Cashew Marketing Trade Developments and Experience a Case Study in

7/29/2019 Cashew Marketing Trade Developments and Experience a Case Study in ...

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Cashew Marketing, Trade DevelopmentsCashew Marketing, Trade Developmentsand Experience: A Case Study in Easternand Experience: A Case Study in Eastern

and Southern Africa.and Southern Africa.

Project Executing AgencyProject Executing Agency

Regional Cashew Improvement Network for Eastern and SouthernRegional Cashew Improvement Network for Eastern and Southern

Africa (RECINESA)Africa (RECINESA)Naliendele Agricultural Research InstituteNaliendele Agricultural Research Institute

P. O. Box 509, Telephone +255 73 2934035; Fax +255 73 2934103P. O. Box 509, Telephone +255 73 2934035; Fax +255 73 2934103

[email protected]@iwayafrica.com

MTWARAMTWARATanzaniaTanzania


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Cashew Apple & NutCashew Apple & Nut

Developing appleDeveloping apple

Developing nutDeveloping nut

Mature Cashew TreeMature Cashew Tree


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Mature cashew nutsMature cashew nuts


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Outline of the presentationOutline of the presentation

1.0 Background

2.0 Marketing Constraints2.1 Production and supply of raw cashew nuts

2.2 Market agents and channels for raw cashew nuts

2.3 Marketing of kernels

2.4 Pricing movements

2.5 Marketing costs and margins2.6 Quality control

3.0 Recommendations

3.1 Major problems, constraints and limitations3.2 Strategic positioning and future prospects

3.3 Strategies put in place to increase productioninclude:

3.4 Policy recommendations


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1.01.0 BackgroundBackground

CFC provides financial assistance to developingcountries for poverty alleviation through commodity-

focused developments. RECINESA one of them, Tanzania, Malawi, Uganda, Kenya,

Mozambique, Madagascar and Ethiopia

Overall objective of the Network is to:

raise the incomes and living standards of resource-poorfarmers therefore contribute to increased household incomes

improvement in production and marketing of cashew nuts

In LDCs, exports of cashew nuts and citrus fruitsincreased by 7.2% and 11.8% respectively between1995 and 1999

Cashew nuts are the largest single export item for

LDCs, having accounted for 53% of the total LDCex orts of fresh and dried fruit and nut in value over


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2.02.0 Marketing ConstraintsMarketing Constraints Cashew nut development in Eastern and Southern

Africa is hindered by a number of constraints: -

Low production levels of farmers Ineffective marketing, pricing and taxation policies

Low and fluctuating market prices of raw nuts hencediscouraging smallholder farmers to increase production of

nuts Lack of standards which are harmonized with international

standards

Weak institutional framework

Declining cashew production.

However, efforts have been initiated recently in order torevamp the cashew industry and improve its marketing


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2.12.1 Production and supply ofProduction and supply of

raw cashew nutsraw cashew nuts Production structure, supply of cashew nuts

varies between different countries in theNetwork

Production decreased in all countries to lowestlevels in the 1970s and 1980s largely because of

the presence of the Powdery Mildew Disease (PMD)

ageing of trees

and poor agronomic practices

On average, around 100,000 MT of casheware produced annually in Tanzania


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2.12.1 Production and supply ofProduction and supply of

raw cashew nuts (cont.)raw cashew nuts (cont.) In Mozambique a peak was reached in 1972 of 216,000

MT, since 1977 the decline has been steep, nowMozambique produces as little as 15 to 20% of the

levels obtained in 1972.

In Malawi national annual prod. of the crop is currentlyless than 100 MT. Decline in production has been linked

to market failures and the consequent lack of care for

the trees by farmers In Kenya, cashew production capacity is currently

estimated at 10,000 MT whereas the total processing

capacity is about 18,000 MT


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2.2 Market agents and. ar et agents an

channels for raw cashewchannels for raw cashewnutsnuts

In all countries in the Network, cashew nut marketing

structures have changed over the years due to changesin the overall macro-economic policies.

