The global price of cashewnuts has jumped nearly 10 per cent over the past week, after the Tanzanian government started buying the entire country’s stock at a higher price.
Growers of cashews, the most valuable export crop for the country, had been holding back from selling after prices fell below what they said it cost them to produce the nuts.
Then President John Magufuli last week ordered a 94 per cent increase in the domestic price to help the farmers and told the government to buy the estimated 220,000 tonne crop after private buyers baulked at the higher price.
Military personnel have since been ferrying truckloads of the crop purchased by the government to selected storage areas.
The price of the commodity rose to $1.80 per kilogramme from $1.15 in seven to 10 days, said Michael Stevens, a commodities trader at Scotland-based Free World Trading.
Global kernel prices hit a high of $2.40 per kilogramme at the beginning of the year, but as demand from the United States and Europe fell, they declined to $1.60 in October, an analyst at Cashewinfo, an India-based industry research organisation, said.
In the United States and Europe, cashew kernels compete with other nuts like almonds and pistachios.
With every increase in cashew prices relative to other nuts, its use in snacks starts falling. Snacks account for over 60 per cent of the demand for cashews, the analyst said.
Traders said they were assessing how Tanzania, a top 10 global producer, would get its cashews to the main buyers in India and Vietnam before the end of the year, after which harvests from other producers in South and West Africa will start to come into the market.
“Between now and then, it’s not clear what the price will be. If buyers think the price will continue to rise then they may come in and buy,” Mr Stevens said.
“Some of the smaller packers may just shut down and not be able to afford the price of raw seed that has been quoted.”
The bulk of the raw cashewnuts which have yet to be shelled are shipped from Tanzania and other African countries to be processed, mainly in Vietnam and India. By Friday, Dar had not outlined a marketing plan.
Prime Minister Kassim Majaliwa, said the government plans to increase the capacity of the existing processing plants.
President Magufuli’s intervention in the subsector, which according to the Bank of Tanzania brought in $340.9 million in foreign exchange in 2017 — superseding earnings from coffee, cotton, tea, cloves and sisal combined, at $270 million — has been criticised by some as political grandstanding, but it served to defuse tensions between cashew farmers and private traders.
“We will buy the entire crop, then we will look for buyers and we will eat anything that is not sold,” said Dr Magufuli, when he commissioned the country’s military to supervise the purchase of cashewnuts in southern region.
Dubbed Operation Korosho, the move was a welcome relief to the aggrieved farmers. The government has paid Tsh4.5 billion ($2.1 million) to cashewnut farmers in Mtwara, Lindi and Ruvuma regions since the operation started two weeks ago.
Mtwara Regional Commissioner Gelisius Byanakwa said the cash was for 130,111 tonnes of the crop collected from various district councils in these regions.
Before launching Operation Korosho, President Magufuli sacked minister of agriculture Charles Tizeba and his industry, trade and investment counterpart Charles Mwijage in a mini-Cabinet reshuffle, disbanded the Cashewnut Board of Tanzania and revoked the appointment of board chairperson Anna Abdallah.
In June, the president had threatened to sack ministers from the south who complained about proposed changes to the Cashewnut Industry Act introducing an export levy to be collected and channelled into the National Treasury’s Consolidated Fund, rather than to the cashewnut fund.
The proposed amendments are aimed at ensuring that part of the export levy collected is not remitted to farmers, but to the Treasury.
The Cashewnut Board of Tanzania had proposed a price of Tsh1,500 ($0.65) per kilogramme of raw cashew but the government rejected it, proposing Tsh3,000 ($1.30) as the least price. Then President Magufuli weighed in and set a price of Tsh3,300 ($1.80) a kilo.
He then deployed the army to supervise collection, deposit the crop in godowns and then to guard it. The president also ordered a government-owned bank to buy the cashewnuts at his preferred price.
The southern regions of Lindi, Mtwara and Ruvuma had more than 200,000 tonnes of cashewnuts waiting for buyers.
Now, according to the Minister for Agriculture Japhet Asunga, about 160 tonnes of cashew worth Tsh540 million ($234,000) have been purchased by the government so far from Tunduru district and the Tanzania Agricultural Development Bank has already disbursed the money to 534 farmers.
Tanzania has about 700,000 hectares under the crop. Lindi, Mtwara and Coast regions account for over 80 per cent of total area with smallholders forming the majority of the producers. Other regions that grow the crop are Tanga and Morogoro.
According to the Food Agricultural Organisation, Tanzania ranks fourth in the production of cashewnuts in Africa, accounting for 20 per cent of the regional market share.
It is preceded by Nigeria, Guinea-Bissau and Ivory Coast. Tanzania ranks the eighth at a global level with the Far Eastern countries taking the top slots.
However, the subsector has been hit by challenges, including lack of value addition and poor payment to farmers.
According to the International Nut and Dried Fruit Council Foundation, Tanzania exports more than 75 per cent of all the cashew exported from East Africa.
To boost production, the CBT in collaboration with Naliendele Agricultural Research Institute regional secretariat and all district councils have started a three-year programme of producing seedlings.
Under the programme, an average of 5,000 cashewnut seedlings are expected to be planted in every village whereby about 30 seedlings are to be distributed to each family which is equivalent to 10 million trees in an exercise will be done on 90 districts across 17 regions.
The country has been engaged in the production of the cash crop since before independence in the years 1960s.
However, poor regulation and lack of reliable payments to farmers had posed significant challenges to the cashewnut farming industry in Tanzania.
The lack of domestic processing firms costs the country vital foreign revenues and thousands of jobs. The government has been facing challenges for finding potential investors in order to revive the cashew processing industry in Tanzania.
The subsector almost collapsed in the 1980s. Annual production had dropped as low as 20,000 tonnes in 1986. This was largely due to various government interventions in the harvesting and marketing processes.
The Ujamaa programme saw a shift in agriculture from cashcrops to alternative crops.
Furthermore, mass relocation of people and the collectivisation of villages during the 1970s resulted in many farmers abandoning large real estates and areas of the crop production.