VN cashew producers in crisis due to lack of capital

Vietnam’s cashew industry has fallen into crisis as the cashew nut export price has been falling. 

Cashew producers are facing big difficulties

Banks have tightened lending, but enterprises do not have capital to maintain their production.

Ho Ngoc Cam, director of Phuong Minh Farm & Forestry Product Import/export, said cashew enterprises have been facing hardships recently.

In 2014-2017, cashew nuts were exported to the European market at $10,000-10,500 per ton, or VND215,000-220,000 per kilogram. 

The materials alone cost VND200,000. As a result, enterprises could not make a profit.

According to Nguyen Duy Tuan, general director of Lafooco, Vietnam’s cashew processors relied on import materials, so they suffered as importers speculated and pushed prices up. 

In early 2018, the raw cashew price exceeded $2,000 per ton threshold which caused banks to become reluctant to disburse money for fear of risk.

As a result, cashew enterprises have to sell what they have to store materials and fulfill export contracts.

“They have to sell at low prices in order to get cash quickly. As there are many sellers, the prices have been falling,” Cao Duc Huy from the Vietnam Cashew Association (Vinacas) explained.

The Import/Export Department of the Ministry of Industry and Trade confirmed that the average cashew nut export price in the second half of June dropped to $9,072 per ton, a decrease of 11.5 percent compared with the same period last year, the lowest level since February 2017.

As the cashew nut prices fall, the profit margin of cashew enterprises decreased and many of them even took a loss. 

Banks have become more reluctant to provide loans to cashew processors. Even large cashew enterprises also have found it difficult to access bank loans as banks have set stricter requirements. 

A lot of enterprises cannot get new loans once the old credit contracts have matured and have fallen into dilemma.

According to Vinacas, 480 out of 600 cashew processing factories in Binh Phuoc and 21 out of 33 enterprises in Long An provinces have suspended production, while operational enterprises have to scale down their production.

In the latest news, Vinacas’ chair Nguyen Duc Thanh informed that Vinacas had a working session with key raw cashew importers and reached an agreement on lowering the cashew price by $150-300 per ton. With the agreement, the raw cashew price has decreased to $1,600-1,700.

“With price levels, factories may resume operation if they can get loans,” Thanh said.

Also according to Thanh, about 500,000 tons of raw cashew worth $800 million are on the way to Vietnam and enterprises need money to receive the goods. Vinacas has called on commercial banks to continue providing loans to rescue the $3.5 billion cashew industry in Vietnam.