Market liberalization policies in the region have putemphasis on separation of the governments from

business.

private companies were given permission to buy andexport raw cashew nuts or process them within the

countries and export kernels to foreign markets. (Let us examine some examples of the marketing

systems)


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2.2 Market agents and. ar et agents an

channels for raw cashewchannels for raw cashewnuts (Cont.)nuts (Cont.)

At present cashew nuts are purchased primarily using a

network of agents who go to the field to buy nuts for thelarge exporters

At village level, buyers, (whether employees ofexporters, their agents or smaller buying companies),

deal with agents of buyers either at designated buyingpoints or other places

Cashew nuts are being bought at all sorts of buying

posts such as primary society offices, village godowns,in the shops, and at farmers' residences

After bulking, cashew nuts are then transported to mainprocessing or export points. Direct purchases fromfarmers account for more than a half of all purchases


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Exports(Raw nuts)

Exports(kernel)

Localconsumers

Exports(raw nuts)

LocalConsumer

Export(kernels)

Farmer

Village trader

Buying companys

Staff/trucks

Experienced

Company

RetailerRetailer

Local

processor

Less experienced

Company

Local

Processor

Buying agent

Village

Cooperative

Society

Figure 1 Marketing channels for cashew nuts inTanzania


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Figure 2 Marketing channels for cashewnutsin Mozambique

Farmers

Informal Traders

(Lojas & Ambulantes)

Commission

Agents/traders

Informal Cross-border trade

Small/MediumScale processors

Commission

agents/traders inneighbouring

countries

Indian Buyers &

Exporters inNeighbouring

Countries

Indian

Buyers/Exporters

Indian Processors

European/USABlenders/Roasters

European/USAConsumers

AIA

Local Consumers


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Figure 3 Marketing channels for cashewnuts inKenya

Bicycle Traders

Kiosks

Brokers

Big Traders

Export (Raw Nuts)

Local Processors &Blenders

DomesticConsumers ExportKernels

Farmers


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Figure 4 Warehouse receipt system for cashewFigure 4 Warehouse receipt system for cashew

marketing in Tanzania (Adopted in 2007)marketing in Tanzania (Adopted in 2007)

Payment Agreement

Loan Receipt

InformationProduce Receipts

Owner Financial

Institutions

Warehouse Custodian

Market


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2.32.3 Marketing of kernelsMarketing of kernels Most kernels that are processed in the region are

exported to different markets with some limited

domestic marketing of kernels. Locally consumed nuts are mostly obtained from the

smallholder cottage type of processors

For the local supplies there are two main problems

poor packaging

labelling and roasting

One big weakness has been lack of market research or

consumer surveys in the Network countries tounderstand the actual domestic, regional orinternational demand for kernels


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2.42.4 Pricing movementsPricing movements Both national and international prices for cashew nuts

depict a wide range of variability prices offered by licensed cashew nut buyers are almost

always higher than those offered by marketing agents

In all countries, processors face competition fromtraders of raw nuts who offer relatively better prices

In countries like Mozambique and Tanzania,governments propose minimum indicative farm-gate

prices based on the international cashew nut price forthat year during each buying season after consultationswith stakeholders.

Most often, indicative prices are, however, are often notadhered


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2.42.4 Pricing movementsPricing movements Farmers are unable to negotiated prices with

traders who come to their village. They can onlydecide whether or not to sell at the price offered

The pricing of raw nuts also hinge on the trade-

off between exporting or processing the nutslocally

For example, during 2004 Kenyan traders exporting

raw nuts offered Kshs 60/kg against Kshs 30-40/kgoffered by processors


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2.52.5 Marketing costs andMarketing costs and

marginsmargins Assessment on whether the pricing mechanisms are

fair or not can be done by looking into thedistribution of returns to different participants in themarketing chain compared to the costs they incur inthe marketing process

In Tanzania, on aggregate, the farm gate pricesrepresented some 71 % of FOB prices for the periodbetween 1991/92 to 2003/04. However, traders benefit

more than farmers in the cashew transactions andearnings to farmers seem to be lower whenproduction costs are deducted from the farm-gateprice


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2.62.6 Quality controlQuality control The quality of cashew nut depends on two factors:

free from disease and pest attack

proper post harvest handling (during drying and storage of nuts).

