A Vietnamese conglomerate is entering the West African cashew market with possible deals for more than a 10th of global output.
Hanoi-based T&T Group JSC, is willing to take on the $7billion industry’s dominant buyers such as Olam International Ltd.
In a fractured sector with dozens of producers, the purchase of such a large amount of cashew by a single company could sway prices in a market that’s not traded publicly and is dominated by a handful of traders.
It could also offer poor, small-scale African farmers better assurance that their crop will be bought.
T&T Group JSC, which holds investments that range from motorcycle parts to banks and real estate, will purchase 200,000 metric tonnes of raw cashew this year from the world’s No-2 producer, Ivory Coast, said Adama Coulibaly – head of the local Cotton and Cashew Nut Council. The volumes may increase to 400,000 tonnes in coming years, T&T said on its website.
The company is also in talks with producers in Guinea-Bissau, Africa’s third-largest grower, to buy a further 50,000 tonnes of nuts this year, said Jaime Gomes, the head of a farmers’ association.
“These are huge volumes,” said Pankaj Sampat, a partner at Mumbai-based cashew dealer Samsons Traders. “If this new player buys such large volumes, it will certainly have a significant impact on the market.”
Global output of the kidney-shaped nut, coveted in Europe and Asia for snacks and baked goods, was 3.3 million tonnes in the 2017-18 global harvest – of which Africa accounted for more than a half, according to the International Nut and Dried Fruit Council.
To be sure, T&T may struggle to fulfill its agreements because newcomers typically take time to establish infrastructure and build distribution channels, said Sampat. Singapore-based Olam took years to build a network of farmers across Africa and runs its own processing plants in Asia.
“They’re attempting to become a major player, but I doubt that they have the capability to do that,” said Sampat. “Signing contracts don’t mean much.”
If T&T goes ahead with its cashew purchase of 50,000 tonnes in Guinea-Bissau, it already signals a come-down from a preliminary agreement in August to potentially buy the country’s entire crop for 10 years.