demand for cashew nut shell liquid for the North American war effort. The expansion of cashew areas began at the end of the 1960s through government incentives and funding. This increase in production allowed Brazil to enter the international market, although actual yields of the crop were low. Cashew cultivation, of which 99 percent is in the north of the country, is of great economic importance for the states of Ceara, Piaui and Rio Grande de Norte, which are some of the poorest regions. Interruptions in incentives and financial aid, linked with low internal prices and a stagnation of export demands, were the main factors responsible for the decline in the production of cashew. Over the past twenty years, however, cashew production in Brazil has boomed, with producers making the most of the large US market for the kernels (CDI, 1995).
Cashews rank third in world production of edible nuts that are traded globally. World trade in edible nuts has experienced relatively rapid growth, averaging about 2.7 per cent per year since the early 1970s and increasing in value from US $1.94 in 1980 to US $2.84 billion in 1990 (United Nations Yearbook of International Trade Statistics).
Worldwide, trade in cashews exceeds US$2 billion and demand is increasing. Of the total world supply, 110 000 tonnes are traded on international markets. India (60 percent) and Brazil (31 percent) are major exporters.
As a major importer of cashew, the USA has a strong influence over the world price, which is fixed in US$ per pound (1 pound = 0.45kg). The price of W320 grade (320 kernels per pound) over the last 15 years has ranged from US$2.73 to US$3.18. The 1999 price for W320 grade was US$3.30 per lb (US$7.2 per kg) FOB.
International trade in raw cashew nuts has traditionally involved shipments from East Africa to India. India was the first country to build up a processing industry, but domestic production has long been insufficient to meet the requirements of the country’s hundreds of small and medium-scale processing outlets. The imports from East Africa generally took place from December to May, which complemented the national harvest from May through to July. Thus, the Indian processors were able to operate over a prolonged period without having to maintain large stores of raw nuts. This trade declined in the early 1980s when East African production reached low levels and Indian importers had problems with access to foreign exchange. Since then, import levels have increased due to greater supply availability, particularly from South East Asia – Vietnam and Indonesia - and Tanzania (Nayar, 1995). Cashews from Tanzania used to command premium prices over other suppliers, but recent years have seen a growing uncertainty about the quality of Tanzanian shipments, resulting in the loss of premium grade (Jaffee and Morton, 1995).
India has long been the world’s largest supplier of cashew kernels with its prices and quality, setting the standards for the industry. In Europe, India has been the preferred supplier, with long standing trading relationships based on confidence in product quality and on fast and regular deliveries. India has more than 150 cashew kernel shippers, many of whom have offices in Europe and the United States (Jaffee and Morton, 1995). Throughout the 1970s, Mozambique was also a major exporter, but its market share has declined. At the same time, Brazilian exports have expanded. The quality of Brazilian cashews does not match that of Indian cashews. Brazilian nuts however have a comparative advantage in the US market, based on lower transportation costs and the unique larger size of the Brazilian cashew nut. Other suppliers, including Tanzania, Kenya and China, are reputed for producing nuts of irregular quality which contributes to substantial price discounts (up to 30 percent) in international markets.
Most cashew kernels exported form India are plain kernels packed in four gallon prime cans, flushed with carbon dioxide, and having a net weight of 11.34 kg (25 lb). These cans are encased in cardboard cartons. Global pricing is generally quoted in US dollars per pound or per kilogram of nuts.
The United States is the largest importer of cashew kernels, accounting for over 50 percent of world imports. Other importers include the Netherlands (ten percent), Germany (seven percent), Japan (five percent) and the United Kingdom (five percent). The former Soviet Union was previously a major importer of cashew kernels, but with recent economic changes, trade to this part of the world has diminished. Other emerging markets include the Middle East, South East Asia and Australia (ITC, 1990; O’Farrell, Blaikie and Chacko, 1998).
Cashew kernels are usually the second or third most expensive nuts traded in the United States. Macadamia nuts are more expensive, and pecan nuts can cost more in years when there is a poor harvest. Cashew nuts have a well established market in the United States with a great variety of end uses. Retail prices vary from about US$4-11 per lb (US$9-23 per kg) depending on kernel size and packaging.
The extensive market connections of large exporters from Brazil and India make it difficult for smaller exporters to make gains in the US market. Importers may appreciate the low prices that small suppliers can offer, but the lack of reliability in quality, tends to make them favour the larger, more reputable suppliers (The Clipper, 1994).
Almost all of the world’s raw cashew nuts are sent to India for processing, since India has an inexpensive labour force and does not produce adequate quantities of cashews to fulfil its domestic processing capacity. Approximately 25 to 40 percent of nuts processed in India originate in foreign countries. India also has a long tradition and good reputation as a high quality processor of cashew. A number of countries therefore prefer to export their raw nuts to India for processing rather than to process themselves and produce lower quality kernels.
China also has a high processing capacity and benefits from having an inexpensive labour force. Chinese processed cashews were previously considered inferior to Indian nuts, but with improving standards, the import of raw nuts to China is on the increase.
World prices of cashew kernels vary according to the size, class and composition of the product. W320 (320 kernels per pound weight) is the category in highest demand and is the reference point for pricing. International prices for cashew kernels are influenced by the behaviour of market operators. There is no fixed market price and the market is speculative.
Cashew quality is of utmost importance. High quality is a major criterion for success on the world market. India and Brazil have worked hard to ensure high quality of the processed kernels. India’s cashew industry was the first to use quality control for improvement of performance. Quality control is administered via the Cashew Export Promotion Council (CEPC).
In order to safeguard and guarantee quality, producers and exporters have introduced quality standards which must be met by cashew exporters. The ISO 6477 standard was introduced in 1988 in order to unite the Brazilian and Indian classifications and to give one single classification scheme for quality control.
Cashew kernels are selected on the basis of the number per unit weight, in accordance with the weight of the kernels. They are also classified either as wholes, chips, splits, butts or baby bits, in accordance with the integrity of the kernel. White or ivory kernels are preferred over brown ones. There is a maximum permitted moisture level (both for raw cashews and cashew kernels) and the product must be free from insects, mould, rancidity and extraneous materials.
The highest price is paid for better quality kernels of the W180 and W210 grades which are the largest and heaviest grades.