Benchmarking the Global Cashew Industry

Benchmarking the Global Cashew Industry

Micro and Small Enterprise Trade-Led Growth Program in Brazil

May 2007

Client: Development Alternatives, Inc (DAI)

Team: Melissa Hall, Pareen Patel, German Sarmiento, Nikola Smith, Aimee Sostowski and Stephanie Waxman

Table of Contents Acknowledgements 1Executive Summary 2Introduction 4Market Based Development Theory 8Brazil Background 10 India

Background and Industry Structure 13I. Output Quantity and Quality 13II. Differentiation 18III. Diversification 19IV. Access to Credit 19India Conclusions 20

Mozambique Background and Industry Structure 22I. Output Quantity and Quality 24II. Differentiation 25III. Diversification 26IV. Access to Credit 27Mozambique Conclusions 28

Vietnam Background and Industry Structure 28I. Output Quantity and Quality 30II. Differentiation 34III. Diversification 34IV. Access to Credit 35Vietnam Conclusions 36

Policy Recommendations and Conclusions 37

Appendices 40I. Charts and Graphs 40II. SWOT Analysis 47III. Matrix 51

Works Cited 65

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Acknowledgements We would like to express our gratitude to everyone who contributed to the project by disposing of their time and knowledge to make this project possible. It was an arduous but certainly rewarding and fulfilling process that enjoyed the receptiveness and collaboration of many people across three different continents. In particular, we would like to extend our appreciation to: Our client, DAI, particularly Hugo Figueiredo and Alexander Darzé, who were decisive from beginning to end with their commitment, open and flowing communication, as well as moral and technical support. Lara Goldmark who designed and initiated the project. Our advisor, David Kyle, who offered invaluable doses of enthusiasm, patience, as well as impressive leadership and guidance throughout the assignment. His creativity and resilient confidence in the team were definitive for the full realization of the task. Jackie Klopp, Rebecca Dahele, and in general the Economic and Political Development Concentration for their support throughout the entire workshop process. Adam Barcan for all of his assistance. Thank you to all the individuals and organizations in each of our targeted countries who welcomed us and shared their time, patience and expertise. These included representatives from government agencies, private processing firms, exporters, public and private credit providers, non-governmental organizations, cashew research centers, organic and fair trade organizations and farmers. Specifically we would like to thank:

- In India to Tomy Mathew (Fair Trade Alliance Kerala), J. Rajmohan Pillai (Beta Foods) B.S. Shekhawat (National Bank for Agriculture and Rural Development). Vineeth Thomas and Rajiv Panthary at Rural Microbanking and Agribusiness Group of ICICI Bank. K. Sasi Varma and Sree Rajmohan at the Cashew Export Promotion Council of India.

- In Vietnam to Bradley LeLonde and everyone at Vietnam Partners LLC, Helle Weeke

(VNCI DAI), Bas Rozemuller (ILO), everyone at IPSARD, and GTZ.

- In Mozambique to Jake Walters and Musa (Technoserve), Raimundo Matule (INCAJU), Elsa Marie (ADPP), Silvino Martins and Denise (Condorcaju), Ali Cherif Deroua (AIA), Rui Cardoso (BCI Fomento), Martin Mason (CLUSA) Lina Lince and Giovanni Lepi.

Thank you everyone for your invaluable support.

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Executive Summary Development Alternatives Incorporated (DAI) was contracted by USAID/Brazil in October of 2004 to implement the Micro and Small Enterprise Trade-Led Growth Program in the Northeast of Brazil. According to the World Bank, the poorest one-fifth of Brazil’s population accounts for only a 2.4% share of the national income and the Northeast region contains the single largest concentration of rural poverty in Latin America.1 Micro and Small Enterprises (MSEs) are essential for development of the Northeast because they constitute 49% of employment in the region.2 In response to these specific challenges, the primary objective of the Micro and Small Enterprise Trade-Led Growth Project is to promote export-led growth among MSEs in Northeast Brazil, ultimately resulting in increased incomes and employment. Project interventions are intended to i) improve the business environment; ii) promote commercial linkages; and iii) facilitate MSE access to financial services. DAI, in collaboration with the Foreign Trade Studies Center Foundation (FUNCEX), is presently conducting research and facilitating targeted interventions to increase competitiveness of MSEs in four sectors and increase MSE integration into the value chain through direct assistance to micro-producers as well as industry level policy recommendations. DAI requested that the Economic and Political Development (EPD) workshop team complement the value chain analysis already conducted by DAI in Brazil by producing a benchmarking study of the global cashew industry and identifying best practices in competitiveness. The EPD Workshop team traveled to countries with successful cashew industries, India, Mozambique, and Vietnam, in order to examine competitiveness along the following four pillars: output quantity and quality, differentiation, diversification, and access to credit. Methodology included a matrix to juxtapose policy and industry indicators in each of the countries vis-à-vis Brazil, semi-structured interviews, and an extensive literature review. Final conclusions will be shared with USAID, FUNCEX, DAI, and relevant public and private institutions in Brazil. Findings will aid in advocating for policy changes on an industry level, which will increase competitiveness of the cashew sector in Brazil, as well as other sectors with similar competitiveness limitations. As a historical leader of cashew production, Brazil has an impressive social and physical infrastructure to support the cashew industry. However, the Brazilian cashew industry currently faces a range of challenges regarding international competitiveness. Brazilian producers and processing firms face challenges including a declining price on the international market, stagnation of the local supply of cashew nuts due to the low financial attractiveness of cashew production, and competition from countries with lower costs and newer technology. To remain competitive and regain lost ground against India and Vietnam, Brazil must make its interventions sustainable and market-oriented. DAI must strive to assist the sector in achieving the right balance between public and private investment through strategically placed incentives. Interventions should focus on innovative measures to increase access to credit and quality of output. With successful implementation of these recommendations, Brazil, as the lead innovator of consumable by-product exports and most forward thinking in terms of traceable production, can increase integration of MSEs within the value chain and strengthen future potential as a major player in the global cashew nut industry. 1 World Bank, “Brazil Country Brief” 2 Brazil - From Bahia to Miami Beach (Note from the Field), Development Alternatives, Inc. 30 Nov 2005 USAID

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Policy Recommendations for Brazil:

1) Pursue interventions that promote private sector engagement in the cashew sector, while at the same time incorporating strategic public sector support.

2) Innovative interventions to facilitate access to credit. For example in Mozambique there is a conglomeration of public and NGO support to meet private needs for cashew working capital. INCAJU, a public cashew promotion organization, USAID, and TechnoServe have created a loan guarantee fund which enables associated processors to access capital. The processors leverage the equity of their warehouse as collateral and take advantage of the loan guarantee to cover the liability of almost 100% of their financing.

3) Encourage quality improvements through differentiation and increased access to information in order to obtain premium prices on international markets. In particular, the partnership between cooperatives and Fair Trade in India and Mozambique are highly respected and generally esteemed more than organic certification. Brazil could investigate the possibility of creating linkages within the value chain between SMEs and cooperatives with Fair Trade.

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Introduction The Brazilian Context Brazil’s economic growth has been unspectacular for several decades and there has been little ground gained in terms of reducing inequality. In response, the government and donors, including USAID, have pursued efforts to improve conditions for export-led growth. In particular, there has been a focus on increasing the integration of micro and small sized enterprises (MSEs) into the production-export chain as well as increasing their competitiveness. These strategies attempt to improve the livelihoods of poor Brazilians and to enhance the MSE share of aggregate country earnings. To aid in these endeavors, USAID contracted Development Alternatives, Inc. (DAI) in Brazil to conduct studies to increase competitiveness of MSEs in four targeted sectors and increase MSE integration into the value chain through direct assistance to micro-producers and industry level policy recommendations. Agriculture represents a promising sector for MSEs in Brazil. It accounts for 10% of GDP, employs about 20% of the labor force, and comprises 40% of Brazil’s exports. However, certain structural factors currently hamper MSE participation in foreign markets. Domestic concerns include heavy taxes, high financing costs, poor transportation infrastructure, and customs expenses.3 In addition, small firms often have difficulty financing improvements to their businesses that would help them comply with international standards.4 Despite these constraints, the cashew nut sector holds great promise for future growth and has the potential to benefit a large number of microentrepreneurs and small producers. Global demand for cashew nuts has grown more than 50% since 2000, reaching 345,000 MT in 2004.5 Along with India and Vietnam, Brazil has positioned itself as one of the world’s major suppliers. Together, these three countries account for more than two thirds of global cashew nut production. In Brazil, the state of Ceará in the Northeast of the country accounts for 90% of cashew nut processing capacity and 80% of total production and income from cashew exports.6 Thus, it has been identified by DAI as a primary location for an export promotion project. Project Background DAI was contracted by USAID/Brazil in October of 2004 to implement the Micro and Small Enterprise Trade-Led Growth Program in response to challenges that MSE face integrating into export markets. Designed to run two years and three months, the project’s primary objective is to promote export-led growth among MSEs in Northeast Brazil, resulting in increased incomes and employment. Project interventions were intended to i) improve the business environment; ii) promote commercial linkages and iii) facilitate MSE access to financial services. The first phase of the Project involved the identification of promising sectors in the Northeast with a high concentration of MSE participation. Cashew in Barreira, Ceará was one of four 3 Monteiro, Joana and Bonnie Brusky, Assessing the Impact of the Micro and Small Enterprise Trade-Led Growth Project of USAID/Brazil: Baseline Research Report, 2006, p. 3. 4 Ibid. 5 Ibid. p 15. 6 Ibid.

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sectors chosen for its potential and readiness to export, its strong value-chain, and its involvement of large numbers of the poor as microproducers and employees. A series of interventions were designed to improve the position of MSEs within the relevant value chain based on the findings of the selection process. These interventions addressed: i) product upgrading and package adjustment; ii) productivity enhancement; iii) increased access to financial services for individual firms; iv) product marketing, and v) market linkages. Detailed sector analyses were also planned to identify challenges to long-term competitiveness. The first phase of the project ended on December 20, 2006. In October of the same year, DAI was awarded another two-year contract with USAID to focus on policy issues. Although the title of the project is the same, there are major differences in the content and administration. The project is primarily administered by FUNCEX (Foreign Trade Studies Center Foundation), an organization in Brazil that works on export policy. DAI Brazil is transitioning into a local consultancy called ARCO, which has many of the same staff. ARCO has been subcontracted by FUNCEX to provide Chief of Party and policy research services. The continuation of the project is intended to build on DAI’s MSE-targeted direct interventions in Phase One. The second phase focuses on larger policy issues to promote public and private sector led advocacy for policy reforms that can improve the conditions for microenterprise development, consolidation and thus competitiveness of MSE products in international markets. Research during this phase will determine targets for needed reforms. Through comparison with best practices in relevant competing markets, this second phase intends to highlight a number of alternative policies or complementary strategies that would strengthen MSE involvement in export-led growth. The Role of This Study The first phase of the USAID contract provided a situational analysis of MSEs in the cashew sector, describing their production processes and identifying the challenges and obstacles (financial, organizational, transport, etc.) that impede improved performance. Concrete assistance was provided to a number of firms aimed at enhancing their processes. The second phase involves transitioning from targeting a limited number of MSEs to an industry-driven value chain upgrading process that includes private sector-led advocacy for policy reforms. DAI sees great potential for agriculture in the Brazilian economy, but does not believe that the country is taking advantage of international best practices. For this reason, DAI initiated this study to expand the scope of analysis to global markets and compare Brazil’s policies to those of its competitors. The goal was to conduct international research to benchmark the status and progress of Brazilian policy and practice in the cashew nut sector against other leading exporters in areas such as compliance with international agricultural standards, finance, and marketing. DAI approached the Economic and Political Development Program at Columbia University’s School of International and Public Affairs to conduct this analysis. Team members include graduate students in the final year of a master’s degree program who have academic and field experience in microfinance and micro-enterprise development, as well as expertise in Latin American studies, value chain analysis and economic policy and analysis was conducted between October 2006 and April 2007.

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Methodology The team’s first task was to identify points of analysis and select countries that would be a focus of the benchmarking exercise. India, Brazil and Vietnam are the three leading producers and processors of cashew nuts in the world. India leads the sector by producing 25% of all raw nuts, followed by Vietnam (19%) and Brazil (16%).7

Source: Technoserve

As Brazil’s primary competitors, India and Vietnam were chosen as key points of focus for benchmarking. India is also the world’s largest consumer, processor and exporter of cashews. However, Vietnam is an increasing threat to both India and Brazil, since it has been growing at 7 Technoserve estimates

Total Raw Nut Production

25%

19%

16%

9%

8%

4%

4%

5%3%

4% 3%IndiaVietnamBrazilGuinea BisseauTanzaniaIndonesiaIvory CoastMozambiqueBeninNigeriaOther

Revenue from Exports

0

100

200

300

400

500

600

Brazil India Vietnam Mozambique

Country

Mill

ion

(USD

)

Sources: Cashew Export Promotion Council of India, Irish Aid, Institute of Policy and Strategy for Agriculture and Rural Development, Vietnam, (current averages)

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10% per year as compared to the average growth rate of 4% annually. We also selected Mozambique, which was once a leading producer, and is currently working to revive its previously vibrant industry. Our research indicated that strategies underway in Mozambique to strengthen the cashew sector, particularly among MSEs, could inform interventions with similar objectives in Ceará. Consultation with ARCO and Planner Consultoria, a USAID sub-contractor specializing in cashew sector research in Brazil, revealed that targets of intervention had already been identified as a result of the extensive value chain analysis that had occurred in the first phase of the project. These target areas were chosen because they addressed constraints that limited the integration of MSEs into cashew markets and Brazil’s overall global competitiveness. These areas became the pillars of our study, and created the framework of our analyses of India, Vietnam and Mozambique. These pillars include: Output Quantity and Quality

- Strategies that enhance the quantity and quality of output at the farm and processor levels. This includes the effectiveness of research and development and agricultural extension to address tree yields, planting techniques and land use practices. At the processor level, policies are assessed that relate to phyto-sanitary standards, equipment upgrades and efficiency of processing techniques.

Differentiation

- Analysis of how countries are setting themselves apart to attract buyers, including through organic and fair trade markets.

Diversification

- Discussion of the extent to which producers diversify income through production and marketing of cashew by-products.

- Analysis of the domestic markets for cashew consumption and future potential to increase internal demand.

Access to Credit

- Assessment of provision of finance from the private and public sectors to fund start-up costs and business improvements for producers and processors. This is a key constraint to competitiveness and determines a firm’s ability to respond to changing market trends.

Research Process After the framework of the study was established, the team conducted an extensive literature review focusing on policies related to the above pillars in Brazil, India, Vietnam and Mozambique. We were asked to focus the depth of our analysis on the latter three countries, since understanding of their sectors and policies was of key interest to stakeholders in Brazil. We conducted field visits to deepen our comprehension of the cashew value chains in these countries, as well as to analyze the impact of government policies and private initiatives on the competitiveness of their industries. Field research consisted primarily of semi-structured interviews with representatives from government agencies (Ministries of Agriculture, export promotion councils, etc.), private processing firms, exporters, public and private credit providers,

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non-governmental organizations, cashew research centers, organic and fair trade organizations and farmers. While research focused on the four pillars described above, we also collected data on the overall cashew industry structure in these countries. Information was compiled into a matrix to be used as a benchmarking tool. The matrix was divided into the following units of analysis: Industry Structure

- general data regarding production, processing, export volume and prices

Research and Development - seed technology, tree varieties, disease and pest resistance, service providers

Farmer-Level

- access to land and credit, labor and transport costs, storage, irrigation practices Farm to Port

- traders and intermediaries, quality control, processing Port to Export

- HACCP and ISO certification, access to markets, major importers This benchmarking exercise resulted in informative comparisons that guided policy recommendations for Brazil, given its position in the global industry (see Figures 1-4 in Appendix I and the complete matrix in Appendix III). Findings are also incorporated into country case studies, which synthesize the strengths, weaknesses, opportunities and threats faced by each competitor. Transferable lessons learned in these case study countries are applied to Brazil in our policy recommendations. The market-led value chain approach to development applied in this analysis is described below. Next is a brief background on the Brazilian cashew industry, followed by the analysis from each of the three case study countries. In the final section, policy recommendations are outlined. Market Based Value Chain Development Theory DAI has pursued a market based value chain methodology in its work with the cashew sector in Brazil. DAI requested that the benchmarking analysis follow the same approach that has guided their assessment and interventions. In this section, the theory behind this approach is described to provide the background and rationale for the development and implementation of this project. After years of following top down, donor driven development theory, practitioners have discovered that a more effective and sustainable way to create positive change for micro and small enterprises (MSEs) and reduce poverty is by actively engaging private sector actors and allowing markets to determine and implement necessary interventions. Working on demand driven projects with the private sector and following market trends ensures that project activities and impact will be sustainable after project completion.

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Within a world of increasing globalization and economic interdependence, MSEs are exposed to global competition. In order to compete, countries must increase efficiency and quality both at the firm and industry levels. According to Michael Porter, a value chain is defined as the full range of activities and services performed in order to bring a product from inception to consumption.8 The goal of market based development projects is to focus on identifying opportunities and constraints to growth within an industry’s value chain in order to increase the competitiveness of the entire chain. The approach allows development practitioners to understand the environment within which MSEs must function and find ways to increase their integration into the chain. Not only do MSEs benefit from increased integration, but they also gain from increased competitiveness and success of the entire chain. There are many ways to affect change within the value chain approach. According to the USAID Report entitled Value Chain Approach to Poverty Reduction: Equitable Growth in Today’s Global Economy, there are four key factors that impact competitiveness within value chains. The first is inter-firm cooperation and coordination which is critical to increasing efficiency and quality of output. Particularly among MSEs, cooperation increases opportunities to reach economies of scale and creates decreased risk and greater stability of income. Second, strengthening relationships among firms within a chain can increase learning between firms, thus promoting innovation and the sustainability of the chain. This includes vertical and horizontal linkages which are mutually beneficial for the actors involved and greatly enhance overall competitiveness of the industry. Third, the distribution of benefits among actors within the value chain creates incentives or disincentives for performance. This includes understanding power dynamics between different actors of the value chain because it is crucial to ensure equitable distribution of benefits, particularly to MSEs. The final factor is that learning and innovation are essential for sustainability and competitiveness. Upgrading and branding require innovative skills and methods that increase competitiveness and revenue. Access to market information enhances the learning process and allows those within the value chain to better understand the end market and thus gain access to previously inaccessible markets. These are just a few reasons why innovation and access to information can significantly impact the competitiveness of an industry in the global market.9 In addition, development projects must demonstrate appreciation for the environment surrounding the chain itself. Many policies and government strategies have great implications for the way that value chains function and for their competitiveness in national and international markets. Those policies surrounding industries are known as the enabling environment. The enabling environment refers to the conditions that affect the business and investment climate, regulatory structures, legal systems, and governance issues that impact a value chain. It is imperative that development practitioners understand what policies are assisting or hindering competitiveness of a specific sector and how they affect MSEs. Therefore, enabling environments also play a large role in market based development theory. Development projects are more effective when they promote and facilitate the use of private institutions rather than seek to replace their services. Private sector development must be driven by entrepreneurs themselves. Subsidies and direct technical assistance should be used carefully

8 Porter, Michael, The Competitive Advantage of Nations, New York: The Free Press, 1990. Republished with a new introduction, 1998. 9 USAID Report, Value Chain Approach to Poverty Reduction: Equitable Growth in Today’s Global Economy

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and sparingly, with more emphasis placed on developing capacity within the private sector to provide necessary business and financial services. Creating a market for these services ensures it is demand-led, sustainable, and that competition increases quality and efficiency. A focus on indirect provision of technical assistance that develops private sector markets for business services and assists the public sector in improving the business environment is the basis of market-based development. These indirect methods of intervention use markets to guarantee efficiency and sustainability. Brazil Background According to the World Bank, the poorest one-fifth of Brazil’s population accounts for only a 2.4% share of the national income and the Northeast region contains the single largest concentration of rural poverty in Latin America.10 Regional inequality is exemplified by the disparities between the Southeast and Northeast regions, where the GDP per capita in the Southeast is 2.5 times that of the Northeast.11 The poor, rural Northeast also contrasts sharply with the modern agribusiness sector in the Center-West region, where much of the Brazil’s economic growth and foreign trade has come from in recent years.12 MSEs are essential for development of the Northeast because they constitute 49% of employment in the region.13 There are 4.7 million registered businesses in Brazil and approximately 9.5 million informal enterprises. Out of these businesses, MSEs employ over half of the economically active population. According to the Brazilian Service for the Support of Micro and Small Enterprises (SABRAE), the lack of access to credit is one of the principal obstacles to the growth and development of small enterprises in Brazil. Although they account for 20% of the GDP and 60% of employment in the country, MSEs receive just 10% of the credit provided by state and private banks. And only a small base constitutes exports with just .4% (18,000 of the 4.7 million) of the registered businesses in Brazil currently exporting.14 SABRAE estimates that MSEs only contribute to for 2 - 3% of the total value of exports.15 The Brazilian Cashew Industry The Brazilian cashew industry currently faces a range of challenges to its international competitiveness. In particular, the challenges that small enterprises face in accessing investment and working capital are particularly relevant to the cashew sector, which is primarily constituted of small producers and small firms in supporting markets. Although it is a sector that generates significant employment and export revenues in the Northeast, Brazilian producers and processing firms face declining prices on the international market, stagnation of the local supply of cashew nuts due to the low financial attractiveness of cashew production and underexploited domestic market. The industry is concentrated primarily in Ceará, Rio Grande do Norte and Piauí with the remainder produced in other states in the Northeast region. There are approximately 195,000

10 World Bank, Brazil Country Brief 11 DAI Brazil Terms of Reference document 12 Ibid. 13 Brazil - From Bahia to Miami Beach (Note from the Field), Development Alternatives, Inc. 30 Nov 2005 USAID 14 Joana Monteiro, Bonnie Brusky, Assessing the Impact of the Micro and Small Enterprise Trade-Led Growth Project of USAID/Brazil: Baseline Research Report, 2006, p. 3 15 Serviço Brasileiro de Apoio às Micro e Pequenas Empresas/Brazilian Service for the Support of Micro and Small Enterprises (SEBRAE) website (www.sebrae.com.br)

