Cashew producers ranking

Withdrawal of the multinational Olam from the cashew business in Mozambique and the terrorist attacks in the province of Cabo Delgado, one of the country’s cashew producing regions, could remove Mozambique from the list of the world’s ten largest producers of cashew nuts and threaten its place as the fourth-largest processor worldwide. The warning comes from economist Constantino Marrengula. Contacted by “O País” to talk about the impact of Olam’s decision, the university professor recalled that the cashew nut is a strategic crop for the Mozambican economy, and employs more than one million rural families. This cashew producing population is concentrated in the northern and central regions of the country, where there is a higher incidence of poverty. “The [Olam] announcement represents a setback for family incomes,” Marrengula stated.

The cashew nut comes 11th among Mozambique’s export products, and Olam’s decision is also a setback for employment, public finances, exports and industrial capacities, reinforcing a long-term trend of loss of productive capacity in an area vital to the economy. “The cashew sector is one among the few areas of the economy that position Mozambique as an important player in a market with promising long-term prospects, with increases in consumption expected in countries like China,” Marrengula said.

In the list of risks for the sector, the economist highlighted severe climatic events, such as Cyclones Dineo, Idai and Kenneth, which devastated cashew production in Inhambane, Zambézia and Nampula provinces. According to a report on the competitiveness of Mozambique’s cashew industry prepared by producer association INCAJU in partnership with the French Development Agency, by June 2020 only 11 of the 26 existing companies were in operation (about 40%).

“Data from the Cashew Industrial Association indicate that at least one company closed in 2020 due to the break in export logistics due to the Covid-19 pandemic, the increase in the price of raw cashew nuts and the fall in the price of nuts,” he said. Between 2017-2020, cashew nut production grew between 0.7% and 2.3%, but the economist and university professor says it is difficult to predict what will become of the sector in the future. “Taking as a reference Olam’s announcement and the current state of the sector, it is to be doubted that the country will be advantaged by this scenario. On the contrary, it runs the risk of losing its position in the ranking of the largest cashew nut producers and processors,” Marrengula said.

He also noted that, in the last three years, the prices of raw and processed cashew nuts both fell, as well as tending to converge, reducing the margin for processors. In the economist’s view, in the scenario described, “intermediaries with the possibility of selling raw cashew nuts in markets that pay more, such as India and Tanzania, will win. It starts to compensate for exporting the little raw cashew nut available”.

“India, Mozambique’s main competitor, has bolstered its protectionist and support measures for its [own] cashew [processing] industry, which ends up favouring exports of raw nuts from Mozambique,” Marrengula notes. However, even “without being the price maker, Mozambique will be able to maintain the strategic relevance of the sector by intervening on the cost side, while reformulating its marketing strategy and seeking alternative markets, as suggested by INCAJU itself at the time of the launch of the competitiveness report”.