Correct grading of nuts and quality control are important formaintaining a country's reputation as

an exporter of high quality nuts

And to ensure that farmers are offered good price

In the marketing system for kernels in the respective countries,

quality control is strengthened by the national bureaus of standards

However, quality control is sometimes difficult because of a numberof factors including:

the use of non-standard weights and measures

failure of cooperative unions to increase farmers' bargaining power

unsatisfactory performance of extension staff regarding quality

lack of mechanisms for rewarding farmers producing high quality

cashew nuts.


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2.62.6 Quality control (cont.)Quality control (cont.)

Traders also sell as standard grade on the internationalmarket nuts that are really under grade and buy as undergrade from farmers' nuts that are really standard grade

Farmers also have their share of the blame because theycould mix standard grades with under grades, soak nutsin water or put stones in nuts to increase weights.

Also quality control for kernels has not yet been wellcoordinated and neither are there stringent requirementsfor packaging finished products except when one sells inlocal supermarkets or overseas markets


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3.0 RECOMMENDATIONS3.0 RECOMMENDATIONS


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3.13.1 Major problems, constraintsMajor problems, constraints

and limitationsand limitations The cashew nut industry has suffered from a number of constraints

socio-economic, bio-physical and technical, which are directly or

indirectly linked to production and marketing The major constraints that have a direct bearing on marketing of

cashew nuts include:1. Insufficient market and price information

2. Lack of institutional framework3. Inefficient marketing channels for raw nuts

4. Lack of credit to smallholder farmers

5. Insufficient knowledge coupled with poor technology and information transfer

6. Weak farmer organisations or groups

7. Low farm gate prices

8. Low nut and kernel quality

9. Sub-optimal domestic consumption of kernels in the region

10. Unsustainable funding of Research and Development


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3.23.2 Strategic positioning andStrategic positioning and

future prospectsfuture prospects The Network member countries seem to have

high potential for the growth of the cashewsector and each country has set a number ofstrategic options to exploit this potential.

The main strategies aim at increasing production

improving domestic processing

and connecting local processors to markets


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3.2.1. I3.2.1. Increasing production Include

Using improved planting materials

improving husbandry practices

rehabilitation and upgrading of abandoned cashew orchards introducing the crop in new areas that have shown some

potential for growing the crop.

Fostering development of medium and large scale farms

by offering technical assistance and financial incentivesin high potential areas

To strengthen extension services through training of

subject matter specialists or local councillors. Educating farmers through training of various

technologies and skills of cashew production.


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3.2.2 Im3.2.2 Improving domesticproving domestic

processingprocessing Measures to enhance domestic cashew nuts processing

include:

Encouraging investment in cashew production and processingby removing barriers to investment imposing surcharges onexports of raw nuts in order to give priority to selling of raw nutsto local processors.

Streamlining of registration of companies and offering incentivesto processors such as exemptions of duty for imports and taxholidays.

Strategic marketing initiatives are:

Assisting farmers to form associations under which they couldaccess information and extension services, markets, and credit.

Linking processors of raw nuts to international markets forkernels.


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3.3 Policy Recommendations3.3 Policy Recommendations

A number of problems still persist in the sector in theregion. To alleviate these bottlenecks, two sets ofrecommendations are put forward: -

those focusing on increasing production and quality attributes those dealing with strategic marketing decisions

1. Encouragement of farmer groups/associations

2. To encourage progress towards better cashew qualitystarting from the field

3. Strengthening of legislative bodies where they alreadyexist and foster their institutionalization in countrieswhere they do not exist

4. To improve quality of research, there is an urgent needto secure sustainable funding for research and

development activities


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Ladies and gentlemenLadies and gentlemenThank for ListeningThank for Listening

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Cashew Marketing Trade Developments and Experience a Case Study in