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producers cultivating cashews on 680,000 hectares, a production area which has remained unchanged for the past ten years. The most recent agricultural census conducted by the Brazilian Institute of Geography and Statistics (IBGE) in 1995/96 revealed that the sector is characterized by large fragmentation of production with 95% of producers being small and medium enterprises. Small producers are defined as those with less than ten hectares of land and medium producers hold between 10-100 hectares. Together, small and medium sized producers account for 64% of the total volume produced.16 Currently the substitution of older and less productive trees with the higher yielding dwarf cashew variety is stagnant at around 9% of total trees planted. The existing trees have a yield of 150-300 kg/hectare, while the dwarf cashew has the potential to produce up to 1000 kg/hectare. The dwarf variety also has greater yield in the extraction process and is less expensive to maintain as these trees are closer to the ground. A lack of access to financing, high labor costs and low product prices are disincentives for this type of investment. In fact, average prices paid for semi-processed cashews from Brazil have been found to be 30% less than those from India because Brazil achieves a lower average percentage of whole nuts. 17 Technological transfer to rural areas, plant care and management and extension services have also been cited as reasons why this more productive variety has not been more widely adopted. The failure of many small producers to engage in process and product upgrading is closely related to limited access to finance, which could be explained in part by the governance of the value chain. Although Brazilian processors offer a minimum price, the majority of the small producers sell their raw cashew nuts through intermediaries. Producers either sell to small local traders in exchange for their merchandise (food, consumer goods and agricultural supplies) or to professional traders who buy from both producers and small traders. There is evidence of value chain finance in the forms of trader credit (pre-harvest finance), especially for more financially precarious small producers that receive advances for the sale of their cashews before the harvest. Trader credit, which is made possible through established trust-based relationships and the middleman’s knowledge of the sector, is used by producers to care for their cashew trees and meet basic household needs. Official credit often does not reach small producers because of these financial arrangements between value chain actors. It is difficult to provide formal credit if the collateral has already been sold or if there is information asymmetry between the producers and creditors. In cases in which producers are able to access formal financial services, Banco do Brasil and Banco do Nordeste are the institutions with the greatest presence. In contrast to other cashew producing countries, most of Brazil’s processing is mechanized, which results in lower quality nuts because automated production yields fewer whole kernels and nuts are generally darker in color. Despite these shortcomings, it is essential for Brazil to develop increasingly sophisticated technology for mechanization as relatively higher labor costs preclude more labor intensive manual processing. These characteristics limit the access of the Brazilian cashew industry to value-added markets and the low price earned for the final product prevents processors from providing higher remuneration to producers (for raw nuts). This low yield of whole nuts (50-55% for large processing firms in Brazil compared to over 70% in India) further

16 Insertion of Micro and Small Enterprises into the International Market, Volume 1: Analysis of the Cashew Industry, USAID 2006, p. 44 (Translated from Portuguese) 17 Volume 4: Consolidation of the Experiences of the Cashew Case, USAID 2006, p. 7 (Translated from Portuguese)

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inhibits competitiveness in production capacity. However, despite low yields of whole nuts, Brazil’s cashews are larger, whiter, and considered to be of a higher quality than its competitors. While production is fragmented between many small producers, the processing stage is concentrated in large mechanized plants. There are 33 processors in Brazil, of which 22 are active mini-mills and 11 are large processing plants. Over the past two decades there has been a growing concentration of large processors. According to figures compiled by EMBRAPA and the Union of Cashew Producing Industries of the State of Ceará (SINDICAJU), in 1987 there were 27 processing units, with 80% of the cashews processed by eight companies. Today there are only eleven plants with 80% of the cashews being processed by just six companies.18 Mini-mills account for only 10% of the industry’s total processing capacity. The state of Ceará holds 90% of industrial capacity and port infrastructure and 80% of cashew exports are processed in this state.19 Cashew kernels and Cashew Nut Shell Liquid (CNSL) from Ceará represented the second largest export product from the state in 2005.20 Small processing facilities are limited by access to finance which prevents them from adopting new technology as well as meeting international standards (HACCP, ISO 9000, American Food Institute) and market access due to disadvantages of scale. The competitiveness of mini-mills is also threatened by a tendency to have limited access to information, lower management capacity, and less financial records which makes access to credit more difficult. Labor costs are higher in mini-mills, which translates into the cost of production of $30 USD per 50 pound box compared with $20 USD from the large mechanized producers.21 The increased cost is compensated for by the higher production of whole cashews (75-85% for the mini-mills compared with 50-55% for the large processors), the better appearance and better taste of the nuts that implies a higher price and a higher margin for the producer. However, as only 2% of the export volume comes from mini-mills22 the other 98% are processed by a few large firms.23 The recent appreciation of the Real has affected the profit margins of both mini-mills and large processors.24 The domestic market is considered to be an area for potential growth as currently only 20% of Brazilian cashews are consumed domestically and the other 80% are exported. Mini-mill production in particular goes to domestic consumption as these nuts often do not meet international export standards.25 USAID research found differentiated brands for the domestic market to be limited, with only two products marketed by processors and two created by packaging companies. Because Brazilians have a higher per capita income than India and Vietnam it has been suggested that they should be in a position to consume more cashews. The use of byproducts, particularly the cashew apple, is another area of for growth, as 90% of fruit pulp is currently unutilized. At the present time, more than 100,000 MT of products derived from

18Insertion of Micro and Small Enterprises into the International Market, Volume 1: Analysis of the Cashew Industry, USAID 2006, p. 45 (Translated from Portuguese) 19 Consolidation of the Experience of the Cashew Case, USAID 2006 (Translated from Portuguese) 20 “Encontro Fortalece Cadeia Produtiva da Cajucultura,” Diario do Norteste, October 18, 2006. (Translated from Portuguese) 21 Insertion of Micro and Small Enterprises into the International Market, Volume 1: Analysis of the Cashew Industry, USAID 2006, p. 21 (Translated from Portuguese) 22 Ibid. p. 65 23 Volume 4: Consolidation of the Experiences of the Cashew Case, USAID, p. 16 (Translated from Portuguese) 24 Insertion of Micro and Small Enterprises into the International Market, Volume 1: Analysis of the Cashew Industry, USAID 2006, p. 60-61 (Translated from Portuguese) 25 supra note 23

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the cashew fruit such as juice, sweets, jellies, and animal feed are produced for domestic consumption and this is an area that has potential for further development.26 India Background and Industry Structure India is the world leader in cashew production, processing and exportation. However India is at an important juncture in the development of its cashew industry due to increased international competition. At the present time only half of the cashews processed in India are produced domestically, reflecting that production has not kept pace with its growing processing capacity. While Kerala has been the center of cashew production and processing for over fifty years, both activities are now moving out of the state due to high labor costs and land shortages. Production is now more fragmented and the states of Tamil Nadu, Maharashtra, Karnataka, Andhra Pradesh and Orissa have emerged as leading producers of raw cashew nuts. (See Appendix I Figure 5 for a map of India.) It is important to note, however, that there are significant differences in the way each state within India has supported its cashew industry. The potential benefits to small producers and workers are highly dependent upon the type of cultivation (individual homestead farms vs. plantations) and processing system (cooperative, cluster, private and government factories). Technological innovation has been concentrated in the development of new varieties and planting techniques and in the final packaging phase, but there appears to be little interest in the mechanization of processing. Due to the long history of the sector, India has the strength of highly skilled labor in all stages of manual processing and therefore is committed to the continuation of this “hand-crafted” approach. This involves the use of mallets to remove cashews from their shells, as opposed to a more mechanized technique that results in a higher percentage of broken nuts. India’s low labor costs have enabled it to sustain this method and maintain a quality advantage in the industry. Given the fact that India is simultaneously pursuing a range of strategies including public sector plantation development, cluster-based approaches and organic production there is the opportunity to gain multiple insights from this case. Lessons that can be drawn from India include its high level of national and state level government support for research and development and technical assistance. There is also a strong financial infrastructure due to India’s social banking regulations, which has ensured widespread branch coverage and access to credit through a range of commercial banks and cooperatives. As both the government and the private sector explore ways to make the cashew sector more competitive, fair trade and organic production appear to be a promising but unexplored option. Although fair trade and organic production are limited to date, there are a few interesting models in Kerala that could be replicated elsewhere in India and provide lessons for the Brazilian context. The following discussion of India’s cashew industry, particularly focusing on the state of Kerala as the site of our field research, is organized according to the four thematic pillars: I. Output Quantity and Quality

26“Encontro Fortalece Cadeia Produtiva da Cajucultura,” Diario do Nordeste, October, 18, 2006.

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The quantity of raw cashew kernels exported from India grew steadily in the early 1990s (from 48,000 to 77,000 MT) and then continued to grow at more moderate rates in the later part of the decade.27 More recently, export quantity reached 114,000 MT in 2005-2006, although this marked a slight decrease from the previous year.28

Source: Cashew Export Promotion Council of India

Because India’s processing capacity exceeds its production, approximately 50% of all raw nuts are imported. Domestic production reached 460,000 MT in 2005 while imports increased from 95,000 MT in 2001 to over 252,000 MT in 2003.29 Government institutions have recently focused attention on enhancing domestic production to lessen dependence on imports from other cashew producing countries. This is primarily motivated by a desire to increase self-sufficiency rather than to ensure traceability, which was not identified as a threat to India’s industry by the processors and exporters we interviewed.

Source: Data compiled from Cashew Export Promotion Council of India and Harilal et al 2006.

27 Cashew Statistics, Cashew Export Promotion Council of India CD-ROM, 2001 28 Cashew Export Promotion Council of India website, http://www.cashewindia.org/html/c0300frm.htm, viewed 4/22/07 29 Food and Agriculture Organization of the United Nations and CEPC Cashew Statistics

Import of Raw Nuts into India

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-86

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-96

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-01

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-02

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Cashew production in India is dominated by smallholder farmers. Between 80-90% of cashew holdings are on less than two acres of land that are of poor quality and/or multi-cropped.30 In Kerala, this is partly due to a land ceiling law which was repealed in 2006 that limited individual land holdings to five acres for cashew production as well as other designated crops. Government-run plantations, however, are exempt from this regulation, which has led to the recent development of cashew estates on government-owned lands. State-level plantation corporations are estimated to manage 10% of all land under cashew cultivation. Both public and private production is shifting out of Kerala to more land-abundant states including Maharashtra, Tamil Nadu, Karnataka, Orissa and Andhra Pradesh. This is also due to lower value added taxes in these states (2%-4% as compared to 12.5% in Kerala).31 The state of Maharashtra is an interesting case study in successful public and private sector support for cashew development, particularly in the Sindhudurg district, which is near the border with Goa. Between 2002-2005, UNIDO helped initiate a strategy to support cashew production in the region following government efforts which had increased the total area under cultivation by 2.5 times between 1990-1998.32 The intervention targeted small and marginal farmers, microentrepreneurs and women. Strategies continue to be implemented, and are intended to address technical constraints, quality improvement, access to credit, marketing and greater coordination between banks, NGOs and public institutions. In 2002, the Department of Agriculture initiated a District Rural Industries Project thorough NABARD and an NGO (Gopuri Ashram), which included technical assistance in marketing and production, as well as financing of local cooperative and commercial banks for extending credit to microenterprises. Sindhudurg also has active support centers for processors and other small industries, which help register SMEs, facilitating their access to credit, and provide subsidies for equipment upgrades. Several NGOs, some of which are funded by the Indian Council of Agricultural Research, provide training to farmers and processors, including specialized services to enhance fruit processing and organic production. Technical assistance is intended to help standardize production processes throughout the region in order to improve the marketability of nuts and fruit products. Although public funds have helped initiate many of these projects, interventions also help strengthen linkages between commercial banks, farmers, processors and NGOs to enhance capacity in the private sector. Research & Development/Agricultural Extension The government is attempting to enhance domestic production through investment in research and development and agricultural extension. The Indian Council of Agricultural Research, an apex body responsible for the organization and management of research under the Ministry of Agriculture, supports the National Research Centre for Cashew. This center serves as the headquarters of the All India Coordinated Research Project on Cashew, an initiative with a presence in each of the eight cashew producing states. Through this network of research centers based at state agricultural universities, the project seeks to increase cashew production and productivity by developing higher yield trees, creating efficient disease and pest management practices and promoting more efficient planting techniques. Between 30 and 40 cultivars have 30 ICICI interview 31 NABARD interview 32 UNIDO, “Diagnostic Study – MSME – The Cashew and Fruit Processing Cluster – Sindudurg District, Maharashtra”, 2003, p. 17.

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been released by these institutions with maximum yields of 18-20 kg/tree.33 Soft-wood grafting is the most widely-supported method of propagation. The Cashew Research Station at Kerala Agricultural University is a leader in research and development and has focused on the development of high yield varieties, bigger nuts and nuts with a higher shelling percentage. Of the fourteen varieties that have been developed in Kerala, eleven were created at the station through hybridization. These varietals are shared with affiliated institutions in other states. Agricultural extension is primarily conducted by these publicly-funded research centers and universities, although NGOs do provide services in some areas. Farmers can purchase grafts directly from research stations. The Department of Agriculture also buys grafts in bulk and distributes them on the local level at village centers. These efforts have had mixed success, primarily due to the high cost of replacing trees. Farmers who choose to replace their trees risk losing income for 7-8 years while they wait for the grafts to reach their full yield. Some farmers in Kerala expressed dissatisfaction with the fact that the grafts, while producing higher yields, created smaller nuts that fetched a lower price, and also required more intensive fertilizer and chemical use. Utilization of high-yielding varieties has been most successful in Maharashtra, where new plantation development is more common. This may help explain the higher yield per hectare in that state (1300 kg as compared to the national average of 815 kg per hectare).34 Processing India is the global leader in cashew processing, and Kerala is the most productive processing state in the country. Kerala processed nearly 50% of the country’s total capacity of one million metric MT of raw nuts in 2000 and exports the highest share of cashew kernels.35 However, rising labor costs and strengthening labor unions have resulted in the development of processing units elsewhere. It is estimated that there are 1,700 processing units nation-wide. Dexterity of labor is one of India’s comparative advantages due to its three-generation history of processing. It is estimated that India’s perfected manual processing technique results in only 20% broken nuts, as compared to about 50% broken nuts in Brazil.36 Processing in Kerala is somewhat unique due to the influence of the communist government. In reaction to the poor working conditions in the sector, the government incorporated the Kerala State Cashew Development Corporation (KSCDC) in 1969. The KSCDC owns and manages 30 factories, and its Managing Director also heads the Kerala State Cashew Workers Apex Industrial Co-operative Society (CAPEX), which operates ten worker-owned factories. A primary purpose of these institutions is employment creation. KSCDC and CAPEX workers earn benefits including healthcare and pension that are estimated to add value to the minimum wage by 68%. The minimum wage before benefits is comparable for both public and privately-owned processing facilities and is set annually by a committee designated by the state government. Wages vary by activity (shelling, peeling, grading, etc.) but average approximately 100 rupees (approximately $2) per day in Kerala. The minimum wage in neighboring states is a mere 30

33 Cashew Research Station at Kerala Agricultural University interview. 34 Directorate of Cashewnut and Cocoa Development 35K.N. Harilal et al. Liberalisation, Gender and Livelihoods: the cashew nut case, Working Paper 3, p. 40. 36 Statistics vary on the proportion of nuts that are broken in India. This figure was cited by USAID in a presentation entitled ”What Drives Competitiveness in the Mozambique Cashew Value Chain?” drafted by Jake Walter, October 2006. Other leading Indian exporters quoted rates as low as 5% and 2.5% in Kerala.

17


rupees ($0.68) which has caused privately-owned processing companies based in Kerala to open processing units elsewhere. In Panruti, Tamil Nadu, small processors have formed a cluster in order to increase incomes. The average daily wage for the shelling and peeling stages is 50 rupees (approximately $1) and skilled workers employed in grading earn about 70 rupees (about $1.50) per day.37 In Panruti, cashew farmers supplement their own incomes by operating small units in which they process their own harvests as well as nuts purchased from export houses that source raw materials from other parts of India or abroad. Although these processors have the independence of owning their own raw materials, premises, and machinery, they are part of a network linked to specific export houses. They purchase nuts from exporters, but are not obligated under contract to sell the finished product back to them. There is evidence of variations to this arrangement in which groups of small processors share the expense of transporting a truckload of raw nuts from another state instead of buying them from export houses. Along with shared transport, small processors in Panruti are able to rent machinery and other infrastructure within the cluster, resulting in low barriers to entry. The Panruti case is unique because it is one of the few examples in which rural people are involved in both the production and processing phases of the cashew industry and participation in both activities generates employment for almost the entire year. Cluster members have also devised risk sharing schemes that protect them from the daily prices fluctuations. Because it typically takes 10-15 days for a batch of raw nuts to be processed into kernels, processors in Panruti avoid these price changes that would affect their margins by carrying out only one production sub-process and then selling the semi-finished product immediately. Landless people are involved in the Panruti cluster through wage labor and as collectors of ‘free’ nuts that become available at the end of the harvest when farm boundaries are no longer enforced. This cluster experience demonstrates how producers with limited resources and even landless people can benefit from primary production and processing when the relationships within the value chain are renegotiated. The involvement of farmers in processing in Panruti is very innovative and distinct. Overall, privately-owned firms dominate processing in India, and traders serve as important middlemen between farmers and factories. The government plays a crucial role in trying to enhance the capacity of private processors and exporters. The Cashew Export Promotion Council of India (CEPC) was established by the central government in 1955 to promote the export of cashew kernels and cashew nut shell liquid (CNSL), as well as to serve as a liaison between foreign importers and member exporters. Membership is open to any exporter, regardless of size or affiliation. CEPC also supports processors by managing a Quality Upgradation Lab and Technical Consultancy Centre in Kollam, India’s processing hub. In addition to certifying quality, the lab provides training to processors. Drum roasting and steam-cooking are the most commonly promoted processing methods. CEPC also manages the Department of Commerce’s Integrated Scheme for Cashew Quality. These schemes consist of consecutive 5-year plans that include various components. The current plan includes a one-time subsidy for the installation of processing equipment that conforms to international standards and quality requirements of importers. Subsidies are also offered for improvements to facilities to make processing units ISO or HACCP compliant. Finally, the plan provides subsidies to exporters who adopt the flexi-pouch vacuum packing system, which is the 37Eapen et al. “Liberalisation, Gender and Livelihoods: the cashew nut case” Working Paper 3, 2003. p. 26-27.

18


packing method most commonly demanded by importers in the U.S. and the U.K. (importers in the Middle East require tin packaging, and this method is commonly adopted by processors specifically for that market). Overall, the rate of subsidies offered by CEPC is 25% of the cost incurred by exporters and the total amount for all subsidies granted cannot exceed 800,000 rupees (approximately $18,000) per exporter during each 5-year period. The scheme’s focus on quality is indicative of the challenge processors face in meeting international phyto-sanitary standards. These standards are usually seen as a greater constraint on business growth than traceability requirements. II. Differentiation The Indian cashew industry differentiates itself primarily on quality, as described above. The labor-intensive “hand-crafted” manufacturing process results in a higher percentage of wholes, and avoids blanching that can occur with foot pedal machines (although the latter are also used). The market for value-added products is not considered extensive, although flavoring is common. Roasted and salted nuts are the most popular varieties. Different flavor preferences by region (Middle East vs. UK/US vs. domestic) make specialization difficult. The confectionary market, however, is growing considerably, and cashews are increasingly exported for use in chocolate, biscuits, ice cream and other sweets. Most domestic biscuit companies have a cashew variety. Organic The marketing of organic cashews has not been a focus, and one large buyer estimates that certified organics are less than 0.5% of total production.38 This is primarily due to the difficulty of certification, particularly since the majority of cashews are grown on small, fragmented farms together with other crops. Ironically, most cashews in India are naturally grown organically, but cannot adhere to the stringent requirements of international standards. Proving compliance with standards is difficult in regions that have been growing cashews for nearly a century. In Mangalore and Goa, where newer plantations are being developed, standards may be easier to achieve. Despite these obstacles, the government has recently become interested in exploring organic production, given the estimated 25% price premium. KSCDC hopes to develop a model organic plantation that can serve as a demonstration site, but plans are still in early stages. Fair Trade The cashew fair trade market is relatively small in India, but has considerable potential. TransFair USA’s database of Indian fair trade organizations dealing in nuts or nut products includes only one agency, Fair Trade Alliance Kerala (FTAK). This organization has existed for three years and has been certified organic for one year. It works with 3,000 producers. FTAK is affiliated with the Ethical Nut Company, a UK-based initiative that brings together producers from developing countries and alternative trading organizations. It is trying to move away from NGO models that depend on intermediaries by making farmers directly involved in governance, decision-making, and quality monitoring. FTAK’s governance structure includes committees at the village, district and state levels, and mandates that one-third of representatives are women. The state committee vets all contracts and decides on the farmgate price. Farmers also operate the 19 collection depots in the state. FTAK hires a truck to transport nuts from these depots to 38 Beta Foods interview

19


processing units. A strict traceability system is maintained, and each bag can be traced according to date, depot origin and the machinery in which it was processed. The price that FTAK producers receive is nearly a third higher than the market price (45 rupees per kg of raw nuts as compared to 35-38 rupees per kg). Farmers are paid R. 43 at the depot, and R. 2 in the off-season, to help them smooth income over time. On the retail market, nuts sell for $3.3/kg as compared to the $2.15/kg standard price. Most of FTAK’s buyers are in the U.K. and the E.U., and business is growing. In 2007, FTAK expects to sell 50,000 kg, which is 2.5 times higher than the previous year’s sales. Splits were also sold in advance to the Ethical Nut Company and an Italian buyer at a fair trade price. FTAK is working to attract even more buyer interest, as it would like to involve even more producers. The U.S. market is currently unexplored, and FTAK hopes to attract the support of TransFair USA. III. Diversification The market for cashew by-products in India has focused on Cashew Nut Shell Liquid (CNSL). Its sale is strongly promoted by CEPC as a renewable material that can be used to make specialty chemicals and polymers including insulating varnishes and resins. CNSL-based polymers are resistant to cold, water, microbes and termites. There is a high demand for these polymers in India’s coastal states, where they are used to seal boats. India’s largest international buyer of CNSL is the U.S., followed by Korea and Japan. Quantities exported have ranged from 6,923 MT in 2003-2004 to 7.474 MT in 2004-2005 and 6,405 MT in 2005-2006.39 (See Appendix I Figure 6 for a time series graph of CNSL exports from India over the past decade.) Marketing of cashew apple byproducts is not extensive. This is partly due to the vulnerability of the apple, which does not have a protective skin, and must be processed within eight hours of harvesting. Despite extensive research at government centers and universities that have attempted to optimize use of the apple to diversify farmer incomes, jams, jellies and juices are not considered marketable domestically or internationally. Four grades of cashew liquor have been discovered, but the highest, Feni, is only produced in Goa due to government restrictions on commercial sale. Some large private firms, including Beta Foods, have attempted to market by-products including jams, but found it difficult to change consumers’ tastes. The Cashew Research Station has done extensive research on productive uses for the cashew apple and offers training on its processing. The Research Station is not aware of the market demand for cashew apple products, but reports that its commercial production of cashew apple syrup has been profitable. The alternative uses of the fruit have not been popularized and are primarily used for household consumption. Farmers who seek to diversify their incomes usually cultivate other crops, such as rubber, which can be sold-year round, is not subject to the same price fluctuations, and can provide additional earnings through the sale of its timber. IV. Access to Credit India’s credit products are among the most innovative worldwide. State and federal laws support financing for both the rural sector and small enterprises. The Government of India through the Reserve Bank of India has mandated that all commercial banks advance 40% of their Adjusted Net Bank advance to the “Priority Sector”, which includes agriculture, small scale industries, and 39 Cashew Export Promotion Council, http://www.cashewindia.org/html/c0300frm.htm, viewed 4/23/07.

