The Cashew Industry Faces Challenges to Maintain Its Leading Position
For many years, Vietnam has held the number one position in the world for cashew exports. However, Cambodia and several African countries are ramping up their production of raw cashews and deep processing of cashew kernels, leading to fierce competition for the Vietnamese cashew industry. Building a stable source of raw materials, reducing reliance on imported cashews, and making a strong shift towards deep processing and product diversification to meet consumer demands are essential for the industry to sustain its position and dominate the market.
According to the Vietnam Cashew Association (Vinacas), Vietnam is currently the largest processing hub for raw cashews in the world, exporting to major markets such as the U.S., Europe, and China. However, approximately 90% of the raw materials used for processing come from imports, which poses a significant barrier to the sustainable development of the cashew processing and export sector, especially in the current volatile market.
Vietnam accounts for nearly 80% of the world’s cashew kernel exports, and the raw cashews processed by Vietnamese factories represent 60% of global raw cashew production. In 2023, the country exported over 644,000 tons of cashews, generating more than $3.64 billion, marking a 24% increase in volume and an 18% increase in value compared to 2022.
Challenges in the Cashew Capital
Binh Phuoc, known as the "cashew capital," is the most dynamic region for cashew production and business in the country, with 2,793 processing facilities and numerous small and medium-sized enterprises involved. This area is considered the world’s leading cashew processing center, capable of processing 500,000 tons of cashews annually. Binh Phuoc was also the first locality to receive a geographic indication certificate for its cashew products in March 2018.
About a month ago, the price of raw cashew nuts surged unexpectedly, catching industry players off guard. Kim Yen Processing Facility, which has nearly 20 years of experience in producing and processing cashew nuts, faced difficulties due to the daily price fluctuations. Phung Thi Kim Yen, a representative of the facility, stated that during the harvest season, the selling price was only 25,000 VND/kg, but by mid-June 2024, it had risen to around 40,000 VND/kg for domestic raw cashew nuts, with even steeper increases for imported raw cashews. Despite high demand for raw materials, the supply is very limited, leaving processing companies anxious.
According to Bạch Khánh Nhựt, Vice President of Vinacas, domestic raw cashew supply currently meets only 10-12% of export processing needs, leading to an import rate of 88%-90%. However, during peak months in May and June 2024, imported raw cashews were not delivered as per contracts, or prices surged significantly, putting domestic importers at risk of severe losses. At one point, exporters in West Africa raised raw cashew prices by 40-50% compared to February and March 2024, reaching $1,500-1,700 per ton.
Regarding the causes of this situation, Nhựt explained that while cashew trees are drought-resistant, this year’s El Niño phenomenon has severely impacted production across all countries. In Vietnam, reports indicate that 2024 production may drop by around 20%. In Ivory Coast, a major supplier of raw cashews to Vietnam, production has decreased by 20-25%. Consequently, in May 2024, Ivory Coast issued a temporary ban on raw cashew exports to ensure sufficient supply for domestic processing companies. This ban was lifted on June 10, 2024, but the sudden spike in raw cashew prices created challenges for exporters in Vietnam. Specifically, even though they could not procure raw cashews for processing, they had already signed contracts, pressuring Vietnamese companies to fulfill their agreements at all costs.
The Raw Material Supply Bottleneck
Nguyễn Quốc Mạnh, Deputy Director of the Crop Production Department (Ministry of Agriculture and Rural Development), noted that from 2008 to 2013, Vietnam's cashew yield remained low, below 10 tons per hectare. Since 2014, thanks to intensive cultivation programs, yields have improved to 12 tons per hectare. However, in 2016 and 2017, yields dropped due to severe drought, unseasonable rains, and disease. In 2023, the yield reached 12.2 tons per hectare, an increase of 1 ton from 2022 but a decrease of 1.3 tons from 2021. Overall, from 2000 to 2020, Vietnam's raw cashew production grew at an average annual rate of 8.1%, peaking at 399,300 tons in the 2021-2022 season.
In addition to relying on external supplies due to limited domestic production, Vietnam's cashew processing industry faces significant risks as imported raw material supplies are gradually shrinking. According to Vinacas, major cashew-producing countries like Ivory Coast and Cambodia are investing in processing to enhance value-added and limit raw exports. Meanwhile, increasing domestic raw cashew production is fraught with challenges.
In reality, the area dedicated to cashew cultivation is shrinking as farmers shift to other crops like coffee and pepper. Existing orchards are aging, leading to decreased yields. Although the Crop Production Department has coordinated with the Cashew Research and Development Center to establish processes for adapting to climate change and replanting, the results have yet to be significant.
Currently, there are not many new cashew varieties selected for production, and localities lack policies to support replanting efforts. Farmers are hesitant to engage in replanting, as it will take time before they can harvest, leaving them vulnerable to financial difficulties without a source of income. The implementation of staggered replanting that aligns with the capacity of each household and region to avoid affecting livelihoods and total cashew production has not been widely or effectively executed.
For these reasons, achieving self-sufficiency in raw cashew supplies for processing into exported cashew kernels remains extremely challenging. In the near term, during the third and fourth quarters of 2024, the cashew industry is expected to face significant obstacles due to continued raw material shortages, a situation that may extend into the first quarter of 2025.
