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High interest loans push cashew exporters into distress sales
They know that cashew demand in America and Europe is set to rise towards the end of the year, but cashew exporters are shortseling themselves to repay high-interest loans.
Vietnamese cashew exporters are selling their stock at lower prices to pay off loans that they pay very high interest rates on.
The distress sale is happening despite expectations that demand for the nuts will increase at the end of the year.
Nguyen Duc Thanh, acting president of the Vietnam Cashew Association (VINACAS), says export prices of Vietnamese cashew has dropped from US$6,500 per ton last month to $5,600 per ton, but very few orders have been placed.
The demand for cashew nuts on the global market, however, is still high, especially with North America and Europe likely to run out of stock during the year-end season.
Many cashew processing businesses have decided to sell their stock at prices equal to or lower than their production costs because loan repayment deadlines are close. And these loans have high interest rates, Thanh said.
The situation becomes more difficult when foreign customers “know the situation and thus try to push the prices further down,” Thanh said.
The 2 percent monthly interest rate that businesses have to pay is too high, he said, suggesting banks should extend loan terms and lower interest rates to help businesses in the cashew industry.
Some banks have agreed to prolong the maturity period for the loans and cashew processors can settle their debts at the end of this year or the beginning of next year.
VINACAS has also asked local cashew exporters not to lower their prices as the demand for cashews will surge at the end of this year.
Moreover, exporters should not purchase cashews from farmers before signing contracts with foreign customers, VINACAS said.
Material shortage
Another difficulty that Vietnam’s cashew industry faces is the shortage of raw cashews for processing.
As local farmers cannot provide enough cashews for processors and exporters, the country has to import about 250,000 tons of raw cashews every year, mainly from African countries, Indonesia and Cambodia.
Nguyen Van Lang, general secretary of VINACAS, said Vietnam planned to increase its cashew area to 500,000 hectares in 2010 from the current 400,000 hectares. Most of Vietnam’s cashews are grown in the southern provinces of Binh Thuan, Binh Phuoc and Dong Nai and the Central Highlands region.
VINACAS said it has already proposed that the government spends VND50-60 billion ($3-3.6 million) every year to develop cashew growing areas and ensure stable supply.
The association has also called on cashew growers in Cambodia, Indonesia and Africa to increase co-operation with Vietnamese buyers.
Vietnam was the world’s biggest cashew exporter last year, shipping about $650 million worth of the nuts.
The country has exported 109,000 tons of cashew in the first eight months this year, generating revenues of $597 million.
Another 60,000 tons are expected to be exported by the end of this year, which will raise total cashew exports revenue in 2008 to about $1 billion. This will top earlier estimates of $680-700 million set for the year.
Thanhnien
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