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microcredit, among other underserved areas. Out of this total 13.5% is to be extended directly to farmers for agriculture and allied activities and 4.5% supports indirect agribusiness, including lending to processing units and small scale firms engaged in agriculture activities. ICICI Bank is a leading commercial lender to the agriculture sector. Its Rural Micro-banking and Agribusiness Group (RMAG) offers a range of integrated products for production, upgrading, post-harvest needs, marketing and export credit. Its services are designed to address constraints in value chains, and are planned following sector analyses that identify key obstacles. ICICI minimizes costs through its use of technology and by working through intermediaries like MFIs, NGOs and cooperatives to deliver services. Its goal is to provide touchpoints (through a branch, kiosk or affiliate) every 10 km in rural areas. ICICI has developed special low cost ATMs and biometric smart cards with pre-loaded loan limits. Interest is calculated from amounts withdrawn on a given date to avoid the burden of flat interest rates calculated on the entire loan from the initial disbursement. Insurance products for farmers are designed to target specific risks, like rain, to help reduce premiums. ICICI’s products for the cashew sector focus on commodity-based financing. ICICI funds accreditation for warehouses whose records are digitized and interlinked. Farmers’ access to credit is based on their deposit at the warehouse, which is verified for volume and quality by an independent agency. Cashew prices are monitored daily and distributed to warehouses to advise clients when to buy and sell. The leading publicly-funded agricultural credit institution is the National Bank for Agriculture and Rural Development (NABARD) which provides funds to 30 commercial and cooperative banks that offer branch services in rural areas. Products include capital investment loans to finance inputs, land and infrastructure until the yielding stage. These term loans are disbursed over the gestation period, usually for 3 years. During the yielding state, short-term (1 year) loans are available. Funding for processing units is offered year-round. NABARD and ICICI dominate the market for financial services in the agricultural sector. NGOs play a secondary role, and serve more isolated areas. Some farmers in the cashew producing districts of Kerala complained that interest rates for NABARD-funded loans are set too high, and are not well-matched to current cashew prices. Others complained that ICICI is too profit-oriented and should charge lower rates or serve poorer clients. Overall, the broadest range of services may not trickle down to the poorest producers. Most government subsidies, including those offered by CEPC, do not reach these farmers. For example, ICICI’s RMAG estimates that only roughly 10% of farmers, primarily from tribal groups, receive subsidies. As a result, some farmers prefer to borrow from moneylenders when credit is needed. Traders may also be sources of informal credit. Many of them run additional businesses in communities, and offer sales to farmers on credit in the off-season. India Conclusions While India has a legacy of leadership in the global cashew industry, it is clear that it must continuously reassess its comparative advantages in order to remain competitive. In particular, India should focus on increasing domestic production and explore rising demand for organic products in the United States and the U.K. Efforts to increase productivity could be supported by enhancing private sector involvement in agricultural extension, which could result in greater competition and diversity of services to improve output

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India’s cashew industry is characterized by the participation of a dynamic private sector. Moving forward, it is essential that public and private stakeholders collaborate in order to determine how to best address the impending challenges faced by the industry. Cashew producing states like Kerala which have a long history in the sector are facing declining competitiveness as older trees become less productive. It is an ongoing challenge to determine how to provide the right incentives and support that will encourage farmers to invest in replanting higher yield varieties, especially in the face of more lucrative alternatives such as rubber production. Although the government has tried to increase output by establishing new publicly owned plantations with high-yield trees, this does not address the needs of smallholder farmers. Greater productivity at the farmer level could be supported by increasing the number of agricultural extension providers, particularly in the private sector. Although productive capacity remains a challenge, India continues to distinguish itself in the market by producing high-quality nuts through a labor-intensive manual process. Because India has prioritized nut quality over by-products to differentiate itself, this “hand crafted” approach should be a greater focus of marketing campaigns. India also maintains an edge over its competitors by having an exceptionally strong credit market. This will help Indian producers and processors continue to upgrade and respond to changing market trends. Fair trade and organic production are promising but unexplored options and should be more fully developed to benefit small producers and firms.. Overall, India distinguishes itself in the cashew sector by maintaining high quality and large export volume. If it manages to increase domestic production, diversify agricultural extension services and explore alternative markets, including fair trade and organic, it has the potential to lead the industry for many years to come.

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Mozambique Background and Industry Structure When analyzing Mozambique’s current cashew industry, it is fundamental to keep in mind that the country went from being the number one producer and exporter of processed cashews in the world during the early 1970’s, approximating 240,000 MT per year, to becoming an exporter of insignificant volumes of raw unprocessed nuts. In 2001 Mozambique’s processing capacity had disappeared completely as a consequence of a combination of factors during a long lasting decline: civil war, price controls and a raw nut export ban, the spread of Powdery Mildew Disease, inadequate industrial policies opting for large plants and mechanical processing technology and forced price and trade liberalization by the World Bank. (See Appendix I Figure 7) After such a devastating breakdown of the industry very few expected to witness a comeback of cashew processing in Mozambique. However, today the industry has rebounded with production levels of approximately 70,000 MT of which roughly 30,000 MT are expected to be domestically processed during the 2006-2007 campaign.40

Source: PowerPoint presentation provided by Ali Cherif Deboua (President AIA), “Cashew Industry in Mozambique”, INCAJU, Report

“Developing the Cashew Nut Industry in Mozambique”

Beginning in 2001 the Mozambican cashew nut industry embarked on a remarkable recovery phase due to impressive leadership roles played by Technoserve, a US based nonprofit international development organization, and USAID. The industry entered a period of new growth by following a privately led strategy that identified small and medium scale processing plants and use of labor intensive manual technology as a more suitable approach to the specific country conditions of Mozambique. After six years, the results attained suggest that the strategy has been effective, as demonstrated by the strong resurgence in processing capacity.

40 Technoserve (Irish Aid), slide 38, sources: ICAJU, Technoserve Dataset

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Independence war, followed by civil war, with

exodus of Portuguese

Privatization of cashew nut

factories

Mozambican raw nut production

Collapse of uncompetitive

domestic processing

industry

Surge of new labor intensive processing industries located in

rural areas

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The recovery process began with Antonio Miranda, who was the first local entrepreneur to install a small scale processing plant in the year 2001 with support from Technoserve. This startup attempt received intensive technical assistance from Technoserve in aspects such as business planning, plant and quality system design, establishment of linkages with buyers and access to financing for working capital and investment purposes. In time the factory was making a profit. Encouraged by his success, other motivated entrepreneurs joined the industry. Therefore, Jake Walters, director of Technoserve in Mozambique, credits the growth to the entrepreneurial nature of the entrants who were motivated individuals, with strong managerial experience, an extensive entrepreneurship trajectory, and a spirit for innovation.41 In addition to the selection of motivated entrepreneurs, identifying the optimal factory size and technology has been crucial. Opting for small and medium scale processing plants and use of manual technology has proven effective given Mozambique’s conditions of labor costs, human capital resources, access to credit, and decentralized cashew nut production among thousands of smallholder farmers. Today through this approach there are 23 functioning plants in the country with a combined installed capacity to process of approximately 41,050 MT.42 Even more significant is the fact that by 2005 processors were buying nuts from approximately 110,000 smallholder producers and generating jobs for approximately 6,293 workers in the processing factories. For this year’s campaign the processing industry was expected to provide jobs for approximately 9, 915 workers. 43 The appropriate plant design smoothes over the difficulty presented by the low levels of human capital and requires a considerably smaller initial capital investment (approximately 25% that of a large scale plants.) This is fundamental given the underdevelopment of the financial system Moreover, small processing factories are more able to employ at full capacity and are also easily adaptable for expansion. Most of the new factories have been built with initial capacities to process 1,000 MT and are designed so that capacity can progressively be increased to 2,500 MT in 5 years. The range of processing capacity among the new factories varies between 500 and 5,000 MT per year.44 In addition, most of the Technoserve supported interventions have targeted the northern province of Nampula which “has approximately 42% of the country’s cashew trees and accounts for approximately 60% of national cashew nut production”45. The southern provinces of Gaza and Inhambame are other important centers of production. The new approach has been designed and carried out in such a way that the small and medium size processing plants are located in the proximity of areas with a high concentration of trees. By intentionally placing the plants near the farmers, intermediation between farmers and the processors is minimized. Ergo, there is a stronger relationship between the two actors and transport costs are reduced. This design has also benefited buyers, who have greater control over the quality of the nuts. Figure 8 in Appendix I

41 Interview with Jake Walters, Director of Technoserve, Mozambique 42 Technoserve (Irish Aid), slide 41 (source: Technoserve Dataset) 43 Ibid. slide 40 44 Interview with Ali Cherif Deroua, President of AIA 45 Artur, Luis and Nazneed Kanji. “Satellites and Subsidies: Learning from experience in cashew processing in Northern Mozambique”, November 2005

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illustrates the concentration of production and processing in Nampula as well as the positional arrangement of factories across the province. Last, but not least, it is worth mentioning that throughout the field work, the team was constantly told by those involved in the industry how much the overall experience has been about “learning by doing”.46 From Technoserve, to the processors, to the managers, to the officers of INCAJU, this was the general perception. It has been inevitable to run into mistakes such as errors in plant design, inappropriate management practices, underestimation of financial challenges, or wrong selection of entrepreneurs. However, impressive leadership by key players (Technoserve and increasingly the processors) coupled with consistent business planning and monitoring of the process, lends to taking opportune corrective actions when necessary, thus facilitating the consolidation of the enabling environment.. Replanting initiatives, the conformation of an alliance of processors –Agro Industria Associadas (AIA) – in 2004, the establishment of a loan guarantee program, training of farmers, joint branding by members of AIA through the brand Zambique created in 2005, and perseverant persuasion for government participation are all initiatives that characterize the flexible, energetic and business minded approach that has driven the recent recovery of the industry. The importance of all of these will be analyzed in greater detail through the lens of the four pillars that were prioritized by our study. The role played by AIA as well as the joint branding efforts under Zambique will be crucial along the pillars; as means of achieving economies of scale across several services, for the protection of quality standards throughout the value chain and for expansion purposes onto unexploited markets. I. Output Quantity and Quality Smallholder farmers are responsible for 95% of cashew production and thus production is fragmented among thousands of small subsistence farmers that do not perceive themselves as part of the “cashew business.” Given this reality it is difficult to incentivize farmers to invest time and income in the treatment of trees, which hampers the quality of the nuts and reduces tree productivity. Thus far, INCAJU (Institute for Cashew Promotion), the government’s cashew promotion entity, has been unable to drive the necessary interventions (replanting, disseminating information to farmers on best practices of tree treatment, research and development, etc.) needed to secure the rehabilitation of the industry. In addition, there is an urgent need to renovate Mozambique’s old stock of trees which were planted during colonial times. These trees are gradually producing less and lower quality nuts, which affects the competitiveness of the industry throughout its value chain. Farmers are losing potential income, factory employees receive lower wages as they are paid on a piece-rate basis, and operating costs are higher for processors. In general terms, due to this reality, the situation will be unsustainable in 10-15 years against international competition. Average outturn in Mozambique is of 42-46 pound quality, lagging well behind the most competitive industries of the world. India and Vietnam have 50-56 average outturns, while Brazil is at 50-55 average outturn.47 As problematic as this threat is for the prospects of industry consolidation and future sustainability, insufficient action has been taken to renovate the existing stock of trees. INCAJU has favored short term maintenance of trees over an aggressive strategy to replant.

46 Interviews with Technoserve, Processors, Plant Managers and BCI Fomento 47 What drives competitiveness in the Mozambique cashew value chain? Presentation given by Jake Walters, October 19th, 2006

25


In response to this threat, processors have opted to move forward and develop medium and large plantations of their own. In addition, they have initiated training for farmers in sampling and measuring outturn as well as in educating them in practices for proper tree care. Training in sampling is the starting point that will hopefully lead to the payment of premium prices to farmers based on the quality of the raw nuts produced and sold to processors. Overall improvement of raw nut quality will remain central as the industry moves towards consolidation. Furthermore, in a crucial departure from the previous failed approach that was dominated by large scale factories and use of mechanized technology, Mozambique principally makes use of manual cutting technology. Manual shelling and cutting technology takes advantage of the low costs of labor of rural Mozambique. In addition, this labor intensive technique is significantly superior in terms of achieving a higher percentage of whole kernels compared to the mechanized technology that dominates the Brazilian industry. For example, factories are achieving on average approximately 73% of whole kernels whereas old factories achieved a mere 60%.48 However, the productivity of Mozambique’s factory workers is well behind India’s and Vietnam’s as well as that of other African processing industries such as Tanzania and Ivory Coast. This problem has three causes: first, the low outturn of the nuts due to decaying trees, secondly, the poorer skill of workers throughout the different cycles of the factory process (cutting, peeling and selection) and thirdly, high rates of absenteeism at around 20%.49 (See Appendix 1 Figures 9 and 10 for a comparative view of Mozambique’s position in terms of tree outturn and workers’ productivity in cutting, peeling and selection cycles of processing.) Finally, due to lack of infrastructure for electricity in many distant rural areas where the factories have been installed, there are factories that must rely on a less efficient steaming technology that slows down processing time. However, some of these factories have eventually been provided or are in the process of receiving access to electricity and better roads. II. Differentiation The entrepreneurial lead strategy put forward by Technoserve has been extremely attentive to the demands made by the market on the subject of quality standards. As part of the medium and long term plan, it became crucial to achieve economies of scale across a range of services for competitiveness purposes, including the need to supervise the quality of the nuts, as well as the standards of factory operations and facilities. Following the plan, Agro Industrias Associadas (AIA), a consortium of processors in the Nampula province was created in 2004. After a thorough deliberation process it was decided that AIA would concentrate efforts in the following activities and services: centralized warehousing, transportation to port, shipping and customs, acquisition of equipment, and as mentioned above, quality control monitoring and consolidation of brand reputation. In addition, in 2005 a brand by the name of Zambique was launched under which all member processors of AIA began exporting their finished product. The existence of AIA constitutes a significant step in terms of protecting and strengthening the Zambique brand. With all processors exporting under the Zambique brand, there is a strong incentive to regulate and standardize the quality of its pooled production through proper

48 Technoserve (Irish Aid), slide 36 49 Technoserve (Irish Aid), slide 14, and interview with Manager of Condorcaju

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monitoring practices. Processors understand the consequences that a single container of poor quality kernels has on the reputation of the Zambique brand and thus have been compliant and respectful of the valuations that AIA has applied to the factories so far. Furthermore, AIA has been working on the refinement of a standardized evaluation for quality control that if consolidated over time has the potential of becoming a powerful tool for generation of individual factory diagnosis. Such a tool could facilitate and improve the decision making processes for factory management as well as for the conglomerate. In addition, for future brand strengthening purposes, AIA is visioning the possibility to expand Zambique through a franchising mechanism where factories can buy the rights after complying with rigorous quality requirements. For this to happen, the consortium will require that further developments be made in terms of quality certification. Although the business plan for AIA envisions that by 2010 its network of processors will meet 60% of HACCP standards, the progress on this matter has been limited to very few factories, particularly the larger ones.50 It is important to note that the industry has concentrated most of its efforts on the European market and thus has been particularly attentive to its specific quality demands. A strong link with a Dutch broker that buys the entire production of the conglomerate has been established. The South African market is so far an unrealized opportunity, which all the key players (processors, INCAJU, Technoserve) agree must be explored. Expectations of further growth will be determined by AIA’s capacity to protect the quality of its product as a means of expanding its services and brand onto other industries and potential unrealized markets. For 2010, AIA has targeted the following goals: 30,000T nut processing by AIA network, 6,150T of kernels (20.5%), ten or more AIA factories in network, an additional 7,000 jobs created, for a total of over 12,000 direct jobs and 10,000 hectares of raw cashew crop under ownership or with sole buying rights. Ultimately, AIA will be pivotal for the self sustainability of the industry as the idea is that it will eventually replace Technoserve as a reliable source of technical assistance on a for-profit basis. 51 Finally, the industry has not entered into organic production due to the insufficient reach of extension services, and the complexity of complying with organic certification. On the other hand, there is interest in exploring options within the Fair Trade market. CLUSA (the Cooperative League of the USA) has supported two communities in forming a relationship with Fair Trade in northern Mozambique. Stakeholders in Mozambique would like to promote a further integration of communities with these organizations. This results in a high percentage of pesticide free production, which can be conducive to the introduction of organic cashew nut production. III. Diversification Currently Mozambique does not have the technology to meet the specificities required to develop byproducts. There is little institutional support or capacity to initiate the development of byproducts, and the factories have not reached the high volumes of processing that is necessary to produce the Cashew Nut Shell Liquid (CNSL). As such, the industry is not ready or prepared to take advantage of the innumerable industrial applications exploited by other nations. In

50 Technoserve (AIA Business Plan), slide 59 51 Ibid. slide 32

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addition, despite recent growth, Mozambique does not have the production capacity to dedicate a portion of their trees for cashew fruit exploitation. Furthermore, the cashew juice that is commercialized and sold in Maputo is imported from Brazil, a perceived leader in by-products in Mozambique. Finally, the narrowness of the local economy and low consumption rates due to the country’s structural poverty condition indicate that byproduct development will not be driven by the domestic market. In essence, this constitutes a structural weakness for Mozambican processors given that they cannot rely, as competitors do, on extra profit derived from commercialization of byproducts and opportunities offered by larger and more vigorous domestic markets. Mozambique’s domestic market is extremely small and thus the amounts of cashews sold internally represent insignificant proportions. According to a study done in 2005, the domestic demand for kernels at the time was of an insignificant 20 MT per year.52 Given this, the industry has been predominantly conceived for exportation and little or no effort has been done to develop a domestic market for cashews or by-products. IV Access to Credit The lack of accessible credit at is one of the most constraining factors threatening the viability of the industry, and it is particularly challenging to the small and medium size processors who have been the main drivers of the recent growth. The cashew industry is perceived to entail enormous risk given its volatility, thus credits are granted under very costly conditions which limits processors’ capacity to enter the market and reinvest in expansion. The fact that there is only one commercial bank (BCI Fomento) offering credit to the processors demonstrates narrowness of financial opportunities available to the industry. In the face of this obstacle and with the purpose of facilitating access to working capital for processors, Technoserve assisted with the design of a loan guarantee program that has been jointly funded by INCAJU and USAID in 2001. The fund covers approximately 50% of the loan granted to an AIA member and is given at a TBOR +4 rate. Even though the fund has become the most important source of financing for processors, many loans are diverted to unintended purposes. There is also nervousness among processors about the perceived threat of USAID eventually discontinuing its contribution to the program. In addition, processors use their warehouses as collateral to cover the remaining 50% of their loan. However, warehouses must be properly monitored to ensure an affective control and in excellent sanitary condition to have a significant collateral value. The incidence of stolen inventories and inability to meet warehouse standards has undermined the confidence of banks in this type of loan guarantee. To complicate matters, given that land is owned by the state and a tenure system exists, mortgaging the land is not an alternative. Finally, overly tight cash flow results in an inability of processors to meet the terms to pay back loans as well as the salaries of factory workers. Paradoxically, this problem has resulted from increased demand and export quantity. At the beginning when export volumes were small

52 Artur, Luis and Nazneed Kanji. “Satellites and Subsidies: Learning from experience in cashew processing in Northern Mozambique”, November 2005, P. 14

