Chapter 2: The World Cashew Market and Senegal

Cashew is grown mostly in semi-arid, sub-tropical regions of Africa, Latin America and South- and South-east Asia . The world’s largest producers are India , Vietnam , Brazil , Tanzania , and Guinea Bissau respectively. As shown below, Senegal is currently the world’s tenth most important producer of cashew nuts, and Africa’s seventh largest.

Table 1:

World Raw Cashew Nut Production – 2002 (Estimate)

Country

Quantity (in MT )

1. India

350,000

2. Vietnam

200,000

3. Tanzania

120,000

4. Brazil

100,000

5. Guinea Bissau

91,000

5. Mozambique

50,000

7. Ivory Coast

30,000

8. Nigeria

15,000

9. Benin

15,000

10. Senegal

12,000

11.Other Countries

40,000

WORLD TOTAL

1,018,000

Source: Multiple Sources, FAO Statistical Database, The Cadju, Vol. 1, No. 1

On a global scale, Senegal is not a major player, but its strategic location in West Africa places it firmly within the global chain for raw nut exports. Moreover, cashew is becoming increasingly important to the Senegalese economy. Production levels all over West Africa have been increasing markedly, and Senegal is no exception. Current forecasts place its production potential by 2010 at 30,000 tonnes, a two-fold increase over current levels (ENDA, 2002). More importantly, Senegal ‘s production is highly concentrated in the Casamance area to the south of The Gambia. In this area, with a population just under one million, cashew as a cash crop has become the single largest source of income for the majority of farmers from the Kolda to Ziguinchor regions within the last five years. This despite the fact that there has been little coordinated government intervention. It appears as though cashew cultivation has emerged largely through market encouragement and the ease with which the smallholder peasant can cultivate the crop. This is also reflected in the seemingly chaotic and lazy nature of cashew cultivation in the Casamance, compared to other countries such as Tanzania where there are effective and coordinated government programmes to improve farming techniques and quality of production (Martin, 1997; Sijaona, 2002). In these countries, cashew has been cultivated over a longer period of time, and concerted efforts undertaken by their governments have assisted in improving quality and quantity of national production over the last decade. In Senegal, where cashew cultivation is still a new phenomenon, farmers often fill a given field haphazardly, employ little or no pest control and have applied little or no selection of seed for quality – far from employing studied techniques for cultivation. The market so far has demanded raw nuts of any size, and therefore there has been little pressure to select certain varieties over others. As will be argued further in this paper, with the emergence of a local processing industry, and a government increasingly aware of the importance of cashew to economic development, these demands appear set to change. This is mostly because local kernel processors demand more specific quality than Indian exporters, who also process the nut for products other than kernels and therefore do not insist as much on nut size and weight.

Senegal ‘s main production zones are shown in Map 1. The Casamance consists of five Departements below the Gambia and is the primary production area, with its epicentre in the so-called Balantekounda in the area around Sedhiou. Because of the long-standing separatist conflict in the Casamance, an estimated 40% of Senegal ‘s production is unaccounted for or left unharvested, mostly along the border with Guinea Bissau but also in the Departement Bignona closer to the Gambia . However, a significant proportion of nuts exported from Senegal are smuggled in from Guinea Bissau but do not figure in Senegal ‘s production statistics. 2003 is a record year for smuggling, with a minimum of 5,000 tonnes having been smuggled in from Guinea Bissau.

Map 1: Senegal 's production zones

Sources: Enterprise Works, Eaux et Forets

2.1 The Casamance and Guinea Bissau

While Senegal ‘s production ranks it only as Africa ‘s 7 th largest producer of raw nuts, it is next door to the continent’s second largest, Guinea Bissau. Not only has this geographic position offered many advantages and stimuli for development of cashew production in Senegal , it has made Senegal into a more important centre for global cashew trade than its own production alone can warrant. The enormity of Bissau ‘s production attracts more attention to the region as a whole. In the past Senegal has benefited from traders and exporters based in Bissau who eventually searched over the border. Within the last three years, as Senegalese production has continued to increase, many of these exporters have chosen to base themselves in the Casamance outright for reasons of security, infrastructure and general ease of commerce. As opposed to several other African countries that have imposed taxes and bans on the export of raw nuts, Senegal ‘s market is completely liberalised. Despite the ongoing separatist rebellion (which has entered a new period of negotiation and reconciliation), many traders prefer the business climate and the relative political and social stability. In contrast, the recent civil war in Cote D’Ivoire – West Africa ‘s largest producer after Guinea Bissau – has blocked and even discouraged all but the most venturous Indian buyers from doing business there. After trading for many years in Tanzania and Guinea Bissau, one large Indian exporter has chosen to base himself in Ziguinchor from now on. He explains that since cashew is so important to the Bissau economy there is much more of a tendency to “grab for loot” by officials, rendering the costs of procurement much higher. It is also riskier to trade in Bissau , as extortion of exporters like him is rampant. In Tanzania he acknowledges higher government interference, corruption and resulting difficulties getting nuts to port. In contrast, in Senegal , as he put it:

