Vietnam seen as threat to Indian cashew exports

Earnings from overseas sale fall by 9% in April-January.

Vietnam is posing a major challenge to India's leadership in global cashew nut exports, Cashew Export Promotion Council of India Chairman P Bharathan Pillai said on Tuesday.

"We (India and Vietnam) are now neck to neck in quantity of exports and they (Vietnam) can overtake us any time," he said.

He sees export earning from cashew nut slipping for the second year in a row in 2007-08 (April-March), on the back of competition and an appreciating rupee, among others, he added.

Exports, in terms of quantity, are also unlikely to rise compared with last year, he added. Exports earnings from cashew nut fell 9 per cent from a year ago to Rs 1,858 crore in April-January, while export quantity slipped to 94,794 tonnes from 98,286 tonnes.

India exported 118,540 tonnes of cashew nut worth Rs 2,455 crore in 2006-07 compared with 114,143 tonnes of Rs 2,514 in the previous year.

Competition from Vietnam
Vietnam, a late entrant to cashew nut processing, is in a position to offer competitive rates due to sufficient raw material as well as high level of productivity, Pillai said.

India's average yield is around 700 kg a hectare while in Vietnam it is nearly 2,000 kg, he noted. Productivity gap at farm levels between the two countries favours Vietnam processors, he said.

Also, Indian processors, who depend on imports for nearly 50 per cent of their raw material requirements, are more vulnerable at even a slight change in domestic or global raw material prices, he added.

He dismissed Vietnam's claim of replacing India as the world's largest cashew nut exporter as "premature", however, he noted that "Vietnam is posing a great challenge to Indian exporters."

Rupee rise
The rupee's appreciation against the dollar is the main setback for the domestic cashew industry, he said.

Pillai said exporters had booked orders at Rs 44 a dollar but rupee fell to 39 level.

"The only saving grace was fall in import cost which helped ease the situation modestly."

India imports nearly 500,000-600,000 tonnes raw cashew every year mainly from African countries.

Import cost of raw cashew fell to Rs 1,356 crore in first 10 months (April-January) of the current year from Rs 1,608 crore in same period a year ago.

While quantity of imports slipped marginally to 510,434 tonnes from 519,979 tonnes.

Domestic market
The rupee appreciation and growing competition in overseas markets are forcing exporters to seek opportunities in the domestic market, he added.

India is the biggest consumer market for cashew nut after the US and it is natural for processing companies here to turn to the domestic market, he said.

Pillai noted that some of the major exporters are already making bulk supplies to buyers in north India.

Spread of organised retail chains across the country also provides a new window of opportunity for cashew nut producers, he added.

However, he said demand for premium grade cashew nut in the domestic market is still low as most people prefer broken grades.

Demand for superior grades remains strong mainly during marriage season in north India, he added.