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enough and the broker only had to do business with few sellers, he was in a position where he could pay for his orders up front. As the volumes augmented, the broker was no longer able to pay up front and had to be given as much as 45 days to do so. An important structural pressure on processors relates to the correspondent times for buying the raw material. The harvest is sold during the last three months of the year (October, November and December) when processors have to buy sufficient raw nuts to make their plants operational all year long. This sizeable annual investment (working capital represents about 50% of sales cost) is in itself a vital reason for credit.53 Although processors are generally optimistic about the potential of their businesses and satisfied with the positive social impact that they generate, in the interviews that we conducted the processors repeatedly voiced their concern about the need to find better, more appropriate, and more affordable sources and mechanisms of financing.54 Particularly to solve the ongoing problem of obtaining access for investment capital; the loan guarantee program has somehow solved the working capital issue. Mozambique Conclusions It is impossible to deny the extraordinary recovery of Mozambique’s cashew industry in the past 6-7 years. It has certainly been thanks to the execution of a well planned market driven strategy, strongly led by private processors and supported by a committed and well prepared international development organization. This growth has been attained in a surprisingly short period of time and there is potential for the continuation of this trend looking forward in time. Despite the fact that Mozambique will not be a global competitor in the cashew industry in the short-run, its method of rapid growth provides interesting policy options. As we moved through the four pillars, the sense of success but at the same time of inevitable fragility was something that seemed present throughout different aspects of the industry. Developments in areas such as access to credit and improvement of the quality of the nuts are definitely in need of further work. On the other hand, there is a clear vision in terms of invigorating its industry through marketing and branding. The establishments of AIA in 2004, followed by the creation of Zambique in 2005, are two positive steps that solidify the grounds for further development. In the end, the enforcement of proper regulatory mechanisms for the purpose of protecting and improving the quality of Mozambique’s cashews will result in the possibility of commercializing the product at a higher price. In overall terms, the industry has a strong sense of direction. Vietnam Background and Industry Structure Vietnam is currently the second largest exporter of processed cashew nuts in the world. What is significant about this feat is that the country was able to reach this position within the last twenty years. This success began in 1986 when a group of liberal socialist party leaders implemented a series of intense economic reform policies entitled Doi Moi. These policies initiated a shift 53 Rui Cardoso, personal interview, Tuesday, March 13th, 2007 54 Interviews with Ali Cherif Deroua (Alexim Ltd) and Silvino Martins (Condorcaju)

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towards a market-oriented economy through decentralization, privatization, outward orientation of economic activities, easier access to external markets for trade, and a drastic change in the agricultural sector in terms of land and tax policies. Doi Moi was a reaction to the more extreme socialist policies under which the economy had stagnated during the previous decade. Doi Moi played a key role in the success of agricultural exports from Vietnam and helps explain some of the challenges still faced by agricultural industries today. These reforms focused on securing agricultural prices, linking production and industries, and increasing off farm activities (processing capacity) to reduce underemployment in agriculture and rural areas. In the early 1990s, when international cashew prices were rising, Vietnam recognized the potential use of cashews as a poverty reduction or cash crop. Both public and private sectors began to invest in cashew research and development, agricultural inputs, and processing facilities. The combined efforts of farmers, the government, and increasingly, the private sector led to rapid growth in the quantity and quality of cashews produced and exported from Vietnam. The government eliminated export taxes, which further contributed to rising exports. Due to changes implemented during Doi Moi, farmers gained access to land use rights, which enabled them to choose how to capitalize on their land. Prior to this shift, the state had complete

ownership and control over land, including the right to tell farmers which crops to grow. Farmers also benefited from the elimination of taxation on land used for agricultural production. In comparison to the past, when hard work only benefited the state, now farmers see the incentives of working hard to improve their own income. Since 1990, production of raw cashew nuts has increased by thirteen times and now amounts to 400,000 MT/year. Processing capacity grew at an even faster rate, now at 700,000 MT per year.55 Vietnam has undergone several major economic and trade reforms, culminating in its accession to the World Trade Organization on January 11, 2007. Vietnam is also a member of the ASEAN Free Trade Agreement (AFTA). Since Doi Moi, Vietnam has transformed from an importer of food products to one of the world’s major exporters. This shift is illustrated by Vietnam’s tremendous growth in world market shares of cashews. In 1990, the export volume of Vietnamese cashew kernels only amounted to 260 MT and 14 million USD. In 2005, Vietnam

55 Dr. Khai, Institute of Policy and Strategy for Agriculture and Rural Development

0

20000

40000

60000

80000

100000

120000

140000

2000 2001 20022003 2004 2005

Year

Tons and Ha Ha

Tons

Source: ILO

Output and productive area of raw cashew in Binh Phuoc, 2000-2004

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exported 103,000 MT of processed cashew kernels, yielding revenue of 480 million USD.56 The graph below demonstrates how growth occurred in both the processing and production capabilities, with processing now exceeding production. Approximately 98% of Vietnam’s processed cashews are exported, with only 2% sold in the domestic market. The primary market is the United States (capturing 41% of Vietnamese exports) followed by China (20%), the UK and the Netherlands (12%), and Australia (10%). Vietnam’s cashew industry has greatly benefited from China’s export market due to proximity and less strict quality standards; Vietnam is its largest supplier of cashews.57

As Vietnam’s processing capability exceeds its production capacity, the country must import raw cashews to be processed. Currently, processors import approximately 300,000 MT of raw cashew nuts. Imports come primarily from Africa and Indonesia (with little or no import tax) at the end of the year when domestically harvested cashews have been exhausted. Competition for domestically produced cashews has driven many inefficient processors out of business, and has coincided with an increasing trend towards privatizing state-owned processing facilities. As international cashew prices have been falling over the past few years, cashew production in Vietnam faces new competition and challenges. The industry is currently very successful, but must improve its competitive advantage in order to ensure continued success in the future. An analysis of the Vietnamese cashew sector along the four main pillars that guided this research illustrates the opportunities and constraints faced by all players within the value chain. A market based value chain analysis is discussed below, along with current and past policies that impact the cashew nut sector and its competitiveness in global markets. I. Output Quality and Quantity Productivity in any agricultural industry emerges in two fundamental ways: 1) areas with more suitable soil and climate conditions are more productive and 2) proper use of high yield varieties,

56 Ingrid Hultquist, Binh Phuoc Cashew Value Chain, ILO PRISED Project, 2005 57 Adam Branson, FAS Office of Agricultural Affairs at the U.S. Embassy in Beijinq, China. http://findarticles.com/p/articles/mi_m3723/is_4_16/ai_117773761/print

USA41%

China20%

Australia10%

UK4%

Holland8%

Canada4%

Other13%

Export destinations of Vietnamese cashew kernels

Source: Vietnam Cashew Association

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irrigation, fertilizers and pesticides can further augment productivity. In the first instance, Binh Phuoc Province’s most paramount competitive advantage is its favorable climate and suitable soil58. All interviewees in Vietnam commented on the high quality of nuts produced in this region, and in Vietnam as a whole. Industry players in Vietnam claim that their cashew nuts are larger, whiter, and taste better. In addition, it is claimed that cashews from Binh Phuoc have a higher nutritional value. Finally, Vietnam has been remarkably successful in increasing both the quantity and quality of production by focusing on expanding technologies to increase yields of cashew trees. (See Appendix I Figure 11 for a map of the cashew producing regions in Vietnam.) As exemplified by data given above, Vietnam has succeeded in increasing output significantly since 2000. This growth is despite the fact that the agricultural sector has been less protected than other economic sectors in Vietnam, 59 and subsidies have continually decreased. Instead, indirect policies by the state, such as research and development and agricultural extension, are used to encourage and facilitate agricultural production. Although interviewees at the Ministry of Agriculture and Rural Development and the Institute of Agriculture Science stated that there were no agricultural subsidies in the cashew sector, secondary research shows that there have been a few programs in which seeds or varieties are provided to farmers at subsidized rates, although only at the producer level. There have been no subsidies in processing/exporting cashew products from Vietnam since 2000.60 At the national level, Program 225, which was created to upgrade research institutes that develop plant seeds and subsidize seed imports and multiplication, provides about VND 100 billion per year (6.25 million USD).61 The Institute of Agricultural Science, with public funding, has developed five new varieties of cashews, the best of which can yield 4-5 MT per hectare. The government also invests heavily in transferring these new technologies to farmers through state-run Agricultural Extension Centers (AECs), which successfully disseminate new plant varieties. The National AEC, which operates under the Ministry of Agriculture and Rural Development (MARD), was established in 1993.62 There are provincial AECs in each one of the 64 provinces, which are under the administration of the National AEC. Each provincial AEC supervises an AEC station in each district. The AECs at different levels provide farmers with information relevant to agricultural production, agribusiness, and policies related to agricultural and rural development. Through AECs, the government also provides a subsidy of VND 30-50 billion (approximately 2-3 million USD) each year; seed assistance accounts for 60% of these funds, with 60% of the seed prices in mountainous areas subsidized and 40% in plain areas.63 Recently, funding for the National AECs has been increasing by about 5% each year.64

58 Ingrid Hultquist, Binh Phuoc Cashew Value Chain, ILO PRISED Project, 2005, p. 1. The province of Binh Phuoc is the largest cashew producing province in Vietnam with 115 000 MT of raw cashew and 116 000 ha in 2005, representing almost one third of the country’s total production. For this reason, research was conducted primarily concerning this province. 59 Hoa Nguyen and Ulrike Grote, Agricultural Policies in Vietnam: Producer Support Estimates, 1986-2002, International Food Policy Research Institute, December 2004, p. 8 60 Dr. Ton, Institute of Agricultural Science, Interview, 14 March 2007 61 Ibid, p. 26. This program began on December 10, 1999 under the Prime Minister’s Decision No. 225/1999/QD-TTg, and it was renewed in January 20, 2006 to continue through 2010 under Decision No.17/2006/QD-TTg. 62 Prime Minister’s Decision No. 13/CP 1993. 63 Hoa Nguyen and Ulrike Grote, Agricultural Policies in Vietnam: Producer Support Estimates, 1986-2002, International Food Policy Research Institute, December 2004, p. 27 64 Dr. Ton, Institute of Agriculture Science, Email Correspondence, 14 March 2007

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Information and training is provided at local AECs as well as through television broadcasts and field visits. Additionally, the AEC uses demonstration plots to disseminate information. In the opinion of Dr. Ton of the Institute of Agricultural Science, “On average, AECs have fulfilled about 80% of the requirement of rural communities.”65 Total growing area of cashews in 2006 was 330,000 ha in which 120,000 ha were replaced with new and high yielding varieties, mainly by grafted seedlings, particularly in Binh Phuoc. While average yield across Vietnam is 1.24 MT per hectare, in Binh Phuoc it is 2-4 MT per hectare. This increase in yield is paramount to Vietnam’s competitiveness in global cashew markets, and illustrates the success of government supported research and development as well as extension. Although Vietnam has no private extension centers, private companies are involved in fertilizer, pesticide, and seed provision. Use of these inputs, particularly fertilizer, has grown steadily in Vietnam in the past decade. In 1999, fertilizer consumption amounted to 263 kilograms per hectare of cropland, which is high compared to the Asian average consumption of 149 kilograms per hectare and a worldwide average of 94 kilograms.66 Although these agricultural inputs are easily accessible on the market, lack of capital to buy such inputs is sometimes an impediment. As such, the government has had a history of subsidizing prices. According to the Vietnam Fertilizer Association, the national demand for subsidized fertilizer usage for 2005 is estimated to be approximately 6-6.5 million MT.67 Most of this fertilizer is imported and subsidies are provided indirectly through subsidized credit programs for importers of fertilizer. Although one would conclude that farmers may not benefit from such indirect subsidies, studies show that benefits do in fact trickle down and lead to slightly lower prices for farmers. 68 Another issue is the lack of proper knowledge on how to use fertilizers. About 30% of farmers apply fertilizers every year, but the remaining 70% use fertilizer sporadically, which hinders productivity. The Department of Industry stated that they are working on the standardization of fertilizers, but they could not reveal the policy due to its sensitive nature.69 Government policies have focused on increasing yield due to the limited land in Vietnam and competition with other cash crops for that land. Many farmers in the past few years have replaced cashew trees with other cash crops, such as rubber, which are more lucrative given current pricing trends in international markets. As other cash crops become more profitable, and competition for land increases, the private sector has also taken initiatives to increase competitiveness the quality and quantity of output. Processors in Vietnam have begun to assist with cashew production in Cambodia. Cambodia shares a border with Binh Phuoc province, so the soil quality is similar and therefore suitable for cashew production. Additionally, Cambodia has higher land availability and lower labor costs. There is thus high potential for cost-effective imports from Cambodia to fulfill processing capabilities. Vietnam has been adversely affected by labor shortages in the cashew industry. This constraint has been caused on one end of the value chain by low international prices for cashews and on the other end of the value chain by “fraudulent behavior” by farmers and collectors. Farmers

65 Dr. Ton, Institute of Agriculture Science, Email correspondence, 6 April 2007 66 Hoa Nguyen and Ulrike Grote, Agricultural Policies in Vietnam: Producer Support Estimates, 1986-2002, International Food Policy Research Institute, December 2004, p. 27 67 Vo Thuy, US Commercial Service 68 Hoa Nguyen and Ulrike Grote, Agricultural Policies in Vietnam: Producer Support Estimates, 1986-2002, International Food Policy Research Institute, December 2004, p. 27 69 Mr. Cahn and Mr. Minh interview, Department Of Industry, Binh Phuoc, Vietnam, March 15, 2007

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and collectors engage in placing rocks and/or water in sacks of cashew nuts sold to processors in order to increase the weight and price obtained.70 These two constraints on either end of the value chain have squeezed processors and resulted in uncompetitive wages compared to other industries. Processors thus have difficulties retaining employees. In response, some processing facilities have moved to areas of Vietnam populated by ethnic minorities, where labor costs are lower. Some of these processing facilities are located in the North of the country, far from the central and southern cashew producing regions. However, given labor constraints, it has been profitable to relocate factories to such areas. To further address labor shortages, Vietnam could benefit from mechanizing their processing capabilities. Some processors have tried mechanized deshelling techniques, but have found the percentage of broken nuts to be too high.71 Another large processor, Calofic Company, invested in higher quality machines, but the factory has since ceased processing cashew nuts until international prices rise. The Department of Industry of Binh Phuoc stated that there is not enough investment in manufacturing these machines and would like foreign investors to aid in bringing this technology to Vietnam.72 The introduction of open markets and economic freedom produced a quick response from farmers seeking to capitalize on their land. Due to historical land laws in Vietnam, farmers have small size farms of about two hectares;73 this factor, coupled with land use rights, proved favorable towards open market orientation. However, there is very little cooperation to increase quantity or quality among players within the cashew value chain. According to value chain theory, horizontal and vertical linkages are critical for MSEs in order to obtain economies of scale, increase efficiency, and augment income. The lack of such linkages in Vietnam is once again a reaction to the more socialist period in Vietnam, and the reactive shift towards a more individualized work ethic. Farmers lack the trust necessary to form cooperatives and work with traders and/or processors. Small farm sizes also act as a disincentive for processors to work directly with farmers as transaction costs for the processors would be too high. This lack of cooperation is also evident in Vietnam’s Cashew Association (VINACAS). According to many sources, VINACAS is having internal political difficulties amongst the governing members. Additionally some sources noted that VINACAS has not been effective in representing the cashew industry in order to make more preferable demands, politically and otherwise, to benefit actors along the value chain. On the other hand, Vietnam is currently a leader in the International Pepper Community, which has been a valuable opportunity for the industry in terms of obtaining new technology, controlling prices, and increasing access to information; this organization could serve as an example to the cashew association and demonstrates potential for international cooperation within the global cashew industry. Discussions of cooperation between the Vietnamese, Brazilian, and Indian cashew associations have been initiated; however seem to be very preliminary. Most sources said it would be a beneficial relationship, but expectations of success of this cooperative effort were not high.

70 Mr. Huong, VCCI interview. 71 Mr. Cahn and Mr. Minh interview, Department Of Industry, Binh Phuoc, Vietnam, March 15, 2007 72 Ibid. March 15, 2007 73 The Land Law (1993) put a ceiling on the amount of land that can be allocated to households: for annual crops, the limit is two hectares in the central and northern provinces and three hectares in the southern provinces, and for perennials the limit on land holdings is ten hectares.

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Access to information is a major impediment to increased production and incomes of farmers and small and medium sized processors in Vietnam. Information regarding market prices is critical to ensuring that all players receive a fair price and can plan future investments based on market trends. In addition, information about farming/processing techniques to increase output is also essential. The International Labor Organization (ILO), in collaboration with the Vietnam Chamber of Commerce and Industry, is currently implementing two projects in the Binh Phuoc region to target obstacles to information for players in the cashew industry. The first is a daily radio broadcast of market prices. The second is an easy to read brochure to be disseminated to farmers about production techniques. Once again, cooperation and linkages among actors in the cashew sector would be another technique to improve information flows within the value chain. II. Differentiation Currently Vietnam is not involved in any organic, fair trade, or traceability projects for cashews. The national government has plans to develop a model for organic production, but the high use of fertilizer and pesticides and lack of incentives for farmers to produce organically makes this very difficult. Information gathering and dissemination regarding profit potential from organic production may increase the incentive to initiate organic cashew production in Vietnam. However, incentives are further reduced by the proximity of the Chinese market, which does not demand high quality organic cashews. The benefits of organic production could be seen through increased exports to the U.S. and European markets at premium prices. Binh Phuoc province has plans for branding their cashew nut as the highest quality nut in the world, but industry officials say that it is a long process and will not happen for a few years. 74 Lack of coordination among farmers is also an impediment to this effort. Increased horizontal linkages would facilitate branding and would have a significant impact on farmer and MSE income in Vietnam. III. Diversification

In Vietnam it is imperative that players in the cashew sector begin to employ methods to diversify income through the use of by-products, increasing demand in the domestic market, or intercropping. Diversification of income reduces dependency and risks such as extreme weather conditions, labor shortages, and susceptibility to international prices. Currently in the Binh Phuoc region, 50% of farmers are completely dependent on the cashew nut as a source of income, and more than 80% say the cashew nut is their main source of income. Intercropping with coffee and/or cacao is done sporadically in one region of the country, but this method could be employed more widely to increase farmer income and reduce dependency on one crop. Other ways of diversifying income from farm activities are through intercropping with pepper, rubber, fruits (such as rambutan, jackfruit, apples, and cassava), and cattle breeding. Some farmers or their families may also perform work on other farms or work for processing companies.

Vietnam’s current efforts at cashew diversification center on producing the Cashew Nut Shell

74 Mr. Cahn and Mr. Minh interview, Department Of Industry, Binh Phuoc, Vietnam, March 15, 2007. Later corroborated by Mr. Hoang, VCCI, Ho Chi Minh City, Vietnam, March 16, 2007.

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Liquid (CNSL) for use in paints. The CNSL is mainly exported to China but is also commercialized domestically. Currently, ten companies are exporting CNSL but only in very minimal amounts. The quantity of CNSL currently produced is not sufficient to diversify and increase incomes of farmers and small and medium sized processing plants. Larger processors which are currently exporting CSNL can achieve a slight augment in profit, but the amount is fairly insignificant and therefore benefits do not trickle down to actors further down the value chain. If processors increase production and exportation of CNSL, this could potentially increase prices received by farmers in the future, thus increasing farmer income. The cashew apple is not currently being used due to challenges of processing and preservation of the apple. Binh Doung region is starting to produce cashew wine from the apple, but it is not clear how successful this will be and if there is a market for the product. The government is looking into future potential development of apple byproducts such as juices or ethanol, but does not currently have the technology or market demand to do so. According to Dr. Duong at the Ministry of Agricultural and Rural Development, the 400,000 MT of cashews produced in Vietnam equates to approximately one million MT of wasted cashew fruit. Domestic demand for cashews is very low. In each of the four processing plants visited, only 1-2% of cashews were sold in the domestic market, and these were only the poorest quality of nuts that were not able to be exported. Currently, there is also a 5% tax on cashew nuts that are sold domestically, creating less incentive for processors to sell locally. However, the government’s goal is to increase domestic demand by 20% by the year 2010. The government believes that as Vietnam develops and achieves greater levels of economic growth, incomes will rise, thus demand for cashews (a relatively expensive product) will increase; whether domestic tastes will change by the year 2010 remains to be seen. There are minor efforts to differentiate products by adding value at the processor level. Thirty cashew factories have begun salting, roasting, or making candies with cashew nuts, but these products are almost entirely for domestic consumption. In order to export such products, processors must work on quality and effective packaging and marketing.

IV. Access to Credit Although Vietnam’s financial sector offers credit through state-owned banks, such as the Bank for Agriculture and Rural Development and the Bank for the Poor, there are no special credit programs geared towards the cashew industry. And, challenges exist for both processors and producers in accessing credit. Difficulty arises from the land use certificates that are necessary collateral to acquire loans. Many farmers do not have these certificates and the process to obtain one is long and difficult. Processors generally do have certificates, but they receive less collateral as a result of the certificates labeling their land as agricultural land (agricultural land is worth less as collateral than industrial land). Switching land titles on the certificates is also expensive and time consuming. The Ministry of Agriculture and Rural Development is currently conducting a land survey of farmers to assist with problems related to certification. There are some efforts to provide value chain financing. In some cases there are agreements between collectors and farmers, where collectors lend money to farmers to buy fertilizers and pesticides on the condition that during the upcoming harvest the farmer will sell only to that collector. In Binh Phuoc, some farmers have a longstanding relationship with the collectors of

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up to four years, but many farmers also choose collectors that offer the best price or who are willing to buy immediately. The farmers do not have legally binding contracts with the collectors as commitments are often oral or relationship based. Vietnam Conclusions The success of the Vietnamese cashew sector can largely be attributed to a successful shift towards privatization and economic opening in the 1980s. From farmers gaining land use rights and profiting from high international cashew prices in the 1990s to the privatization of state-owned processing units, private sector success supports the market based value chain approach. Related interventions that encourage private sector investment in the cashew industry should be applied in order to increase competitiveness. In addition to capitalizing on a rapidly market-oriented economy, government support for R&D and extension has been paramount in increasing cashew yields. Scientific research has produced high yielding cashew trees and through state-run Agricultural Extension Centers, the plants as well as seeds, fertilizers, and training are disseminated. Constraints on the cashew industry include pricing, loss of labor, and lack of information. The pricing constraint arises from “fraudulent behavior” by farmers and collectors as well as low international prices. Pricing issues have squeezed processors, who cannot afford to pay workers competitive wages compared to less manually intensive industries. Finally, farmers suffer from lack of information regarding prices as well as best practices for cultivation. Following a market-based approach, there has been an outstanding impact from private sector led growth. Although government investments in AECs and R&D have helped bring Vietnam to its current level of output, there is still a place for investment in information dissemination as well as more mechanized forms of processing to counteract labor shortages. Market based development theory suggests that the private sector should provide extension services, which the government could consider to ensure the sector’s future sustainability.

