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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Benchmarking the Global Cashew Industry
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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Benchmarking the Global Cashew Industry
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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Benchmarking the Global Cashew Industry
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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Benchmarking the Global Cashew Industry
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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Benchmarking the Global Cashew Industry
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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Benchmarking the Global Cashew Industry
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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Benchmarking the Global Cashew Industry
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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Benchmarking the Global Cashew Industry
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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Benchmarking the Global Cashew Industry
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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Benchmarking the Global Cashew Industry
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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Benchmarking the Global Cashew Industry
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
0
50
100
150
200
250
300
350
400
1970
-71
1975
-76
1980
-81
1985
-86
1990
-91
1995
-96
2000
-01
2001
-02
Year
Imports
% Share ofimports in totalexports
15
Benchmarking the Global Cashew Industry
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.
16
Benchmarking the Global Cashew Industry
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
Benchmarking the Global Cashew Industry
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
Benchmarking the Global Cashew Industry
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
Benchmarking the Global Cashew Industry
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.
20
Benchmarking the Global Cashew Industry
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
21
Benchmarking the Global Cashew Industry
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.
22
Benchmarking the Global Cashew Industry
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
0
20
40
60
80
100
120
140
160
180
75 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00' 01' 02' 03' 04'
1‘000 tons
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
23
Benchmarking the Global Cashew Industry
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
24
Benchmarking the Global Cashew Industry
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
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Benchmarking the Global Cashew Industry
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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Benchmarking the Global Cashew Industry
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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Benchmarking the Global Cashew Industry
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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Benchmarking the Global Cashew Industry
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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Benchmarking the Global Cashew Industry
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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Benchmarking the Global Cashew Industry
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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Benchmarking the Global Cashew Industry
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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Benchmarking the Global Cashew Industry
- 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
Benchmarking the Global Cashew Industry
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
Wholes Per Worker Per Day
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
Wholes Per Worker Per Day
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.
Moz
ambi
que
face
s m
ore
exch
ange
rate
vo
latil
ity fr
om in
tern
al p
ress
ures
suc
h as
in
flatio
n. F
urth
erm
ore,
sin
cce
the
maj
or
mar
ket f
or M
ozam
bica
n pr
oces
sed
nuts
ar
e in
Am
ster
dam
they
are
less
con
cern
ed
with
a d
efla
ted
US
cur
renc
y.
Port to Export
Bra
zil
Indi
aVi
etna
mM
ozam
biqu
e
Com
para
tive
adva
ntag
eTh
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
Pro
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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L. Waxman, Hanoi, Vietnam, 12 March 2007.
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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.