Cashew exports are struggling because of being on passive in raw material sources

For each container of exported cashew kernels, enterprises lose hundreds of millions of dong when they have to import raw materials at high prices, while export prices are not adjusted to increase accordingly.

Each container of cashew export lost VND 600 million

According to many cashew export processing enterprises, with the rising price of raw cashew materials in Africa, partners have broken contracts, causing cashew export processing activities of Vietnamese enterprises to suffer, the more they export, the more they lose money.

Mr. K.Q.T, Director of a cashew export enterprise in Binh Phuoc, said that Vietnam's cashew export processing industry depended largely on raw materials from Africa. The domestic cashew growing material area was still maintained but only met about 20-25% of the demand of processing factories.

Currently, the biggest difficulty for cashew processing and export enterprises is that raw cashew materials imported from Africa have increased prices. “The price of raw cashew nuts has increased, many raw material suppliers from Africa do not comply with previously signed contracts, do not deliver or deliver slowly, causing domestic enterprises to face the risk of supply chain disruption, affecting the implementation of export contracts” - analyzed by a business representative.

According to Mr. K.Q.T., previously deliveries were made within 30-40 days, but now partners extend deliveries to 2-3 months, even "breaking the contract" not to deliver, asking to increase prices, causing enterprises in ruins. “Our company processes and exports about 40 containers of cashew nuts every month, so we need to import up to 3,000 tons of raw cashew nuts. But with the rising price of raw cashew nuts and the export price not being accepted by partners to increase accordingly, for each container of cashew kernels exported, the company lost about VND 600 million”.

According to the Vietnam Cashew Association, the increase in raw cashew prices is causing great difficulties for enterprises in Vietnam's cashew industry. The sudden increase in the price of raw cashew nuts while the quality has decreased has caused significant losses to enterprises.

According to enterprises, foreign partners have many "tricks" to force Vietnamese cashew export enterprises, such as: delivering goods but not providing documents to receive the goods; Some other exporters even "broke the deal", selling the raw cashews that had signed a contract with one enterprise to another at a much higher price...

According to Hoang Son 1 Joint Stock Company, each year, besides the amount of raw cashews purchased domestically, Hoang Son 1 must import a large amount of raw cashews to process cashew kernels for export. In early 2024, Hoang Son 1 signed a contract to import 53,000 tons of raw cashew nuts from West Africa (mainly from Ivory Coast). But currently, the company may only receive about 25,000 tons at right price. The company will receive the remaining raw materials on the condition that it must accept payment at a higher price than the price at the time of signing the contract.

What measures support enterprises?

Although raw material prices are rising and export processing is likely to incur losses, many enterprises still try to maintain a part of orders to retain customers and workers, as well as maintain their cash flow to not fall into bad debt when evaluated by the bank.

According to the Vietnam Cashew Association, if this situation persists, it will lead to the risk of disruption in the global cashew supply chain when Vietnam holds the position of the world's largest cashew kernel exporter, accounting for nearly 80% of exported cashew kernels. At that time, not only Vietnam's cashew industry but also cashew nut distributors and retailers were affected.

Faced with that situation, the Vietnam Cashew Association sent an official dispatch to the Ivory Coast Cashew Exporters Association, asking the Association to help remind exporters to properly implement raw cashew sales contracts.

At the same time, the Vietnam Cashew Association will make a written proposal to the Government, relevant ministries and branches to remove difficulties for the cashew industry, including impacting African countries to remove the ban on exporting raw cashew nuts.

For the Ministry of Agriculture and Rural Development, the Vietnam Cashew Association recommends paying attention to developing cashew raw material areas and developing high-quality, high-yield cashew varieties. This will help cashew processors be less dependent on imported sources, not to be pressured.

Besides, according to some enterprises, Vietnam has advantages in technology, machines for peeling raw cashew nuts, machines for splitting cashew kernels that are not broken, with few waste products... exported cashew kernel products are favourite in many countries. But currently, these machines are being provided by Vietnamese enterprises for cashew factories in Africa and Ivory Coast. However, they have not done all the raw cashew processing steps like Vietnam, only peeling the hard shell, then exporting to Vietnam. The above-mentioned import of peeling cashew nuts by Vietnamese enterprises is not for domestic consumption but rather for production, performing some final stages and then re-exporting. Thus, the added value obtained from the following stages is not much.

Faced with the situation of owning machinery and equipment systems and possessing cashew processing technology in hand, some African countries have shifted their focus to investing in domestic production, banning the export of raw cashew nuts to ensure raw material sources for domestic processing. For example, Benin has announced a ban on exporting raw cashew nuts from 2024. The governments of some African countries have issued many preferential policies such as tax exemption and reduction, building systematic infrastructure from warehouses, preliminary processing areas, deep processing plants, packaging lines, food quality laboratories... which are major obstacles in importing cashew raw materials for Vietnamese enterprises.

In addition, some Vietnamese enterprises have begun to import semi-finished cashew nuts (which have undergone preliminary processing and shelling), and even import secondary goods and waste products (the bad nuts, waste nuts) returned for further processing or commercial business. This will inevitably become a driving force and opportunity for neighbouring countries to improve their cashew production level, while at the same time negatively affecting the value and brand quality of Vietnamese cashew nuts.

Therefore, some enterprises suggest management agencies consider exporting processing technology; as well as having sanctions against imported cashew kernel shipments... to support enterprises and create jobs for domestic workers.

Source: Customs News