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Policy Recommendations for Brazil Brazil has long since established its name and reputation as a leading producer and processor of cashews. Despite being overtaken in terms of the quantity of processed nuts, Brazil still has unique comparative advantages that Vietnam and India do not possess. Brazil has the most convenient access to the US market, the most sophisticated by-product industry and has impressive industry knowledge that stems from significant historical cashew production and exportation. In addition, Brazil has a more sophisticated understanding of traceability and greater interest in organic and niche markets than India, Vietnam or Mozambique. These other countries do not have the resources, experience, or interest that appears to be exhibited by Brazil. However, responding to new competitors and new market demands is of utmost importance for Brazil to regain lost ground and remain a significant player in the cashew sector. Creating an atmosphere of competitiveness within the cashew industry means that the sector must achieve efficiency along the value chain. Thus, an analysis of the cashew industries in India, Mozambique, and Vietnam focused on four pivotal points of the value chain provided great insight and lessons learned for increasing global competitiveness in Brazil. One of the most salient primary conclusions of this benchmarking analysis is that competitiveness requires the right balance of public, private, and NGO involvement in the sector. Each of these players must have the proper incentives and opportunities to support and invest in the cashew industry. First of all, the necessary boost in competitiveness requires robust private sector involvement, based on the empirical evidence provided during the field investigations. In particular, Vietnam’s tremendous growth in capacity is credited to recent privatization efforts and India can in part attribute the strength of its industry to the participation of the over 1700 processors competing in their market. However, public or NGO participation is also necessary to incentivize increased research and development, extension, and encourage new entrepreneurs and greater competition into the sector. Together, these three players, public, private, and NGOs, must create an environment that induces private investment to increase quality and efficiency, thus augmenting competitiveness in global markets. Most specifically, finding the right balance between public and private involvement in the key areas of facilitating access to credit and achieving increased quality standards could help Brazil regain a competitive edge vis-à-vis the new industry leaders. Credit In particular, the role of credit has been pivotal to the success of India and Mozambique in increasing production. Brazil could mitigate the effects of a complex and restrictive financial market by tailoring the approaches that have been used successfully by these countries. If replicated, the sustainability of credit schemes and credit organizations must be considered as well as a means to transition from public support to private substitutes.

- The strength and number of credit providers and innovative credit products in India opens up competition and availability of appropriate loan products which respond to the needs of a higher risk demographic in the agricultural sector.

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- Cashew Export Promotion Council of India (CEPC) offers investment to producers for

the purchase of innovative technology and equipment. CEPC’s success is partly derived from the fact that it provides targeted subsidizes that enable private processors to become more productive and quality-focused.

- In Mozambique, there is a conglomeration of public and NGO support to meet private

needs for cashew working capital. INCAJU, a public cashew promotion organization, USAID and TechnoServe have created a loan guarantee fund which enables associated processors to access capital.

- Mozambican processors leverage the equity of their warehouse as collateral and take

advantage of the loan guarantee to cover the liability of almost 100% of their financing. They receive loans with interest rates at approximately TBOR + 4 for working capital. This policy was enacted in 2005, thus there is no strong data on the default rate. However, if this procedure were to be replicated, a strategy should be developed to maximize the value of warehouses through fortification, better construction, etc. to increase the private responsibility for securing loans through collateral versus public/NGO support. Finally, a timeline for weaning processors off the loan guarantee is necessary for sustained competitiveness.

Quality Standards The future of price-premiums for commodities exists in providing a differentiated product to savvy consumers. For cashews, countries must focus on international market demand for quality, the importing country’s standards, and breaking into niche Fair Trade or organic markets. Higher prices correspond to larger, whiter and whole cashews; and US and European markets are placing importance on receiving standardized quality certification for assured access to their markets. Brazil faces competition from India and Vietnam based on quality because it relies heavily on a mechanized processing method which results in a higher percentage of broken kernels. In addition, the replacement of trees which produce a lower grade nut in Brazil will be important given the high priority it is given in all producing countries. Although India, Vietnam and Mozambique are not as prepared to aggressively capitalize on the demand for organic cashews, Brazil would still benefit from catalyzing more participation in Fair Trade markets and in inducing a higher quality production from farmers.

- Encouraging Fair Trade buyers to partner with small producing and processing communities was of great interest to stakeholders in all the field visit countries. In particular, partnerships between cooperatives and Fair Trade organizations in India and Mozambique are highly respected and generally esteemed more than organic certification. Brazil could investigate the possibility of creating support between MSEs and cooperatives with Fair Trade buyers.

- TechnoServe in Mozambique is beginning to implement a program that would train

intermediaries to give price premiums to producers for quality. This system of incentives

39


could enable a shift towards better agricultural practices and adoption of latest R&D technology by the producer.

- In Vietnam, the Chamber of Commerce and Industry and the International Labor

Organization are attempting to broadcast pricing information and best practices suggestions via radio and television to help farmers follow market demands. Both politics endeavor to reduce the information gap between the market and the farm. These activities raise the quality and ergo the competitiveness of the final product.

Conclusions As a historical leader of cashew production, Brazil has an impressive social and physical infrastructure supporting the cashew industry. To remain competitive and regain lost ground against India and Vietnam, Brazil must make its interventions as sustainable and market-oriented as possible; with a particular focus on creating incentives for higher quality production. Furthermore, it must introduce more domestic competition for processing, perhaps by incentivizing more private participation within the industry and through careful analysis of credit extension schemes. Brazil could improve inefficiencies along its value chain by extrapolating the innovations provided by India, Vietnam, and Mozambique. Additionally, by using public and NGO incentives, more private involvement and competition could spur industry growth. By enacting such changes, Brazil stands poised to maximize its potential to distinguish itself as a high quality producer and exporter in niche markets with a system of traceability. In addition, Brazil could consolidate the market as the power house in exportation of cashew juice and could aim to aggressively target new markets for cashew fruit products. In summation, based on several key renovations along the value chain, Brazil exhibits great potential in terms of regaining its position among competitors in the cashew industry.

40

Appendix I

Charts and Graphs

41

Introduction Figure 1: Comparison of Farmgate Price by Country

Sources: SINCAJU, Artur and Nanjji, Harilal et al. (current averages)

Figure 2: Comparison of Processorgate Price by Country

Sources: USAID, Harilal et al, Technoserve (current averages)

Farmgate Price

$0.00 $0.10 $0.20 $0.30 $0.40 $0.50 $0.60 $0.70

Brazil

India

Vietnam

Mozambique

Cou

ntry

USD/kg

Processorgate Price

$0.00 $0.20 $0.40 $0.60 $0.80 $1.00 $1.20

1

Cou

ntry

USD/kg

Mozambique (manual)Vietnam (manual)India (manual)Brazil (mechanized)Brazil (mini-fabrica)

42

Figure 3: Source: Technoserve (Irish Aid) Figure 4: Source: Technoserve (Irish Aid)

Domestic Market vs. Exports

India Vietnam Brazil Moz

$510M $400M $270M $15MTotal =$1,195M

0

20

40

60

80

100%

Percent of Cashew Processing Revenues

Top Four Cashew Processing Countries

DomesticRevenues

ExportRevenues

Sources: Olam International

Cost of Credit

Sources: Olam InternationalNote: Those Mozambican processors who access credit at lower interest rates are backed by

guaranty funds

Work

ing

Cap

ital

Cap

ital E

xpe

nditure

s

India Vietnam Brazil Tanzania Ivory Coast

Mozambique

9%

13%

8%

12%

8%

12% 12%

16%

12%

16%15%

19%

0

5

10

15

20%

Interes t Rate

43

India Figure 5: Map of India

Figure 6: CSNL Exports Source: Cashew Export Promotion Council of India

44

Mozambique Figure 7: History of Production vs. Processing

Source: Technoserve (AIA Business Plan) Figure 8: Location of factories in Nampula province

Source: Diagram provided by Ali Cherif Deboua (President AIA)

Nampula

Namige Miranda Industrial Nametil

CondorCaju MurrupulaIPCCM

IulutiAlexim Lda

AngocheMiranda Industrial

Namialo Africaju

Meconta Miranda Industrial

Napaco MauriCaju

MonapoOLAM

NacalaAIA Lda

MecuaGan Lda

210

140120

11090

60 65 70

91

57

18 25 2940 35

44 50

2231

48

14 725 28 25 25 16 13 7 0 1 3 9

30

80

40

30

0

00

0

0

0

00 0

00

00

00

5

14 244

37

18 27 4340 45

5063

40

95

1973

Raw nuts processed in Mozambique

Raw nuts exported from Mozambique

1975 1980 1985 1990 1995 2005 *2000

* 0 processed nuts

45

Figure 9: Outturn of Raw Nuts (lbs quality) India 50-56 Vietnam 50-56 Brazil 50-55 Guinea Bissau 48-56 Ivory Coast 48-52 Indonesia 48-52 Benin 46-50 Tanzania 45-52 Ghana 44-48 Mozambique 42-46 Nigeria 40-46 Kenya 40-46 Madagascar 40-46 Source: Technoserve (USAID) Figure 10: Workers’ Productivity Source: Technoserve (Irish Aid)

Ind

ia

Vie

tna

m

Tan

za

nia

Ivo

ryC

oa

st

Moz

1716

1312

8

0

5

10

15

20KG

Wholes Per Worker Per Day

Mozambican workers’ productivity levels lagging behind their counterparts in Africa

Ind

ia

Vie

tnam

Ta

nzan

ia

Ivo

ryC

oa

st

Mo

z

12

11

98

7

0.0

2.5

5.0

12.5KG

10.0

7.5


Cutting Section Peeling Section Selection Section

Ind

ia

Vie

tna

m

Ta

nzan

ia

Ivory

Coa

st

Mo

z

120 120

100

90

75

0

25

50

125KG

100

75


Sources: Olam International; Condorcaju Lda. (Q1-Q3 2006)

46

Vietnam Figure 11: Cashew Production in Vietnam (Metric Tons)

Source: EDE Consulting

47

Appendix II

SWOT Analysis

48

SWOT: India

STRENGTHS - Support for the cashew sector through a range of

government institutions at the state and national levels. Institutions such as the Cashew Research Station, the National Research Centre for Cashew (NRCC), and relevant ministries have prioritized plantation development and organic production. The Cashew Export Promotion Council (CEPC), an organization funded by the federal government of India, coordinates nearly all of the exporters of cashews and allied products in its membership.

- Both national and state level policies for the sector. This reflects political will, but could be problematic if these policies are not aligned.

- Some of India’s largest exporters are leaders in the use of sorting and packaging technology.

- Growing domestic market with India’s emerging middle class.

- Strong financial infrastructure due to India’s social banking regulations.

- Highly skilled labor in all steps of manual processing due to long history of sector

- Availability of land for new cultivation (in states other than Kerala)

- Good physical infrastructure (good roads, high population density, accessible ports)

WEAKNESSES - Limited use of byproducts for food and beverage

products. The general perception is that this is wasteful and a missed opportunity to diversify farmers’ incomes, but attempts to adjust consumers’ tastes to products from the cashew apple have not been successful.

- Cashew faces competition from other more lucrative crops such as rubber.

- In the case of the Kerala State government, employment creation is more of a priority than the competitiveness of the sector.

- Dependence on imported cashews for half of those processed, so traceability could be a challenge (although traceability was not identified as a major constraint in our interviews).

- In Kerala, homestead farming is predominant and until recently cashew production fell under the land ceiling which limited plantation development. Cashew production is just one part of farmers’ income generation activities. This method of land use has also limited organic certification.

- Extension services—although there is reportedly an extension office in every village, there is inconsistent acceptance of the varieties, methods and use of chemicals that they promote. There is clearly a difference of opinion between many farmers and the agricultural establishment. The role of NGOs in the provision of extension services is limited.

OPPORTUNITIES - Fair trade and organic production (Fair Trade

Alliance Kerala as one interesting model) - Given the manual nature of India’s processing the

idea of “hand-crafted” cashews could be marketed. The Cashew Export Promotion Council has also proposed the branding of a “Made in India” cashew which could be another way to differentiate their product.

- Further market development for by-products

THREATS - As the economic life a cashew tree is 30-35 years

many are becoming less productive in this well established sector. Especially a threat in Kerala where production was historically concentrated, but there are promising higher yields in other states such as Maharashtra where trees have been planted more recently.

- Although financing is widely available, smallholder farmers assert that the credit products do not meet their needs, that they are in debt because of high interest rates and that loans are tied to the obligatory use of fertilizers.

- Price fluctuations, vulnerability to weather changes, and the brief (1-3 months) yield are causing farmers to switch to rubber cultivation. Cashew farming is considered to have a lower social status compared to rubber production, so there is less incentive to invest in upgrading.

- Some processors are concerned that low wages in Vietnam are a threat to India’s competitive edge. India is trying to address this by moving production and processing out of Kerala.

49

SWOT: Mozambique

STRENGTHS - Tremendous growth of processing capacity in a matter of

very few years. - The private-led strategy introduced by Technoserve has

certainly proven successful up to this point. Nonetheless, other complementary factors will have to come to place if the industry is to be sustainable in the long run.

- Processed cashews or the kernel sells at a higher price in the international market than raw cashew. This is beneficial for everyone throughout the value chain.

- Processing plants are located in areas of concentrated production, which strengthens the links between processors and producers and eliminates some of the intermediation between these two.

- Small and medium size plants: o Do not require as highly sophisticated managerial

skills, which is crucial, given Mozambique’s lack of human capital.

o Have substantially smaller initial capital requirements.

o That use manual cutting technology usually result in better quality

o if rightly designed are easily adaptable for expansion purposes

- Through association (AIA), processors have been able to gain scale for different purposes (commercialization, marketing, political leverage, etc). They need from one another in order be competitive. There is a very collaborative dynamic among processors.

WEAKNESSES - Short-term solution of treating old cashew trees

is not sustainable: the quality and efficiency of old trees is eroding the profitability of processing.

- Insufficient capital is available for processors to capitalize on profitable use of by-products. They are unable to extract oil from the shell and do not use the shell as fuel.

- Shallow nature of investment and finance in Mozambique

- Poor internal infrastructure raises the cost of transferring the product to the port.

- Limited processing capacity is insufficient to enter many markets who demand many containers (e.g. USA)

- Public extension is not efficient particularly given the newness of this government after many years of volatility

- High level of pests and diseases inherent in Mozambique’s climate

OPPORTUNITIES - South Africa offers an enormous opportunity for further

expansion. Open borders, excellent road system, large stores like shoprite with presence in various other African countries.

- As the government witnesses the growth of the sector it has started paying more attention to it while wanting to participate and gain some credit for its evident success. Zambique was launched in Baltimore with the presence of the president of the country. With increased scale comes and important degree of political leverage for the processors.

- The industry provides a great number of jobs in very poor areas where no other opportunities are to be found. Thousands of jobs, local economic development near the factories bring tremendous social impact to the lives of many. Thus, the opportunity to commercialize and sell the Mozambican cashews as an activity that is socially responsible and that contributes to alleviate poverty.

- Since the processing industry is relatively new, best practices in all areas of production can be more easily incorporated to the industry. (quality supervision, technological developments, marketing and branding, etc)

THREATS - If new trees are not planted, the cashew industry

will be unsustainable in 10-15 years. - Processors are extremely debt burdened and

have severe cash flow problems due to a lack of working capital resulting:

- their production ultimately is less competitive (in pricing)

- volatile commodity markets heighten the chance of processors withdrawing their investments/closing

- Government is very young and thus unpredictable: public support for the new cashew industry could be withdrawn

- The USAID fund that is currently acting as a loan guarantee for working capital for processors could be removed in the short-term making access to financing even more difficult

- Private entrepreneurs could be more mercenary and may see that another industry or country is more profitable, thus leaving Mozambique with a higher unemployment rate.

50

SWOT: Vietnam

STRENGTHS

- New sense of an individualized work ethic - No export tax and no tax on land used for

agricultural purposes - Newer cashew industry, thus newer trees which

have higher yields - High government investment in R&D and

extension, and resultant high yield trees - High quality cashew nuts - Easy access to agricultural inputs - Increased involvement of the private sector,

particularly in processing - Nearby market for lower quality cashews (China)

WEAKNESSES

- Little organization among actors along the value chain.

- Lack of access to information (price, production techniques, market information, quality standards)

- Competition for land from other, more profitable cash crops (i.e. rubber)

- No differentiation - VINACAS, the cashew association, does not

provide the support necessary to increase growth and success of the sector

- Lack of access to credit for machinery, agricultural inputs, and new tree varieties

- Insufficient quality control, inconsistent quality - Shortage of domestic cashew production to fulfill

processing capabilities - Both farmers and collectors engage in

"fraudulent behavior" in an attempt to increase prices (i.e. putting rocks/water to increase weight of cashews sold to processors)

OPPORTUNITIES

- Increased income in Vietnam and China may increase demand for better nuts, thus augmenting market potential for Vietnam

- Branding of Binh Phuoc cashews will differentiate Vietnamese cashews and increase prices

- WTO accession in January 2007International Cashew Association with Brazil and India. Vietnam is currently a leader in the International Pepper Community, which has been a beneficial opportunity for the industry in terms of obtaining new technology, controlling price, increased access to information

THREATS

- Continued decreasing trend in international prices, fluctuating prices

- Labor constraints for both processors and producers

- Unstable and unpredictable weather

51

Appendix III

Matrix

Bra

zil

Indi

aVi

etna

mM

ozam

biqu

e#

of p

rodu

cers

1950

00A

ppro

xim

atel

y 45

0,00

0 fa

rmer

s an

d 50

,000

trad

ers

Est

. 400

-500

,000

farm

ers,

15,

000

in

serv

ices

(inp

ut s

uppl

iers

/col

lect

ors)

146,

000

in 2

007

(Tec

hnos

erve

)

# of

pro

cess

ors

22 a

ctiv

e m

ini-m

ills

and

11 la

rge

proc

essi

ng p

lant

s

App

roxi

mat

ely

1700

, abo

ut 5

0% o

f whi

ch

are

orga

nize

d (T

he W

orld

Cas

hew

C

ongr

ess

and

conf

irmed

with

CE

PC

)22

4 (IP

SA

RD

)15

Pro

cess

ors

(Sou

rce:

Tec

hnos

erve

)23

fact

orie

s ru

nnin

g

# em

ploy

ed in

cas

hew

indu

stry

170,

000-

200,

000

1,00

0,00

0 in

pro

cess

ing,

pro

duct

ion

and

tradi

ng (C

EP

C)

600,

000-

700,

000,

incl

udin

g fa

rmer

s th

at

inte

rcro

p (IP

SA

RD

)

110,

000

prod

ucer

s se

llt to

pro

cess

ors

&

6,29

3 em

ploy

ed in

fact

orie

s (2

005

Irish

A

id)

# em

ploy

ed in

pro

cess

ing

plan

ts15

000

500,

000

(CE

PC

)21

0,00

0 (IP

SA

RD

)6,

293

(Tec

hnos

erve

, Iris

h A

id) 2

005

10,0

00 (A

prox

, 200

6-20

07, I

rish

Aid

)#

hect

ares

680,

000

(US

AID

200

6)73

0,00

0 (F

AO

200

5)43

3,00

0 (IP

SA

RD

)50

,000

(FA

O 2

005)

kg p

rodu

ced

per h

ecta

re

268

(IBG

E 2

005)

815

kg/h

a na

tiona

l ave

rage

with

a ra

nge

of

640

kg/h

a (T

amil

Nad

u) to

130

0 kg

/ha

(Mah

aras

htra

) (C

ashe

wnu

t and

Coc

oa

Dev

elop

men

t)12

40 k

g/ha

(ILO

200

5)11

60 (F

AO

200

5)#

met

ric to

ns p

rodu

ced

1700

0046

0,00

0 (F

AO

200

5 )40

0,00

0 (IP

SA

RD

)70

,000

tons

(Iris

h A

ID 2

006

est.)

# to

ns p

roce

ssed

280.

000

tons

/yea

r30

2,23

3 (F

AO

200

4)70

0,00

0 (IP

SA

RD

)33

,000

tons

(Iris

h A

id 2

006

est)

# m

etric

tons

exp

orte

d47

,000

tons

(200

4, S

IND

ICA

JU);

80%

of

prod

uctio

n is

exp

orte

d11

4,14

3 (2

005-

2006

, CE

PC

)10

0,00

0 (IL

O 2

005)

FAO

200

4: 4

0.91

(100

0 to

nnes

) 20

05: 9

5 (1

000

tons

)#

tons

impo

rted

(raw

nut

s)0

252,

605

(200

2-20

03, C

EP

C)

300,

000

(IPS

AR

D)

37,0

00 to

ns

Rev

enue

from

exp

orts

(USD

)14

5 m

illio

n57

1 m

illio

n (2

005-

2006

CE

PC

)50

0 m

illio

n (IP

SA

RD

)15

mill

ion

(Iris

h A

id)

Usa

ge o

f By-

Prod

uct

Onl

y 20

% o

f fru

it in

Bra

zil i

s us

ed. (

1)

cash

ew a

pple

for j

uice

, (2)

jam

s, (3

) an

imal

feed

, (4)

can

dy a

nd d

esse

rts, (

5)

CN

SL

used

in th

e ch

emic

al in

dust

ry in

the

prod

uctio

n of

dye

s, lu

bric

ants

and

co

mes

tics,

(6)T

anin

, ext

ract

ed fr

om th

e tre

etru

nk a

nd n

ut s

hells

use

d in

che

mic

al

com

post

Exp

orte

d 6,

405

M.T

of c

ashe

w n

ut s

hell

liqui

d (C

NS

L) in

200

5-20

06 (C

EP

C).

Cas

hew

she

lls a

nd o

uter

laye

r pee

l are

so

ld to

leat

her a

nd p

aint

indu

strie

s.

Cas

hew

Res

earc

h S

tatio

n pr

oduc

es

cash

ew a

pple

syr

up a

t an

aver

age

of 2

000

bottl

es/y

ear f

or lo

cal c

onsu

mpt

ion.

C

ashe

w a

pple

liqu

or (F

eni)

and

cash

ew

appl

e w

ine

prod

uced

com

mer

cial

ly o

nly

in

Goa

.

