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Business News of Saturday, 30 May 2015

Source: B&FT

Cashew trade gains 166% rise in value

The price of raw cashew nuts have soared to an all time high of GHC4 a kilo on the local market after seeing a quantum leap in price in less than 18 months, putting a smile on the faces of farmers who are grappling to meet demand.

B&FT has gathered that a kilogramme of raw cashew nut, which sold on the market for GHC1.5 in 2013 is now trading for GHC4, representing an increase of 166 percent.

The steep spike in price of the commodity has been attributed to high demand for the product, with supply unable to keep pace.

Ghana currently processes and exports around 150,000-200,000 metric tonnes of raw cashew nut annually; local production of raw cashew nut varies between 40,000-50,000mt -- with the deficit bridged with imported nuts from Cote d’Ivoire, Togo, and Burkina Faso.

Local industries presently boast an installed processing capacity of about 60,000mt.

Data from the Ghana Export Promotion Authority indicate that cashew in 2013 generated about US$170million in foreign exchange earnings, making it the second-largest contributor to the non-traditional export crops.

As cashew is mostly grown in Brong Ahafo, almost all the processing companies and depots of exporters are located in the region.

Traders previously bought supplies from Cote d’Ivoire through the borders, particularly via the Sampa border.

But the Ivorian Authorities in 2013 imposed a ban on the export of raw cashew nuts from that country through its border posts, and restricted it to the sea ports only.

The ban on cross-border trading has since starved local cashew industry players, especially processors who have to import raw cashew nuts from Cote d’Ivoire through the Tema and Takoradi Ports for onward transportation to their processing plants in Brong Ahafo at an extra cost. This, many processors say, is not economically prudent to do.

It is further understood that foreign exporters, mainly Indians, have also flooded the Ghanaian cashew market and have generated a fierce and unhealthy competition among themselves and local processors.

The local processors therefore have to compete with exporters for the insufficient local production to do business, which has helped to trigger a rise in the commodity’s producer price, as traders have resorted to buying above the farm-gate price in order to gain significant market share.

B&FT has learnt that the soaring price and shortfall in supply of the commodity has forced many of the processing companies to shut down their operations, leading to a massive loss of jobs. Of the 12 processing companies in the Brong Ahafo Region, Mim Cashew Nuts is the only major plant still in operation.

An industrialist and Managing Director of Kona Agro Processing Limited at Awisa near Wenchi in the Brong Ahafo Region, Raymond Taylor, has as a matter of concern advocated rationalisation of the cashew industry to make it a more vibrant and wealthy agribusiness job-creation tool than before.

In an interview with B&FT he said: “Ghana is currently losing the ability to use raw cashew nuts to create jobs and wealth locally as a result of over-liberalisation and lack of regulatory mechanisms in the system”.

Mr. Taylor said it has become imperative for the government and other relevant stakeholders to picture the issue holistically in such a way that the country can use raw cashew nuts to craft an industry wherein processors can create and sustain jobs, and also maximise foreign exchange earnings.

He said: “There must be a levy on all exported raw cashew nuts, which government could use to support farmers to expand their farms in a bid to increase local production. When there is an export levy in place, exporters will be compelled not to purchase the commodity over and above a reasonably fair price so as to create an equally playing field for all industry players”.

The Industrialist emphasized that he is not against the involvement of foreign exporters in the industry, but the system must be regularised to ensure liquidity -- citing India as a case-study where it has protected its cashew industry with a charge of about 40% import duty on imported cashew kernels.