“The fear of law is there. I trust my agents here. Since this business involves pre-financing, I have to trust people with money. There is too much theft and lawlessness in Bissau .”

He went on to say that the Senegalese government is not nearly as interested in the cashew trade as it is in Bissau (or Tanzania ) and therefore interferes less to “spoil the trade”. For example, in Guinea Bissau, the export tax on raw nuts is 13%, and in Senegal it is zero. His opinion is equivocated by George Varguez, one of India ‘s most important Africa-based exporters.

George Varguez (left) at his storehouse in Ziguinchor

Being the largest single exporter of raw nuts out of Guinea Bissau, he has chosen to base himself in Ziguinchor to oversee his business in Bissau “from a strategically safe distance”. He also claims that of all the countries he exports from in Africa (including Tanzania , Mozambique , and Cote D’Ivoire ), the most pleasant and agreeable business climate is Senegal ‘s. According to Transparency International, Senegal ranks better than all other countries in West Africa except for Ghana in terms of perceived corruption, and highest among major cashew producing African countries listed in its index (Transparency International, 2003).

However, not all people involved in cashew in Senegal approve of the Senegalese government’s apparent disinterest in the sector. Local processors understandably would like to see more government interest to help their industries develop. This would most obviously include an export tax on raw nuts as practiced in other processing countries. The Eaux et Forets office in Ziguinchor would like to have cashew taxed in some fashion. They claim the revenue generated could help them supply farmers with improved varieties and assist with pest and disease control. However, within this government body there is no clear consensus on policy: the Eaux et Forets office in Kolda would prefer not to tax cashew for fear of discouraging farmers to plant more cashew. Rather, argues the Chef de Secteur in Kolda, M. Koeta, a tax at the export level could be conceivable just as long as farmers are not directly affected. In fact, this was the argument that led to the complete liberalisation of the cashew sector in 1986. When a German-Senegalese partnership implemented a programme to advance the cultivation and commercialisation of cashew in the Fatick region, the Germans persuaded the Senegalese government not to tax cashew in any way so as to encourage its spread and commercialisation. This policy holds today.

In Guinea Bissau, export taxes and controls at the buyer and export levels have rendered it difficult for many farmers to sell their cashew at all. This has encouraged many producers and traders to smuggle to Senegal , where they either get a higher price or are able to sell their produce outright (see Box 1).

Box : Border Trade and Smuggling

Text Box: Mpacke is a frontier town at the Bissau border.  It is impressive to see men on bicycles continuously depositing 50 kg sacks of cashew nuts from Guinea Bissau at the roadside.  This happens at a rate of about 1 tonne every 10 minutes.  Although difficult to estimate,  locals say as much as 3,000 or 4,000 tonnes are deposited in this way every harvest season.  Another version of this smuggling theory is provided by Moise Bassene. He explains that rebels inside Senegal are bringing their nuts into Guinea Bissau to then bring back into Senegal via Mpacke.  The direct routes are cut off by the army. So many of these nuts are actually Senegalese.    This is how it works:  Guinean collectors and traders negotiate with the Bissau military and police at the border.  Then they pay the cyclists 1000 CFA/sack to transport th sacks just 200 metres across the border in two phases. At night they smuggle across the border on a side road.  The following morning they complete the short journey to Mpacke.  One collector at the site claimed these men can earn as much as 600,000 CFA/month during the three-month season.  Marie Lopes Diop, a local collector (standing in the picture),  claims this has been going on for many years, as long as she can remember. However, another local collector claims this has been only for three years now, ever since the Bissau government imposed controls on buying and selling.

Another benefit for Senegal in terms of its proximity to Bissau is that many of the superior varieties of nuts now being planted in the Casamance originate in Bissau , which enjoys a good reputation for the quality of its production among West African producer countries. It is hoped this quality should spill over into Senegal , although superior germoplasm is only one of several factors influencing the quality of raw nuts. Others include farming and harvesting techniques, pest control, climate and soil conditions, etc. Further, Indian exporters often mix superior quality nuts originating from Bissau into their Senegalese stocks to improve overall quality and fulfil demands placed by their buyers and processors in India . In turn this should improve demand for nuts coming out of Senegal , as the country has to compete with other West African countries for nut quality. Overall, most Indian buyers in Ziguinchor confirm that Senegalese nuts are of a good – but not the best – quality.