5-10

% o

f nut

she

lls a

re b

urne

d to

fuel

ro

astin

g or

ste

amin

g pr

oces

s. C

NS

L is

ex

tract

ed fr

om s

hells

and

late

r pro

cess

ed

by p

aint

indu

strie

s. C

urre

ntly

10

com

pani

es e

xpor

t, pr

imar

ily to

Chi

na.

1) A

guar

dent

e (a

lcoh

olic

drin

k)2)

Jui

ce (n

ot fo

r com

mer

cial

pur

pose

s)3)

Uns

uffic

ient

vol

umes

of c

ashe

ws

to

proc

ess

CN

SL

*Com

mer

cial

ized

Jui

ce in

Map

uto

is

impo

rted

from

Bra

zil.

Futu

re T

arge

ts

CE

PC

Vis

ion

2020

: 275

,000

MT

to b

e ex

porte

d by

202

0. I

ncre

ase

dom

estic

raw

nu

t pro

duct

ion

to 1

.9 m

illio

n M

T. C

EP

C

wou

ld li

ke to

ens

ure

that

20%

of c

ashe

ws

expo

rted

are

valu

e ad

ded

and

mar

kete

d w

ith th

e "M

ade

in In

dia"

bra

nd.

Targ

et o

f 700

mill

ion

US

D in

exp

ort

reve

nue

by 2

007,

1 b

illio

n U

SD

by

2010

, an

d ex

pans

ion

of g

row

ing

area

s up

to

500,

000

ha b

y 20

10. I

ncre

ase

dom

estic

m

arke

t to

20%

by

2010

.

Nat

iona

l tar

get:

75,0

00 to

nnes

for

2006

/200

7 se

lling

sea

son.

Goa

l at r

isk

due

to u

ncon

trolle

d bu

sh fi

res

Tar

gets

for 2

007:

exp

orts

> U

S$

10

mill

ion,

jobs

>400

0 (A

IA) p

roje

ctio

ns

Industry Information

Bra

zil

Indi

aVi

etna

mM

ozam

biqu

e

Inst

itutio

nal S

uppo

rt

1) B

anco

do

Bra

sil

2) E

MB

RA

PA

3) C

EN

TEC

(Ins

titut

o de

Ens

ino

Tecn

ológ

ico)

4) O

CE

C (O

rgan

izaç

ão d

as C

oope

rativ

as

do E

stad

o do

Cea

rá)

5) U

FC (U

nive

rsid

ad F

eder

al d

e C

eará

)6)

SE

AG

RI (

Sec

reta

ria d

e A

gric

ultu

ra e

P

ecua

ria)

7) S

DLR

8) IN

DI

9) S

ETU

R10

) SE

BR

AE

(Ser

viço

Bra

sile

iro d

e A

poio

às

Mic

ro e

Peq

uena

s E

mpr

esas

)

11) S

ES

CO

OP

/CE

—S

ervi

ço N

acio

nal d

e A

pren

diza

gem

do

Coo

pera

tivis

mo

do

Cea

rá12

) S

IND

ICA

JU—

http

://w

ww

.sin

dica

ju.o

rg.b

r/si

te/in

dex.

htm

l—P

roce

ssor

s’ U

nion

13) S

INC

AJU

—S

indi

cato

dos

Pro

duto

res

de C

aju

do E

stad

o do

Cea

rá

14) A

SC

AJU

—A

ssoc

iatio

n of

Cas

hew

G

row

ers

of th

e S

tate

of C

eará

15) F

AE

C16

) SE

NA

R17

) Cen

tro N

acio

nal d

e P

esqu

isa

do C

aju

18

) Sin

dica

to d

e E

xpor

taçã

o de

A

mên

doas

(?)

19) E

mat

erce

(Em

pres

a de

Ass

istê

ncia

Té

20) E

mpa

ce (E

mpr

essa

de

Ass

eio,

Con

ser1)

Nat

iona

l Ban

k fo

r Agr

icul

ture

and

Rur

al

Dev

elop

men

t (N

AB

AR

D)

2) C

ashe

w E

xpor

t Pro

mot

ion

Cou

ncil

(CE

PC

)3)

Dep

artm

ent o

f Agr

icul

ture

4) In

dian

Cou

ncil

of A

gric

ultu

ral R

esea

rch

5) C

ashe

w R

esea

rch

Sta

tion

of K

eral

a A

gric

ultu

ral U

nive

rsity

6)

Dire

ctor

ate

of C

ashe

wnu

t and

Coc

oa

Dev

elop

men

t

7) N

atio

nal

Res

earc

h C

entre

for C

ashe

w 8

) Pla

ntat

ion

Cor

pora

tion

of K

eral

a 9)

Cen

tera

l P

lant

atio

n C

rops

Res

earc

h In

stitu

te

(CP

CR

I) 10

) Eac

h ca

shew

pro

duci

ng s

tate

has

loca

l affi

liate

s of

the

natio

nal

orga

niza

tions

list

ed a

bove

1) M

inis

try o

f Agr

icul

ture

and

Rur

al

Dev

elop

men

t (M

AR

D)

2) D

epar

tmen

t of A

gric

ultu

re a

nd R

ural

D

evel

opm

ent (

DA

RD

)3)

Vie

t Nam

Inst

itute

of S

cien

tific

and

A

gric

ultu

ral E

ngin

eerin

g4)

Inst

itute

of A

gric

ultu

re S

cien

ce o

f S

outh

ern

Vie

tnam

5) D

epar

tmen

t of I

ndus

try6)

Inst

itute

of P

olic

y an

d S

trate

gy fo

r A

gric

ultu

re a

nd R

ural

Dev

elop

men

t7)

Inst

itute

for S

cien

tific

and

Eco

nom

ic

Res

earc

h P

olic

y8)

Vie

tnam

Cha

mbe

r of C

omm

erce

and

In

dust

ry9)

Agr

icul

ture

Ext

ensi

on C

ente

r10

) Vie

tnam

Cas

hew

Ass

ocia

tion

11) D

epar

tmen

t of S

cien

ce a

nd

Tech

nolo

gy12

) Int

erna

tiona

l Lab

or O

rgan

izat

ion

13) G

TZ-S

ME

Dev

elop

men

t Pro

gram

me

14) V

ietn

am B

ank

of A

gric

ultu

re a

nd R

ural

Dev

elop

men

t15

) Vie

tnam

Ban

k of

Soc

ial P

olic

y16

) Cen

ter o

f Agr

icul

tura

l Pol

icy

(CA

P)

Gov

ernm

ent A

genc

ies

1) In

stitu

to d

e Fo

men

to d

o C

aju

(INC

AJU

, cr

eate

d 19

97)

2) M

inis

try o

f Agr

icul

ture

and

Rur

al

Dev

elop

men

t (M

AD

ER

)3)

Nat

iona

l Ins

titut

e fo

r Agr

onom

ic

Res

earc

h (IN

IA)

4) In

stitu

te o

f Qua

lity

Sta

ndar

diza

tion

(INN

OQ

)

NG

O a

nd D

onor

s1)

Uni

ted

Sta

tes

Age

ncy

for I

nter

natio

nal

Dev

elop

men

t (U

SA

ID),

Age

nce

Fran

cais

de

Dev

elop

emen

t, E

urop

ean

Uni

on2)

Wor

ld V

isio

n, T

echn

oser

ve, A

dven

tist

Dev

elop

men

t Rel

ief A

genc

y (A

DR

A)

2) IN

CA

JU is

fund

ed w

ith th

e ta

x re

venu

e

Industry Information

Bra

zil

Indi

aVi

etna

mM

ozam

biqu

e

Farm

Gat

e Pr

ice

App

rox.

.50

US

D/k

g ra

w c

ashe

ws

(US

AID

20

06);

Due

to a

n ag

reem

ent b

etw

een

the

Uni

on o

f Cas

hew

Pro

duce

rs o

f the

Sta

te o

f C

eará

(SIN

CA

JU) a

nd th

e pr

oces

sors

' un

ion

(SIN

DIC

AJU

), th

ere

is a

min

imum

pric

e of

U

S$

0,44

/kg

that

mus

t be

paid

for r

aw n

uts

deliv

ered

to p

roce

ssor

s.A

ppro

x. .8

0 U

SD

/kg

raw

cas

hew

sA

ppro

x. .5

7 U

SD

/kg

raw

cas

hew

s

MZM

10,

000,

US

D 0

.53

(200

4-20

05) (

Luis

A

rtur a

nd N

azne

ed K

anji,

200

5)0.

50 U

SD

(200

7) (P

erso

nal I

nter

view

s)

Col

lect

or G

ate

Pric

e.5

7 U

SD

/kg

from

min

i-fab

rica

(bas

ed o

n 2.

25$R

/US

D e

xcha

nge

rate

; US

AID

repo

rt)A

ppro

x. .6

5 U

SD

/kg

raw

cas

hew

slit

tle d

ata

on in

term

edia

ries;

mai

nly

purc

hase

d di

rect

ly b

y pr

oces

sors

Proc

esso

r Gat

e Pr

ice

1.01

US

D/k

g m

ini-

fabr

ica;

.77

US

D/k

g fo

r m

echa

nize

d (b

ased

on

2.25

$R/U

SD

ex

chan

ge ra

te; U

SA

ID re

port)

App

rox

1.18

US

D/k

g (H

arila

l et a

l 200

5)A

ppro

x. .8

0 U

SD

/kg

raw

cas

hew

s (T

echn

oser

ve)

.53

US

D/k

g

Expo

rt P

rice

4.7U

SD

/kg

min

i-fab

rica

(US

AID

repo

rt)A

ppro

x 5.

45 U

SD

/kg

(Har

ilal e

t al 2

005)

App

rox.

4.3

US

D/k

ilo

-Avg

FO

B p

rice

(Las

t 5 y

ears

, inc

ludi

ng

tax)

: $45

4/to

n- P

eake

d in

200

4/05

: $64

0/to

n-F

arm

gate

Pric

e(A

vg la

st 5

yea

rs):

$272

/to

n - 2

004/

05: $

420/

ton

Pricing

Bra

zil

Indi

aVi

etna

mM

ozam

biqu

e

R/D

EM

BR

AP

A; N

atio

nal C

ente

r for

Cas

hew

R

esea

rch,

SE

AG

I/CE

Reg

iona

l Fru

it R

esea

rch

Sta

tion

(RFR

S)

C

ashe

w R

esea

rch

Sta

tion

at K

eral

a A

gric

ultu

ral U

nive

rsity

Nat

iona

l R

esea

rch

Cen

tre fo

r Cas

hew

U

nive

rsity

-bas

ed R

esea

rch

Sta

tions

in

cash

ew p

rodu

cing

sta

tes

that

are

par

t of

the

Indi

a C

oord

inat

ed R

esea

rch

Pro

ject

on

Cas

hew

P

rivat

e fir

ms

Cen

ter o

f Agr

icul

tura

l Pol

icy

(CA

P);

Inst

itute

of A

gric

ultu

ral S

cien

ce;

Inst

itute

for S

ocia

l and

Eco

nom

ic

Res

earc

h an

d P

olic

y (IS

ER

P);

Inst

itute

of P

olic

y an

d S

trate

gy fo

r A

gric

ultu

re a

nd R

ural

Dev

elop

men

t (IP

SA

RD

)N

atio

nal I

nstit

ute

for A

gric

ultu

ral R

esea

rch

Seed

tech

EM

BR

AP

A h

as d

evel

oped

new

see

d va

rietie

s, b

ut o

nly

larg

e pr

oduc

ers

have

be

nefit

ed.

See

ds fr

om o

ptim

al p

roge

nies

hav

e be

en

iden

tifie

d an

d pr

omot

ed in

Mah

aras

htra

- th

ese

are

also

rese

arch

ed a

t the

in

stitu

tions

list

ed a

bove

Sta

te in

stitu

te h

as d

evel

oped

five

new

se

ed v

arie

ties.

The

bes

t of t

hose

var

ietie

s ca

n pr

oduc

e 4-

5 to

ns/h

ecta

re.

Impr

oved

loca

l stra

ins

as w

ell a

s sp

ecie

s im

porte

d fro

m B

razi

l.

Gen

etic

type

tree

Onl

y 9%

of B

razi

lian

prod

ucer

s ha

ve th

e dw

arf v

arie

ty

Bet

wee

n 30

-40

culti

vars

rele

ased

, 8-1

0 kg

pe

r tre

e ou

tput

. 200

,000

ha

of g

over

nmen

t-su

ppor

ted

plan

tatio

ns a

re u

sing

hig

h yi

eldi

ng g

rafts

.

30%

of c

ashe

w re

gion

s ha

ve a

dopt

ed n

ew

tree

varie

ties.

Ave

rage

yie

ld in

Bin

h P

huoc

pr

ovin

ce is

2-4

tons

/hec

tare

(nat

iona

l av

erag

e is

1.2

tons

/hec

tare

)

Avg

tree

yie

ld la

gs b

ehin

d ot

her c

ount

ries

- Out

urn

lags

oth

er c

ount

ries.

- W

hy?

stoc

k of

cas

hew

tree

s is

old

and

po

orly

man

tain

ed- 4

2-46

lbs

qual

ity (T

S Ir

ish

Aid

)

Dis

ease

Res

ista

nce

/ Use

of

Pest

icid

e

EM

BR

AP

A h

as c

ondu

cted

ext

ensi

ve

rese

arch

on

the

deve

lopm

ent o

f dis

ease

re

sist

ant v

arie

ties

and

use

of p

estic

ides

th

roug

h its

Inte

grat

ed C

ashe

w P

rodu

ctio

n pr

ogra

m.

Prim

arily

org

anic

- C

ashe

w R

esea

rch

Sta

tion

at K

eral

a A

gric

ultu

ral U

nive

rsity

is

expl

orin

g in

tegr

ated

pes

t man

agem

ent

stra

tegi

es. T

ea m

osqu

ito b

ug is

the

prin

cipl

e pe

st b

ut th

e C

ashe

w R

eser

ach

Sta

tion

has

iden

tifie

d 20

inse

cts

as p

ests

at

its

faci

lity.

Che

mic

als

spra

yed

on

gove

rnm

ent p

lant

atio

ns in

Nor

ther

n K

eral

a co

ntro

vers

ial a

s th

ey a

re c

onsi

dere

d th

e ca

use

of ri

sing

birt

h de

fect

s in

nei

ghbo

ring

com

mun

ities

.

Pes

ticid

e av

aila

ble

on o

pen

mar

ket.

Com

mon

ly u

sed.

Som

e ne

w v

arie

ties

are

also

dis

ease

resi

stan

t.

1) P

owde

ry M

ildew

Dis

ease

is a

maj

or

prob

lem

.2)

Cos

t are

to h

igh

for f

arm

ers

to a

fford

3)

Spr

ayin

g is

offe

red

by IN

CA

JU. T

he

dem

and

for t

Ihis

inte

rven

tion

exce

eds

the

Inst

itute

's c

apac

ity.

*Pre

fere

nce

for s

pray

ing

solu

tions

to tr

eat

the

trees

love

r rep

lant

ing.

Sho

rt te

rm v

s.

Long

term

impa

ct

Research and Development

Bra

zil

Indi

aVi

etna

mM

ozam

biqu

e

Type

s of

Pro

duce

rs /

% o

f Sm

allh

olde

r Pro

duce

rs

1) 9

4% o

f the

57,

000

cash

ew n

ut p

rodu

cer

in th

e co

untry

and

are

resp

onsi

ble

for 5

2%

of th

e ha

rves

t.

2) 4

8% d

one

by la

rge-

scal

e ca

shew

pl

anta

tions

. The

y pr

oduc

e up

to 4

0% o

f th

e ca

shew

s th

ey p

roce

ss a

nd b

uy th

e re

mai

ning

sup

ply

from

sm

all a

nd m

ediu

m-

size

d pr

oduc

ers.

1) N

AB

AR

D e

stim

ates

that

90%

of

prod

uctio

n is

from

sm

all f

arm

ers

who

in

terc

rop

(with

pep

per,

coco

nut,

etc.

) 2)

R

emai

ning

10%

is fr

om g

over

nmen

t-op

erat

ed p

lant

atio

nsM

ajor

ity s

mal

lhol

der f

arm

s

1) S

mal

lhol

ders

: 95%

of p

rodu

ctio

n.

2) A

ppro

x. 1

mill

ion

rura

l hou

seho

lds

(40%

of ru

ral p

opul

atio

n) h

ave

acce

ss to

cas

hew

trees

.

3) C

ashe

ws

acco

unt f

or a

bout

1/5

of t

otal

ho

useh

old

inco

me

and

2/3

of to

tal c

ash

inco

me.

Prod

uctio

n by

Reg

ion

1) C

eara

2) M

aran

hao

3) P

iaiu

4) R

io G

rand

e do

Nor

te

1) M

ahar

asht

ra2)

And

hra

Pra

desh

3) K

eral

a4)

Oris

sa5)

Tam

il N

adu

(D

irect

orat

e of

Cas

hew

nut a

nd C

ocoa

D

evel

opm

ent)

1) B

inh

Phu

oc2)

Bin

h D

uong

3) D

ong

Nga

i

1) N

orth

& N

ampu

la:8

0% (a

ppro

x. 4

0,00

0 to

ns)

2) S

outh

:20%

(10,

000)

(Gaz

a,

Inha

mba

ne).

Acc

ess

to L

and

Land

dis

tribu

tion

a co

ntro

vers

ial i

ssue

in

Cea

rá a

nd B

razi

l mor

e ge

nera

lly. A

lthou

ghla

nd te

nure

sys

tem

s ha

s im

prov

ed,

agra

rian

refo

rm h

as b

een

impl

emen

ted

with

var

iabl

e su

cces

s.

1)Th

e D

epar

tmen

t of A

gric

ultu

re s

uppo

rts

an E

mpl

oym

ent G

uara

ntee

Sch

eme

to

brin

g fa

llow

land

s un

der c

ultiv

atio

n.2)

The

Nat

iona

l Cas

hew

Res

earc

h P

roje

ct

has

also

pre

pare

d la

rge

tract

s of

land

for

new

pla

ntat

ions

.3)

In th

e st

ate

of K

eral

a th

e ex

ista

nce

of

land

cei

ling

until

rece

ntly

lim

ited

the

esta

blis

hmen

t of p

rivat

ely-

owne

d pl

anta

tions

4) L

and

acce

ss is

sues

may

var

y by

sta

te

acco

rdin

g to

land

ava

ilabi

lity

Gov

ernm

ent o

wns

the

land

, but

the

farm

ers

have

the

right

to u

se it

how

ever

th

ey li

ke. L

and

certi

ficat

es a

re d

iffic

ult t

o ob

tain

. Typ

ical

farm

siz

e is

2 h

a as

a re

sult

of th

e La

nd L

aw o

f 199

3.

Land

tenu

re s

yste

m, g

over

nmen

t ow

ns a

ll of

the

coun

try's

land

. La

nd is

ass

igne

d/ a

lloca

ted

thro

ugh

a te

nure

sys

tem

and

men

are

gen

eral

ly th

e ow

ners

of l

and

and

trees

. How

ever

wom

enal

so o

wn

trees

.

Farmer

Bra

zil

Indi

aVi

etna

mM

ozam

biqu

e

Fina

ncin

g

1) B

anco

do

Nor

dest

e is

the

mai

n so

urce

of

cre

dit.

2) C

redi

t offe

red

for i

nves

tmen

t in

star

ting

min

i-mill

s, ra

ther

than

wor

king

cap

ital f

or

farm

ers

(sub

sidi

es fo

r fix

ed in

vest

men

t in

ratio

of 3

to 1

com

pare

d to

wor

king

cap

ital,

US

AID

200

6)

3)

Val

ue C

hain

Fi

nanc

ing

is c

omm

on

Gov

ernm

ent-s

uppo

rted

agen

cies

incl

ude:

1) N

atio

nal B

ank

for A

gric

ultu

re a

nd R

ural

D

evel

opm

ent (

NA

BA

RD

)2)

Cas

hew

Exp

ort P

rom

otio

n C

ounc

il (C

EP

C)

3) M

icro

finan

ce In

stitu

tions

and

Sel

f Hel

p G

roup

s 4)

Coo

pera

tive

and

com

mer

cial

ban

ks

finan

ce S

ME

s.

5) V

alue

Cha

in F

inan

cing

- tra

der c

redi

t, w

areh

ouse

rece

ipts

and

in-k

ind

supp

ort

such

as

shar

ed tr

ansp

ort a

nd m

achi

nary

(e

.g. I

n P

anru

ti, T

amil

Nad

u m

achi

nery

is

join

tly o

wne

d or

leas

ed)

Lim

ited

acce

ss fo

r dis

adva

ntag

ed s

mal

l (p

artic

ular

ly e

thni

c) fa

rmer

s. F

arm

ers

prim

arily

use

thei

r ow

n ca

pita

l, bu

t are

ab

le to

bor

row

up

to 5

mill

ion

dong

/hec

tare

at 1

.5%

inte

rest

/mon

th fr

om a

ny o

f man

y st

ate

owne

d ba

nks.

Col

late

ral i

s di

fficu

lt to

ac

quire

due

to la

ck o

f lan

d ce

rtific

ates

.

1) T

here

is o

nly

one

com

mer

cial

ban

k th

at

offe

rs c

redi

t to

proc

esso

rs a

t ver

y hi

gh

inte

rest

rate

s an

d re

ques

ting

all s

ort o

f in

sura

nces

.2)

A L

oan

Gua

rant

ee F

und

is in

pla

ce to

su

ppor

t pro

cess

ors

acce

ss to

wor

king

ca

pita

l. U

SA

ID a

nd IN

CA

JU a

re p

artn

ers

in th

is.

2)S

ome

smal

l NG

O's

offe

r mic

rofin

ance

se

rvic

es a

nd p

refe

r dea

ling

with

farm

er

asso

ciat

ions

(for

min

g as

soci

atio

ns is

ex

trem

ely

cost

ly, b

ureu

crat

ic, t

ime

cons

umin

g, $

500)

3) In

abili

ty to

use

land

as

colla

tera

l di

fficu

lts c

redi

t4)

Cas

hew

pro

cess

ing

is re

gard

ed a

s a

risky

bus

ines

s. D

iffic

ult t

o ha

ve a

cces

s to

lo

ans

to b

uy c

ashe

w a

nd/o

r bui

ld s

tora

ge

faci

litie

s. In

tere

st ra

tes

over

30%

for t

his

purp

ose

(200

3).

