Cashew farmers are cracking
07-OCT-2008 Intellasia | Vietnam Investment Reviews page 6
Oct 7, 2008 - 7:00:00 AM
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Cashew farmers and exporters are starting to crack under the pressure of having to deal with a lack of product, plummeting global prices and high interest rates on outstanding bank loans.
According to Vietnam Cashew Association (Vinacas), companies are being forced to low ball themselves in order to meet loan repayments.
The sell offs have pushed prices down further still, with W320 cashews which sold for US$7.9 per kilogram in July, now going for less than US$6.3.
Vu Thai Son, head of the association's Trade Promotion Board, said most firms were borrowing at lending rates from 1.75 to more than 2% per month.
"They cannot bear the lending rates, which are always due," Son said.
Since early this year, production costs had increased by 40% and lending rates had risen by 40-50% while market prices have decreased 25-30%.
"Enterprises like ours are not sure whether the prices will rise or not," said Luong A, director of Duy Tan company, which deals in cashew processing and exporting.
Son said foreign importers were tightening the screws on local exporters as they became more aware of their Vietnamese counterparts' financial predicament.
He also said that this was the time of year when companies need to stockpile in the run up to Christmas and the New Year.
"Enterprises should have either kept or increased the export prices," he said before adding that the Christmas was when India and Brazil would harvest their crops and export at high prices.
Nguyen Thai Hoc, Vinacas vice chair and chair of Dong Nai Import-Export Processing Agricultural Products and Food Company, said in the last quarter of this year, the cashew industry would face a shortage of nuts for export.
"The amount stockpiled, which is about 100,000 tonnes, is not enough for more than 200 processing factories which have a processing capacity of 650,000-700,000 tonnes per year," Hoc said.
Vietnam's cashew plantation area is also shrinking due to competition from other cash crop and fruit growers.
Vinacas warned that, by late this year, many local cashew processors and exporters would likely be forced to shut down due to a lack of materials.
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