2.2 The Market for Processed Kernels

As with most African producer countries, 90% of Senegal ‘s nuts are exported raw to Kerala State in India , where they are mostly processed into kernels for consumption in domestic and global markets. Table 2 is a list of the value of cashew kernel exports from the most important processing countries, traditionally led by India but aggressively trailed by Vietnam :

Table 2: Cashew Nuts Shelled – Val (1000$) 
Exports – Val (1000$)

Year

1995

1997

1999

2001

World

637,274

704,752

946,825

720,675

   Brazil

147,236

156,917

142,125

112,251

   Côte d’Ivoire

0

131

2,020

1,725

   India

383,068

325,879

570,595

366,789

   Indonesia

0

3,766

12,733

4,983

   Mozambique

7,000

12,000

15,000

0

   Tanzania , United Rep of

0

112

3,165

746

   Vietnam

34,000

133,331

109,748

151,707

Source: FAO Statistical Database

Table 2 does not include the domestic consumption of cashew kernels for these countries. India , Brazil and Vietnam – the three largest processor countries – have large domestic markets that absorb up to 40 % of their production. Therefore, the total market value of cashew kernels is significantly higher. There are also many useful by-products from cashew nut processing. India and Indonesia specialise in extracting cashew nut shell liquid (“CNSL”) as an artisanal wood varnish and a high-grade lubricant for aircraft brakes. The pellicule around the kernel is processed into tannine, a substance used in leather treatment.

Globally, the market for cashew kernels is growing at nearly 10 % per year. The most important market for kernels is the U.S. , followed by the European Union, which is currently the fastest growing market along with China :

Table 3: World Cashew Consumption (estimate)

COUNTRY Metric Tonnes
USA 55,000
EU 40,000
India 35,000
China 18,000
Australia/N.Z 5,000
Brazil 5,000
Europe (Non EU) 5,000
Japan 5,000
South East Asia 4,000
Other 4,000
Total 176,000

Source: The Cadju, Vol. 1

World prices tend to fluctuate for kernels, but much less severely so than for African raw nuts. In the 1990s burgeoning demand from Indian processors helped push up farmgate prices for raw nuts in Senegal from an initial 50 CFA tenfold to 500 CFA in 2000, but this price collapsed to less than half that value the following year. Subsequently, farmgate prices for raw nuts prices in the Casamance and indeed most of the rest of West Africa have fluctuated between 150 and 300 CFA.

The following chapter contains further analyses of price trends for raw nuts in the Casamance. In comparison, international wholesale kernel prices, while dipping slightly since 2002, remain comparatively more stable: by mid-July 2003, the international kernel price at the wholesale level has sunk by nearly 20% from its 2000 price to just under $2.00 (about 1100 CFA at current exchange rates). This is primarily due to the slumping U.S. dollar, which is the currency of choice for the cashew trade. This decrease is probably only temporary given that world consumption is increasing on a yearly basis, and many forecasts predict a stabilisation if not a long-term increase in kernel prices. Chart 1 shows the price trends for kernels over three years and illustrates that kernel prices have fluctuated by nearly 20%. In comparison, raw nut prices over the same period have fluctuated between 50 – 100% .

Chart 1:

Even more value added is made after kernels are exported wholesale to northern markets. Final or secondary processing involves roasting, salting and packaging for retail, where the final price in these markets typically hovers around 20 USD or more. PlantersT, a subsidiary of RJR NabiscoT, is the world’s largest single distributor of final-processed and branded cashew. The quality demands such distributors place on cashew processors makes the market very competitive for large-scale distribution. Thus, the relationship between processors in India or Brazil and final markets can be described as a more buyer-driven chain (Gibbon, 2001). In contrast, the chain down from Indian processors to African producers and suppliers is trader driven, with intricate, multi-tiered networks of buyers. This will be thoroughly examined in the next chapter.

The forestry and fisheries equivalent, within the Ministry of Environment and Natural Resources

This remains the only large-scale intervention by the government to promote cashew cultivation. The programme was never implemented in the Casamance.

Mostly smuggled

An attempt was made to chart producer prices scouring databases. However, there are no official statistics, and the prices can differ from village to village in Senegal .

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