Trai

ning

/ A

gric

ultu

ral E

xten

sion

1) E

mat

erce

(Em

pres

a de

Ass

istê

ncia

Té

cnic

a e

Ext

ensã

o R

ural

do

Cea

rá)

2) E

MB

RA

PA

3) S

EA

GI/C

E

4)

Min

iste

rio d

o D

esen

volv

imen

to A

grar

io

1) N

AB

AR

D2)

Cas

hew

Exp

orta

tion

Pro

mot

ion

Cou

ncil

(CE

PC

) - Q

ualit

y U

pgra

datio

n La

b pr

ovid

es tr

aini

ng o

n pr

oduc

tion

tech

niqu

es

and

qual

ity s

tand

ards

3)A

ll In

dia

Cas

hew

Res

earc

h P

roje

ct4)

Indi

an C

ounc

il of

Agr

icul

tura

l Res

earc

h5)

Dis

trict

rura

l dev

elop

men

t age

nci

6)

C

ashe

w R

esea

rch

Sta

tion

7)

Gov

ernm

ent e

xten

sion

offi

ces

loca

ted

in

mos

t vill

ages

Nat

iona

l Agr

icul

tura

l Exe

ntio

n C

ente

rs

(AE

Cs)

thro

ugh

Min

istry

of A

gric

ultu

re a

ndR

ural

Dev

elop

men

t (M

AR

D).

One

AE

C in

ea

ch p

rovi

nce,

64

prov

ince

s, u

nder

pr

ovin

cial

cen

ters

ther

e ar

e ce

nter

s in

ev

ery

dist

rict.

Rea

ch a

ppro

x. 8

0% o

f rur

al

com

mun

ities

.

1) In

stitu

to d

e Fo

men

to d

o C

aju

(INC

AJU

, cr

eate

d 19

97)

2) M

inis

try o

f Agr

icul

ture

and

Rur

al

Dev

elop

men

t (M

AD

ER

)3)

Nat

iona

l Ins

titut

e fo

r Agr

onom

ic

Res

earc

h (IN

IA)

4) In

stitu

te o

f Qua

lity

Sta

ndar

diza

tion

(INN

OQ

)5)

Uni

ted

Sta

tes

Age

ncy

for I

nter

natio

nal

Dev

elop

men

t (U

SA

ID),

Age

nce

Fran

cais

de

Dev

elop

emen

t, E

urop

ean

Uni

on6)

Wor

ld V

isio

n, T

echn

oser

ve, A

dven

tist

Dev

elop

men

t Rel

ief A

genc

y (A

DR

A)

7) N

atio

nal S

trate

gy to

pro

mot

e th

e ca

shew

sec

tor (

SN

V) -

AD

PP

and

Te

chno

serv

e

Farmer

Bra

zil

Indi

aVi

etna

mM

ozam

biqu

e

Inpu

ts

Dat

a fo

und

in E

MB

RA

PA

pub

licat

ion

is

appr

ox. 1

0 ye

ars

old

(so

less

acc

urat

e du

e to

infla

tion

and

exch

ange

rate

cha

nges

) --

To p

lant

on

hect

ar o

f dw

arf c

ashe

w tr

ees

itis

est

imat

ed to

cos

t

R

$ 84

7,00

, w

hich

is e

quiv

alen

t to

the

cost

of 2

.017

kg

of c

ashe

w n

uts.

To

mai

ntai

n 1

hect

ar o

f dw

arf c

ashe

w tr

ees

cost

s an

est

imat

ed R

$31

2,00

, whi

ch is

equ

ival

ent t

o 7

43 k

g of

ca

shew

nut

s.

Nat

iona

l Cas

hew

Res

earc

h P

roje

ct a

nd

the

Indi

an C

ounc

il of

Agr

icul

tura

l R

esea

rch

train

in u

se o

f pla

ntin

g m

ater

ials

an

d pr

opag

atio

n m

etho

ds.

In s

ome

area

s,

inpu

t sal

es a

re s

ubsi

dize

d.

See

dlin

gs, f

ertil

izer

, and

oth

er in

puts

av

aila

ble

on th

e m

arke

t as

wel

l as

at A

EC

sat

sub

sidi

zed

rate

s (s

ubsi

dies

unc

lear

, see

re

port)

.

INC

AJU

focu

sed

on m

aint

enan

ce- o

fferin

g fe

rtaliz

er a

nd c

are

tech

niqu

es ra

ther

than

pl

antin

g ne

w tr

ees.

Too

muc

h de

man

d fo

rth

eir s

ervi

ces,

not

eno

ugh

supp

ly

Qua

lity

Stan

dard

sQ

ualit

y st

anda

rds

are

not s

trong

ly

enfo

rced

thro

ugh

a pr

ice

diffe

rent

ial w

hen

purc

hase

d by

an

inte

rmed

iary

. In

term

edia

ries

will

judg

e on

col

or, s

ize,

et

c. H

owev

er, t

here

app

ears

to b

e lit

tle

diffe

renc

e in

pric

e. (

29)

1) In

dia

is th

e gl

obal

ben

chm

ark

2)C

EP

C s

uppo

rts a

Qua

lity

Upg

rada

tion

Lab

and

train

s pr

oces

sors

. 3)

Wes

tern

Indi

a C

ashe

w C

o. h

as a

n ac

cred

ited

qual

ity c

ontro

l uni

t.

Ther

e is

cur

rent

ly a

lack

of u

nive

ral q

ualit

y st

anda

rds.

MA

RD

is w

orki

ng o

n st

anda

rdiz

atio

n of

qua

lity.

1) F

arm

ers

do n

ot m

arke

t raw

nut

s ba

sed

on d

iffer

ent q

ualit

y gr

ades

2)

Moz

ambi

que

rece

ives

low

er e

xpor

t pr

ices

com

pare

d to

nei

ghbo

ring

coun

tries

3)

Nor

th p

rodu

ces

high

er q

ualit

y nu

ts

4) N

o sy

stem

in p

lace

that

rew

ards

pr

oduc

tion

of h

ighe

r qua

lity

nuts

Labo

r

high

cos

ts

Mor

e fa

rms

are

run

by h

ouse

hold

m

embe

rs.

In p

roce

ssin

g, lo

w w

ages

are

aso

urce

of c

ompa

rativ

e ad

vant

age

for I

ndia

Ker

ala

has

the

high

est w

ages

in

proc

essi

ng, w

hich

has

cau

sed

firm

s to

re

loca

te th

eir p

lant

s to

oth

er s

tate

s.

Mos

t fam

ers

do n

ot h

ire e

xtra

labo

r, ho

wev

er s

ome

need

to d

urin

g ha

rves

t se

ason

. Cos

t of l

abor

per

met

ric to

n:W

eedi

ng: 1

7.8,

Fer

tiliz

er/P

estic

ide:

47.

31,

Har

vest

/nut

: 73.

79, O

ther

: 22.

01, T

otal

: 24

1.79

(US

D, a

vera

ge c

ost o

ver 3

0 ye

ars)

(s

ee D

ak L

ak R

epor

t)

1) H

igh

avai

labi

lity

of lo

w c

ost l

abou

r2)

Per

cept

ion

that

wor

king

con

ditio

ns h

ave

dete

riora

ted

in th

e lib

eral

ized

env

ironm

ent.

3)Fa

ctor

ies

assi

sted

by

Tech

nose

rve

prov

ide

a fre

e m

eal,

have

acc

ess

to h

ealth

se

rvic

es, a

nd p

ay a

nnua

l hol

iday

s.

Seas

onal

ityS

ept-D

ec; e

mpl

oym

ent d

rops

afte

r Ja

nuar

yM

arch

-May

Febr

uary

- M

arch

1) N

orth

: Oct

ober

to J

anua

ry2)

Sou

th:

Stor

age

Onl

y 10

% o

f pro

duct

ion

rem

ains

in s

tora

gean

d is

sol

d be

twee

n ha

rves

ts.

30%

of

prod

uctio

n is

sol

d be

fore

the

harv

est a

nd

60%

is s

old

durin

g it.

(US

AID

200

6)

ICIC

I Ban

k fin

ance

s di

gitiz

ed a

nd

inte

rlink

ed w

areh

ouse

sto

rage

faci

litie

s an

dof

fers

com

mod

ity-b

ased

fina

ncin

g

Farm

ers

do n

ot h

ave

acce

ss to

sto

rage

. C

olle

ctor

s co

llect

nut

s da

ily a

nd

proc

esso

rs s

tore

them

.

1) F

ew fa

rmer

s, a

ssoc

iatio

ns o

r co

mm

uniti

es h

ave

thei

r ow

n st

orag

e fa

cilit

ies

2) P

roce

ssin

g of

cas

hew

ker

nels

is li

mite

d si

nce

fact

orie

s ar

e no

t yet

ope

ratio

nal y

ear-

roun

d as

they

are

not

yet

abl

e to

pro

cure

an

d st

ore

a su

ffici

ent s

tock

of r

aw n

uts.

Farmer

Bra

zil

Indi

aVi

etna

mM

ozam

biqu

e

Irrig

atio

n

1) A

vg c

ost o

f a m

icro

aspe

rsio

n sy

stem

for

the

irrig

atio

n of

dw

arf c

ashe

ws

plan

ted

in a

spac

e of

7 x

7 m

, var

ies

betw

een

US

$ 1,

150.

00 a

US

$ 1,

500.

00 p

er h

ecta

r. Fo

r adr

op s

yste

m o

f cos

t var

ies

betw

een

US

$ 1,

350.

00 a

nd U

S$

1,60

0.00

. (E

MB

RA

PA

19

96)

Irrig

atio

n no

t com

mon

ly p

ract

iced

Irrig

atio

n no

t com

mon

ly p

ract

iced

Irrig

atio

n no

t com

mon

ly p

ract

iced

Gen

der

Littl

e in

form

atio

n on

gen

der i

ssue

s

Farm

s ar

e ow

ned

and

oper

ated

by

hous

ehol

d bu

t 95%

of w

orke

rs in

pr

oces

sing

faci

litie

s ar

e w

omen

Man

y fa

rmer

s ar

e w

omen

and

eth

nic

min

oriti

es.

1) W

omen

are

hea

vily

invo

lved

in c

ashe

w

prod

uctio

n. W

omen

wor

k m

ore

hour

s th

an

men

, tho

ugh

earn

less

. Men

and

wom

en

shar

e pa

rtici

patio

n in

all

the

diffe

rent

ac

tiviti

es o

f the

pro

cess

.

2) S

mal

lhol

der a

gric

ultu

re e

mpl

oys

89%

of

wom

en a

nd 6

3.2%

of m

en (D

ello

ite a

nd

Touc

he, 1

997)

3) W

omen

usu

ally

don

't w

ork

with

mac

hine

ry

Usa

ge o

f By-

prod

ucts

A ra

nge

of fo

od p

rodu

cts

for h

ouse

hold

co

nsum

ptio

nA

pple

is u

sed

mos

tly fo

r hou

seho

ld u

se

(frui

t and

juic

e)C

ashe

w a

pple

is n

ot u

sed.

Som

etim

es

used

as

cattl

e fe

ed.

Ver

y m

inor

dom

estic

con

sum

ptio

n of

by

prod

ucts

(Jui

ce &

Agu

arde

nte)

Tran

spor

tatio

n

A p

robl

em fo

r sm

all p

rodu

cers

, whi

ch is

w

hy m

ost s

ell t

heir

raw

nut

s to

sm

all o

r la

rge

trade

rs

Mod

es o

f tra

nspo

rt (c

arts

, tru

cks)

can

be

leas

ed in

Pan

ruti.

Fai

r Tra

de A

llian

ce

Ker

ala

coor

dina

tes

trans

port

of ra

w n

uts

from

vill

age

depo

ts to

pro

cess

ing

plan

ts fo

its c

oope

rativ

e m

embe

rs

Com

petit

ion

for n

uts

resu

lts in

col

lect

ors

goin

g to

the

farm

ers,

ther

efor

e no

t an

issu

e fo

r far

mer

s.

1) N

umbe

r of m

obile

trad

ers

has

incr

ease

dw

ith li

bera

lizat

ion.

The

y ha

ve m

otor

ve

hicl

es to

acc

es th

e ar

eas

of p

rodu

ctio

n.

2) T

errib

le ro

ad in

frast

ruct

ure,

forc

es

repa

ckag

ing,

incr

easi

ng c

osts

. How

ever

. ro

ads

are

bein

g im

prov

ed a

nd b

uilt

as

mor

e pl

ants

are

bei

ng in

stal

led.

Pol

iitic

al

leve

rage

with

gov

t.

Maj

or Im

pedi

men

ts

1) A

cces

s to

fina

ncin

g2)

Acc

ess

to la

nd

1) P

rice

vola

tility

is c

ausi

ng fa

rmer

s to

sw

itch

to ru

bber

cul

tivat

ion

2

) R

isin

g la

bor c

osts

in K

eral

a

3)

Diff

icul

ty o

f org

anic

cer

tific

atio

n

1) A

cces

s to

info

rmat

ion

2) A

cces

s to

land

ce

rtific

ates

3) L

ack

of c

oord

inat

ion

and

coop

erat

ion

amon

g fa

rmer

s

1) C

ompe

ting

food

sec

urity

nee

ds2)

Pro

fitab

ility

con

cern

s in

pla

ntin

g3)

Mai

ntai

ning

and

com

mer

cial

izin

g ca

shew

s4)

Diff

icul

t acc

ess

to c

redi

t5)

Poo

r acc

ess

to e

xten

sion

ser

vice

s

Farmer

Bra

zil

Indi

aVi

etna

mM

ozam

biqu

eIn

term

edia

ry L

evel

Petty

trad

ers

Sm

all l

ocal

trad

ers

rece

ive

raw

nut

s in

ex

chan

ge fo

r the

ir m

erch

andi

se (f

ood,

co

nsum

er g

oods

and

agr

icul

tura

l sup

plie

s)M

ost p

rodu

cers

dea

l with

2-3

in

term

edia

ries

Up

to 6

mid

dlem

en d

epen

ding

on

dist

ance

Lice

nse

is le

gally

requ

ired

but m

any

unlic

ense

d tra

ders

exi

st.

Pur

chas

e di

rect

ly fr

om fa

rmer

s an

d se

ll to

la

rger

trad

ers,

pro

cess

ors

or e

xpor

ters

Mai

n tr

ader

s

Pro

fess

iona

ls w

ho h

ave

finan

cial

reso

urce

san

d ar

e kn

owle

dgea

ble

abou

t the

pr

oduc

ing

regi

ons.

Usu

ally

affi

liate

d w

ith la

rger

pro

cess

ing

units

Usu

ally

affi

liate

d w

ith la

rger

pro

cess

ing

units

Mos

t pro

cess

ors

dire

ctly

rela

te to

an

inte

rnat

iona

l bro

ker (

Dut

ch)

Dire

ct fa

rmer

to m

ill

Onl

y do

cum

ente

d in

cas

e of

Pa-

Rur

al

coop

sys

tem

; or m

ediu

m s

ized

pro

duce

rs

who

can

wai

t for

pay

men

t

In K

eral

a th

ere

is s

igni

fican

t dis

tanc

e be

twee

n pr

oduc

ers

and

the

proc

essi

ng

faci

litie

s. T

here

are

repo

rts o

f a g

row

ing

cotta

ge in

dust

ry in

the

natio

n as

a w

hole

du

e to

risi

ng la

bor c

osts

.

Ver

y lit

tle d

irect

sal

es fr

om fa

rmer

to

proc

esso

r. E

asie

r for

pro

cess

ors

to w

ork

with

a c

olle

ctor

- ef

ficie

ncy

of s

cale

.P

ick-

up b

y pr

oces

sor o

r int

erm

edia

ry

base

d on

clo

sest

mill

Com

mis

sion

Hig

h in

tere

st ra

tes

and

lack

of

trans

pare

ncy

Low

in c

ompa

rison

to o

ther

cou

ntrie

s (c

ultiv

ator

s ca

ptur

e 16

% o

f sup

erm

arke

t re

tail

pric

e w

hile

trad

ers

capt

ure

2%)

Lack

of t

rans

pare

ncy;

mid

dlem

en m

ake

high

mar

gins

bec

ause

farm

ers

are

unaw

are

of fa

ir m

arke

t pric

es.

(Pro

duce

rs

capt

ure

30%

of p

rofit

, Col

lect

ors

20%

, P

roce

ssor

s 30

%, E

xpor

ters

20%

)$2

4.36

/ton

com

issi

on (I

rish

Aid

Rep

ort)

Rel

atio

nshi

p m

iddl

emen

/farm

erA

busi

ve/p

ower

imba

lanc

eS

ome

trade

rs p

rovi

de in

form

al c

redi

t in

the

off s

easo

n

Sin

ce c

ompe

titio

n fo

r raw

nut

s is

hig

h,

colle

ctor

s as

sist

pro

duce

rs o

n-fa

rm in

se

para

ting

the

appl

e fro

m th

e nu

t dur

ing

peak

sea

son;

som

etim

es c

olle

ctor

s of

fer

farm

ers

cred

it fo

r inp

uts.

Stil

l you

ng, n

ot e

stab

lishe

d tie

s

Qua

lity

cont

rol

Trad

ers

dete

rmin

e pr

ices

; Pric

e ba

sed

on

the

perc

eive

d qu

ality

of t

he p

rodu

ct a

nd

trust

wor

thin

ess

of th

e or

der r

athe

r tha

n th

esi

ze o

f the

nut

s, s

o st

anda

rds

vary

from

tra

der t

o tra

der.

Som

e tra

ders

and

pro

cess

ors

test

qua

lity

of ra

w n

uts.

How

ever

, qua

lity

is

dete

rmin

ed b

y bu

yers

in m

ost c

ases

.

Bas

ed o

n tra

der;

met

hods

are

ver

y in

form

al a

nd n

ot te

chni

cal;

farm

ers

may

try

to s

kew

pric

es b

y w

eigh

ing

dow

n ca

shew

s, w

hich

cau

ses

pric

e de

prec

iatio

n

Low

leve

l of q

ualit

y b/

c ol

d tre

es; I

NC

AJU

is

atte

mpt

ing

to g

ive

qual

ity tr

aini

ng to

m

iddl

emen

so

that

pric

e st

ruct

ures

can

ch

ange

.

Tran

spor

tatio

nD

iffic

ult t

o tra

vel f

rom

farm

to m

ini m

ill

Ove

rall

Indi

a ha

s ve

ry g

ood

infra

stru

ctur

e.

Som

e fa

rmer

coo

pera

tives

use

coo

pera

tive

trans

port

syst

ems.

Tran

spor

tatio

n is

not

a m

ajor

impe

dim

ent

for t

rade

rs. P

roce

ssor

s th

at m

ove

to m

ore

dist

ant r

egio

ns p

ay fo

r tra

nspo

rt of

nut

s,

but t

his

does

not

offs

et th

e hi

gher

pro

fit

mar

gin

due

to c

heap

er la

bor.

Ext

rem

ely

poor

tran

spor

tatio

n in

frast

ruct

ure;

road

s in

the

north

alm

ost

non-

exis

tent

; Pro

cess

ors

trans

por t

heir

prod

uctio

n to

Nac

ala

Por

t. W

here

AIA

has

a

cent

ral w

areh

ouse

.

Farm to Port

Bra

zil

Indi

aVi

etna

mM

ozam

biqu

ePr

oces

sing

Lev

el

Type

of p

roce

ssor

Larg

e fir

ms

and

min

i-mill

s

Pub

lic a

nd p

rivat

e. P

rivat

e do

min

ates

the

indu

stry

. Th

e co

ttage

indu

stry

has

gro

wn

rece

ntly

.

Mic

ro, s

mal

l, m

ediu

m, a

nd la

rge

proc

esso

rs. M

ost s

tate

ow

ned

proc

esso

rs

have

bee

n fu

lly o

r par

tially

priv

atiz

ed.

Sm

all a

nd M

edim

: 500

to 5

,000

tons

ca

paci

ty fa

ctor

ies

Fina

ncin

gE

MB

RA

PA

, SE

BR

AE

and

CO

NA

B

Com

mer

cial

ban

ks a

nd d

istri

ct ru

ral

deve

lopm

ent a

genc

ies.

In s

ome

regi

ons

proc

esso

rs a

re re

gist

ered

by

dist

rict

indu

strie

s ce

nter

s w

hich

faci

litat

es th

eir

acce

ss to

cre

dit.

Fina

ncin

g pr

ovid

ed b

y st

ate-

owne

d ba

nks.

Diff

icul

ties

acqu

iring

cre

dit d

ue to

land

use

certi

ficat

es.

Lack

of a

cces

s to

fina

nce

for p

roce

ssor

s;

US

AID

sup

porte

d lo

an g

uara

ntee

fund

w

ith IN

CA

JU/T

echn

oser

v su

ppor

t

Proc

essi

ng c

apac

ity

Som

e do

not

ope

rate

bec

ause

of l

ack

of

supp

ly; a

ppro

xim

atel

y 27

0,00

0 to

ns a

ye

ar: a

ll fro

m N

orth

east

of c

ount

ry

Exc

eeds

dom

estic

pro

duct

ion:

Indi

a im

ports

app

roxi

mat

ely

50%

of n

uts

proc

esse

d

Exc

eeds

dom

estic

pro

duct

ion;

impo

rts

300,

000

tons

of r

aw c

ashe

w n

uts

(43%

) pr

imar

ily fr

om A

frica

and

Indo

nesi

a.S

mal

l; ex

ports

raw

cas

hew

nut

s

Stan

dard

s

HA

CC

P a

nd IS

O fa

vors

larg

e pr

oces

sors

ra

ther

than

min

i-mill

s in

com

plia

nce

and

certi

ficat

ion

CE

PC

Inte

grat

ed S

chem

e fo

r Cas

hew

Q

ualit

y tra

ins

man

ager

s in

pro

cess

ing

that

op

timiz

es q

ualit

yFe

w p

roce

ssor

s ad

here

to IS

O, H

AC

CP

, an

d G

MP

sta

ndar

ds

Ass

ocia

tion

begi

nnin

g to

impl

emen

t a

stan

dard

ized

ass

essm

ent f

or q

ualit

y co

ntro

l, et

c fo

r all

mem

bers

Ext

ract

ion

Shel

ling

Labo

r Cos

tsA

ppro

x. .8

8 U

SD

/kg

App

rox.

