August Topic of the Month: Turbulent times for cashew nuts

The cashew harvest began in February as it always does, but it soon became apparent that everything would be different this time.

Buyers from Asia, and primarily from India, were travelling to West Africa and buying up raw nuts in huge quantities. What lay behind this development was the fact that the strong dollar at the beginning of January had substantially increased their purchasing power by around 25%. They were exporting the raw nuts to their own countries, where they are industrially or semi-industrially processed. While the biggest producer of cashew nuts in West Africa, Côte d’Ivoire, was protecting its own market through tariffs and export bans, in Burkina Faso a large proportion of the harvest was bought up.

The increased demand meant that the prices of raw nuts skyrocketed by more than 50% within just a few days. David Heubi, Managing Director of gebana Afrique, explains: “Our buyers were facing new prices every day. The contracts that we had agreed with the farmers suddenly became mere paper tigers.” The farmers were making the most of the situation and selling their harvest to the highest bidders, and for cash — namely, to the Asian buyers.

This was good for the farmers but bad for gebana, which normally pays for the deliveries by cheque, had already paid in advance, and for cash flow reasons only buys 30-40% of our total annual requirements at the beginning of the season. This meant that gebana Afrique could only buy very expensive and, above all, very much smaller amounts than planned. What was more, the gebana Trade Division in Switzerland already had contractual commitments to sell the nuts on.

gebana Afrique is currently still only able to purchase smaller quantities of organic cashew nuts. Our own processing facility is running continuously, but is certainly not operating at 100% capacity. Since many of the cashew growers also grow mangos, it is hoped that the advance payments to the farmers who are selling their raw cashews elsewhere can be offset by supplies of mangos.

The gebana Trade Division has informed its major customers about the price increases and has asked that they share the burden of this to some extent in order to prevent even bigger financial losses for gebana. The outcome has been favourable: Nearly all of our customers have said they are prepared to share the extra costs. Mirjam Güntert from the gebana Trade Department sees this as an extremely positive development: “Working together to find solutions in a challenging situation so that everyone shares in taking on the problem is, to me, part of what fair trade is all about.”

And what is the outlook for the future? In order to prevent a repeat of this scenario, gebana Afrique and gebana AG have worked together to harmonise the buying strategy for raw nuts. More liquidity at the beginning of the harvest should facilitate fast trading and cash payment.

However, the problem is more far-reaching than that, as out of a total of eight cashew processing plants throughout Burkina Faso, only three are currently in operation. The other five have closed due to lack of the raw product. This means that important jobs have been lost.

The widespread buying-up of raw nuts by foreign processors is threatening the existence of the cashew processing sector — still in its infancy — in Burkina Faso, and with it the value creation that shelling the nuts brings. David Heubi regards the situation as critical: “If the government does not take action to control exports and guarantee the supply of nuts to the country’s own processing plants, the sector will be in trouble.” He is therefore working together with the Association of Burkinabé Cashew Processors to find a solution at the political level — which is no mean feat, given that Burkina Faso currently has a transitional government. Between the new elections in mid-October and the start of the harvest in February, there is not a great deal of time in which to negotiate a solution.

The cashew growers are making the most of the skyrocketing cashew prices that have come as a result of demand from Asia, and are selling to the highest bidders — in spite of their contracts with gebana. What do the farmers themselves say about this? You can read about it here.