.26

US

D/k

g.1

4 U

SD

/kg

(13.

5 kg

/day

/wor

ker)

.16U

SD

/kg

(bas

ed o

n Iri

sh A

id in

fo)

Peel

ing

Labo

r Cos

ts.2

3 U

SD

/kg

(11

kg/d

ay/w

orke

r)2

.16

US

D.k

g (b

ased

on

Irish

Aid

info

)So

rtin

g La

bor C

osts

.033

US

D/k

g (1

40 k

g/da

y/w

orke

r ).1

9 U

SD

/kg

(bas

ed o

n Iri

sh A

id in

fo)

Ave

rage

mon

thly

sal

ary

54 U

SD

/mon

th23

US

D/m

onth

- al

l pos

ition

s (Ir

ish

Aid

)

Gen

der

95%

of l

abor

is w

omen

. Wom

en a

re

spec

ializ

ed in

to o

ne s

tage

of p

roce

ssin

g up

on g

aini

ng e

mpl

ymen

t in

a pl

ant

acco

rdin

g to

thei

r ski

ll an

d ca

ste

She

lling

don

e m

ostly

by

wom

en a

nd

ethn

ic m

inor

ity la

bore

rs.

Soak

ing/

stea

min

g

Min

i-mill

s: s

oak;

larg

e pr

oces

sors

: ste

am

Ste

am b

oilin

g m

etho

d al

low

s th

e re

cove

ry

of th

e C

ashe

w N

ut S

hell

Liqu

id (C

NS

L).

Prim

arily

dru

m ro

astin

g an

d st

eam

ing

met

hods

. Abo

ut 5

% o

f cas

hew

nuts

are

dr

ied

in th

e su

n fo

r 2-3

day

s an

d sh

elle

d w

ithou

t roa

stin

g.Tw

o th

irds

of fa

ctor

ies

use

burn

ing

met

hod,

one

third

use

ste

amin

g m

etho

d.M

ost u

se s

team

, fire

-bas

ed, f

ew a

re

getti

ng te

ch to

use

ele

ctric

mea

ns

De-

shel

ling

Min

i-mill

s us

e se

mi-m

anua

l rem

oval

te

chni

ques

resu

lting

in h

ighe

r num

ber o

f w

hole

cas

hew

s (7

5-85

%) v

s. la

rge

proc

esso

rs w

ho g

et o

nly

50-5

5% w

ith

mec

hini

zed/

impa

ct d

eshe

lling

The

mos

t pre

cise

cut

ting

mac

hine

s ar

e bo

ught

from

Man

galo

re. M

SE

s ar

e di

sadv

anta

ged

by lo

cal s

uppl

iers

with

in

ferio

r mac

hine

ry. C

EP

C m

embe

rs c

an

appl

y fo

r equ

ipm

ent s

ubsi

dies

, but

mos

t sh

ellin

g is

don

e m

anua

lly u

sing

mal

lets

, w

hich

resu

lts in

up

to 9

0% w

hole

ker

nels

fo

r ski

lled

wor

kers

.

Sem

i-man

ual c

uttin

g, m

anua

l pee

ling

(with

kni

fe),

and

man

ual s

ortin

g of

nut

s.

Trie

d im

porte

d m

echa

nize

d de

-she

lling

, ho

wev

er w

ere

not s

atis

fied

with

the

quan

tity

of b

roke

n nu

ts. A

lso

had

som

e so

rting

mac

hine

s, h

owev

er q

ualit

y w

as n

otgo

od.

Sem

i-man

ual

Farm to Port

Bra

zil

Indi

aVi

etna

mM

ozam

biqu

ePr

oces

sing

Lev

el

Usa

ge o

f by-

prod

uct

Exp

ort c

ashe

w s

hell

liqui

d fo

r ind

ustri

al

uses

CN

SL

is s

old

dom

estic

ally

and

exp

orte

d;

shel

ls a

re u

sed

to fu

el s

team

ing;

liqu

or is

so

ld in

Goa

5-10

% o

f nut

she

lls a

re b

urne

d to

fuel

ro

astin

g or

ste

amin

g pr

oces

s. C

NS

L is

ex

tract

ed fr

om s

hells

and

late

r pro

cess

ed

by p

aint

indu

strie

s. C

urre

ntly

10

com

pani

es e

xpor

t, pr

imar

ily to

Chi

na.

Ver

y lit

tle

Gra

ding

4 sc

ales

of c

olor

; siz

e cl

assi

fied

by

aver

age

quan

tity

per p

ound

(sm

alle

st a

re

450

units

/lb. a

nd la

rges

t at 1

60 u

nits

/lb.

Pric

e de

term

inat

ion

by a

com

bina

tion

of

size

, lig

htne

ss o

f col

or a

nd w

hole

ness

26-3

2 ty

pes

depe

ndin

g on

col

or, s

crat

ch,

size

and

who

lene

ss; g

radi

ng ta

kes

plac

e in

the

fact

ory

per C

EP

C s

peci

ficat

ions

. D

espi

te tr

aini

ng b

y N

GO

s, m

ost M

SE

s do

n't g

rade

and

thos

e w

ho d

o us

e on

ly 4

ca

tego

ries.

Diff

eren

t pro

cess

ors

have

diff

eren

t gra

de

stan

dard

s. A

vera

ge is

app

roxi

mat

ely

24

diffe

rent

gra

des.

Sor

ted

by h

and

acco

rdin

gto

siz

e an

d co

lor.

Tech

nica

l Ass

ista

nce

SE

BR

AE

; CO

NA

B, E

MP

BR

AP

A

Var

ies

by s

tate

. In

Mah

aras

htra

, NG

Os

prov

ide

train

ing,

but

it is

onl

y pa

rtial

ly

impl

emen

ted.

CE

PC

Lab

pro

vide

s vo

lunt

ary

train

ing

of m

anuf

acut

urer

s,

prim

arily

in K

eral

a.no

neTe

chno

serv

Pack

agin

g Le

vel

Type

of p

acka

ging

50 lb

. vac

uum

-sea

led

alum

inum

foil

bags

or

two

met

al c

ans

of 2

5 po

unds

eac

h.

Pac

kagi

ng fo

r ret

ail s

ale

of s

emi-p

roce

ssed

or ro

aste

d nu

t can

be

in g

lass

or p

last

ic

jars

, pl

astic

bag

s, m

etal

iciz

ed b

ags,

or

met

al c

ans,

whi

ch c

an b

e be

twee

n 50

g

and

1 kg

with

the

proc

esso

r or p

acka

ger

bran

d la

bel.

25 lb

. vac

uum

-sea

led

tins

fille

d w

ith

carb

on-d

ioxi

de g

as; d

evel

oped

indu

stry

st

anda

rd: t

he fl

exi-p

ouch

pac

kV

acuu

m s

eale

d in

50

lbs

boxe

s fo

r exp

ort.

Vac

cum

sea

l bag

s w

ith Z

ambi

que

logo

25

kilo

s

Man

agem

ent o

f pac

kagi

ng u

nits

Wes

tern

Indi

a C

ashe

w C

o. Q

ualit

y C

ontro

l&

Pac

king

Uni

t was

one

of t

he fi

rst t

o be

aw

arde

d IS

O 9

001:

2000

acc

redi

tatio

n.A

ll pa

ckag

ing

done

by

proc

esso

rs

Inst

itutio

nal s

uppo

rt

CE

PC

pro

vide

s su

bsid

ies

& a

ssis

tanc

e fo

r va

cuum

sea

ling,

pro

duct

upg

radi

ng a

nd

vacu

um s

ealin

g m

achi

nes.

Non

e

Qua

lity

GE

vita

pac

kagi

ng s

yste

m (v

acuu

m s

eal,

carb

on) i

s co

nsid

ered

sup

erio

r

Sor

ted

by h

and

and/

or m

achi

ne fo

r qua

lity,

nuts

als

o pa

ssed

thro

ugh

met

al d

etec

tor t

oen

sure

pur

enes

s of

nut

s fo

r exp

ort.

Sor

ted

by m

achi

ne to

ens

ure

that

no

nuts

w

ere

brok

en a

nd fi

nal q

ualit

y co

ntro

l

Farm to Port

Bra

zil

Indi

aVi

etna

mM

ozam

biqu

eM

arke

t seg

men

t (%

exp

ort)

80.%

50%

(pro

cess

ed)

98.%

1) 7

0% (u

npro

cess

ed)

Qua

lity

Dom

estic

con

sum

ptio

n m

ainl

y of

min

i-mill

lo

wer

qua

lity

cash

ews.

Hig

h qu

ality

for

expo

rtatio

nE

xpor

t hig

htes

t qua

lity

nuts

. Low

qua

lity

sold

on

dom

estic

mar

ket.

1) A

ppro

x. 3

0%-4

0% o

f exp

orts

are

W 3

20

HA

CC

P co

mpl

iant

(# o

f pr

oces

sors

)

Wes

tern

Indi

a C

ashe

w C

ompa

ny w

as o

ne

of th

e fir

st to

be

certi

fied

in th

e in

dust

ry

glob

ally

. Nat

iona

l Cen

tre fo

r HA

CC

P

Cer

tific

atio

n lo

cate

d in

Triv

andr

um, K

eral

a.7

(200

5)

1) A

ll A

IA n

etw

ork

oper

atin

g ov

er 3

yea

rs

mee

t 60%

of H

AC

CP

sta

ndar

ds2)

At l

east

2 p

roce

ssor

s m

eet a

ll H

AC

CP

st

anda

rds

Qua

lity

of n

uts

is h

ighe

r in

the

Nor

th th

an

in th

e S

outh

ISO

com

plia

nt (#

of p

roce

ssor

s)A

mon

g fo

rmal

pro

cess

ors

only

the

larg

est

firm

s ar

e IS

O c

ompl

iant

.10

(200

5)

Maj

or im

port

ers

US

(70%

)U

S (3

8%),

follo

wed

by

the

EU

2006

: US

(41%

), C

hina

(20%

), U

K a

nd

the

Net

herla

nds

(12%

), an

d A

ustra

lia

(10%

)

- Pro

cess

ors

join

tly e

xpor

t all

thei

r pr

oduc

tion

thro

ugh

a D

utch

Bro

ker.

Cha

rges

a 3

% c

omis

sion

. - M

ain

Mar

ket i

s E

urop

e

Mar

ketin

g st

rate

gy c

onsu

mer

be

havi

or

Org

anic

, Fai

r Tra

de a

nd th

e tra

ceab

ility

of

Bra

zilia

n ca

shew

are

bei

ng e

xplo

red

and

mer

it fu

rther

dev

elop

men

t

Bra

ndin

g, fl

avor

ed c

ashe

ws

as a

new

pr

oduc

t, fo

cus

on "h

and

craf

ted"

pr

oduc

tion

Bra

ndin

g is

bei

ng c

onsi

dere

d; q

ualit

y im

prov

emen

t; pl

ans

to d

evel

op d

omes

tic

mar

ket (

will

rise

as

inco

mes

rise

)

1)Th

e co

nsol

idat

ion

of th

e Za

mbi

que

bran

d ha

s be

en a

stro

ng c

ompo

nent

of t

he

over

all s

trate

gy2)

They

are

prin

cipa

lly a

imin

g fo

r the

E

urop

ean

mar

ket.

Less

inte

rest

in U

S

mar

ket

Exch

ange

rate

A d

epre

ciat

ed U

S d

olla

r has

neg

ativ

ely

affe

cted

the

com

petit

iven

ess

of B

razi

l's

indu

stry

and

has

affe

cted

the

prof

it m

argi

ns o

f min

i-mill

s an

d m

echa

nize

d pr

oces

sors

.In

dust

ry h

as b

een

hurt

by th

e de

prec

iatio

n of

the

US

dol

lar

The

Vie

tnam

ese

gove

rnm

ent a

nd th

e S

tate

Ban

k of

Vie

tnam

hav

e be

en

purs

uing

a c

raw

ling

peg

polic

y in

the

past

el

even

yea

rs, l

ettin

g th

e D

ong

grad

ually

de

prec

iate

(30%

) aga

inst

the

US

dol

lar a

t a

stea

dy ra

te in

ord

er to

bol

ster

the

expo

rt se

ctor

. Ris

ing

FDI,

rem

ittan

ces,

exp

orts

, an

d eq

uity

inflo

ws

mad

e th

is p

olic

y of

"m

anag

ed d

eval

uatio

n" u

nsus

tain

able

, and

2007

bro

ught

an

end

to it

. Th

e ce

ntra

l ba

nk p

lans

to k

eep

the

Don

g st

able

in a

fle

xibl

e m

anne

r. A

s, V

ietn

am is

Sou

thea

stA

sia'

s fa

stes

t gro

win

g ec

onom

y, it

will

be

hard

for t

he c

entra

l ban

k to

con

tinue

a

depr

ecia

tion.

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ambi

que

face

s m

ore

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ange

rate

vo

latil

ity fr

om in

tern

al p

ress

ures

suc

h as

in

flatio

n. F

urth

erm

ore,

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cce

the

maj

or

mar

ket f

or M

ozam

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n pr

oces

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nuts

ar

e in

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ster

dam

they

are

less

con

cern

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with

a d

efla

ted

US

cur

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Bra

zil

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e pr

oxim

ity to

US

; tra

ceab

ility

Labo

r, ha

nd p

roce

ssin

g (h

igh

qual

ity) a

nd

hist

ory

of p

rodu

ctio

n

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cess

ing

capa

bilit

ies,

hig

h qu

ality

nut

s gr

own

natu

rally

(goo

d so

il fo

r cas

hew

pr

oduc

tion)

, hig

her y

ield

ing

trees

; clo

se

Chi

na m

arke

t

Nam

e re

cogn

ition

am

ong

brok

ers

(Zam

biqu

e), L

ong

tradi

tion,

low

cos

t of

labo

r

Expo

rt ta

x

Unt

il 20

05 B

razi

l tax

ed a

ll ra

w c

ashe

ws

expo

rts a

bove

the

quot

a of

10,

000

tons

at

a ra

te o

f 30%

. C

urre

ntly

, the

re is

no

expo

rt ta

x.0.

%0.

%

-Fix

ed y

early

at a

leve

l bet

wee

n 18

% a

nd

23%

-As

of 2

006,

unc

hang

ed fo

r fiv

e ye

ars

at

18%

of t

he F

OB

pric

e.

-Impo

rtant

pol

icy

ques

tion.

Whe

ther

to

man

tain

or e

limin

ate

the

tax

- Sup

port

has

been

bui

lt in

favo

r of

elim

inat

ing

the

tax.

How

ever

, thi

s ne

eds

togo

thro

ugh

cong

ress

whe

re it

was

un

anim

ousl

y ap

prov

ed b

y th

e op

posi

tion

as w

ell a

s th

e do

min

ant p

arty

Stor

age

ICIC

I ban

k fu

nds

digi

tized

and

inte

rlink

ed

war

ehou

se fa

cilit

ies

Pro

cess

ors

have

thei

r ow

n st

orag

e fa

cilit

ies.

- Som

e pr

oces

sors

now

hav

e st

orag

e ca

paci

ty a

nd w

areh

ouse

is u

sed

as

colla

tera

l.- A

ppar

ently

, ver

y re

cent

ly in

trodu

ced.

Port

infr

astr

uctu

re

Cea

ra e

xpor

ts 8

0% o

f cas

hew

s th

roug

h th

e po

rts in

For

tale

za.

Stro

ng

infra

stru

ctur

e su

ppor

ts th

is tr

ade.

Feb.

200

7 C

ashe

w B

ulle

tin a

rticl

e ab

out

impr

oved

con

tain

er s

ervi

ce fr

om K

ochi

to

the

U.S

.; E

xpor

ts fr

om p

orts

at K

ochi

, G

oa, M

anga

lore

, Tut

icor

in a

nd

Vis

akha

patn

amA

ll nu

ts a

re e

xpor

ted

thro

ugh

port

at H

o C

hi M

inh

City

.

The

Nac

ala

Por

t:-R

ecen

tly p

rivat

ized

(200

4? m

ust c

heck

)-C

an a

ccom

odat

e co

ntai

ner s

hips

, ho

wev

er b

/c o

f nor

th's

and

Mal

awi's

low

le

vel o

f eco

nom

ic a

ctiv

ity, t

he v

olum

e of

go

ods

ship

ped

thou

gh th

e po

rt is

lim

ited.

-Man

y tim

es g

oods

are

dire

cted

thro

ugh

Dur

ban

or o

ther

por

ts to

gai

n ec

onom

ies

osc

ale

-Lac

ks a

dequ

ate

faci

litie

s su

ch a

s lif

ters

an

d tu

gboa

ts, c

an c

reat

e de

lays

-App

rox.

200

shi

ps a

nnua

lly

Port to Export

65

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Interviews: LaLonde, Bradley, Vietnam Partners LLC, Interview by Pareen P. Patel and Stephanie L.

Waxman, Hanoi, Vietnam, 10 March 2007. Weeke, Helle, Vietnam Competitiveness Initiative, Interview by Pareen P. Patel and Stephanie

L. Waxman, Hanoi, Vietnam, 12 March 2007.

Wade, John, USDA: Foreign Agriculture Service, Interview by Pareen P. Patel and Stephanie L. Waxman, Hanoi, Vietnam, 12 March 2007.

Nguyen Thi, Huong, USDA: Foreign Agriculture Service, Interview by Pareen P. Patel and Stephanie L. Waxman, Hanoi, Vietnam, 12 March 2007.

Ho Thu, Le, Vietnam Partners Investment Management Company, Interview by Pareen P. Patel and Stephanie L. Waxman, Hanoi, Vietnam, 12 March 2007.

Dang Quoc, Hiep, Vietnam Partners Investment Management Company, Interview by Pareen P. Patel and Stephanie L. Waxman, Hanoi, Vietnam, 12 March 2007. Pham Ngoc, Tram, GTZ-SME Development Programme: Value Chain and Sector Development, Interview by Pareen P. Patel and Stephanie L. Waxman, Hanoi, Vietnam, 13 March 2007. Rozemuller, Bas, International Labor Organization: PRISED Project, Interview by Pareen P. Patel and Stephanie L. Waxman, Hanoi, Vietnam, 13 March 2007.

Nguyen Ngoc, Bich, Upexim, Interview by Pareen P. Patel and Stephanie L. Waxman, Hanoi, Vietnam, 13 March 2007.

Sitkoff, Adam, American Chamber of Commerce, Interview by Pareen P. Patel and Stephanie L. Waxman, Hanoi, Vietnam, 13 March 2007.

73

Tran Tien, Khai, Institute of Policy and Strategy for Agriculture and Rural Development, Interview by Pareen P. Patel and Stephanie L. Waxman. Ho Chi Minh City, Vietnam, 14 March 2007.

Nguyen Tang, Ton, Institute of Agriculture Science of South Vietnam, Interview by Pareen P.

Patel and Stephanie L. Waxman. Ho Chi Minh City, Vietnam, 14 March 2007. Truong Minh, Dao, USDA: Foreign Agriculture Service, Interview by Pareen P. Patel and

Stephanie L. Waxman, Ho Chi Minh City, Vietnam, 14 March 2007.

Pham, Sang, Vietnam Partners LLC, Interview by Pareen P. Patel and Stephanie L. Waxman, Binh Phuoc, Vietnam, 15 March 2007.

Bui Quang, Minh, Department of Industry, Interview by Pareen P. Patel and Stephanie L.

Waxman, Binh Phuoc, Vietnam, 15 March 2007. Nguyen Quang, Cahn, Department of Industry, Interview by Pareen P. Patel and Stephanie L.

Waxman, Binh Phuoc, Vietnam, 15 March 2007. Thao, Mai, Huong Mai, Interview by Pareen P. Patel and Stephanie L. Waxman, Binh Phuoc,

Vietnam, 15 March 2007. Farmer, Interview by Pareen P. Patel and Stephanie L. Waxman, Binh Phuoc, Vietnam, 15

March 2007.

Nguyen Van, Chieu, Lafooco, Interview by Pareen P. Patel and Stephanie L. Waxman, Long An, Vietnam, 16 March 2007.

Nguyen Thi, Nhung, Tanimex, Interview by Pareen P. Patel and Stephanie L. Waxman, Long

An, Vietnam, 16 March 2007. Nguyen Van, Hoa, Thalimex, Interview by Pareen P. Patel and Stephanie L. Waxman, Long An,

Vietnam, 16 March 2007. Serene, Philippe, AquaService, Interview by Pareen P. Patel and Stephanie L. Waxman, Ho Chi

Minh City, Vietnam, 16 March 2007. Phung Duc, Hoang, Vietnam Chamber of Commerce and Industry, Interview by Pareen P. Patel

and Stephanie L. Waxman, Ho Chi Minh City, Vietnam, 16 March 2007.

Watts, Gil, Private Developer, Interview by Pareen P. Patel and Stephanie L. Waxman, Ho Chi Min City, Vietnam, 17 March 2007.

D'haeze, Dave A. EDE Consulting for Coffee Asia Pacific, Interview by Pareen P. Patel and Stephanie L. Waxman, Hanoi, Vietnam, 19 March 2007.

74

Pham Tuyet, Mai, Institute of Policy and Strategy for Agriculture and Rural Development, Interview by Pareen P. Patel and Stephanie L. Waxman, Hanoi, Vietnam, 19 March 2007.

Ta Thi Khanh, Van, Institute of Policy and Strategy for Agriculture and Rural Development,

Interview by Pareen P. Patel and Stephanie L. Waxman, Hanoi, Vietnam, 19 March 2007.

Nguyen Bai, Duong, Ministry of Agriculture and Rural Development, Interview by Pareen P. Patel and Stephanie L. Waxman, Hanoi, Vietnam, 20 March 2007.

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Benchmarking the Global Cashew Industry

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