Cashew producers abandoning $1bil dream

VietNamNet Bridge – The Vietnam Cashew Association (Vinacas) has called for help to overcome its current difficulties. With continued losses, cashew producers have given up the dream of becoming a member of the ‘$1bil club’, the industries which have the export turnover of $1bil and higher.

The Vietnam Cashew Association has called for help to overcome its current difficulties

Cashew producers have been in desperate straits because of objective difficulties, and because of… themselves. They have borrowed a lot of money from banks to import cashew materials at high prices for domestic processing but they have not used all the imported materials. As cashew nut prices have been decreasing, the more they produce, the more they lose.

Objective difficulties

In a dispatch sent on November 20 to the Prime Minister, Ministry of Finance and State Bank of Vietnam, Vinacas said that the cashew nut exports to key markets like the US and EU have been decreasing dramatically in the last months of 2008 to just 60% of the same period of 2007. Meanwhile, export prices have dropped sharply by $2,000, from $6,500 to $4,500/tonne.

Cashew processors have had to borrow VND8,000bil from banks to collect materials for processing. However, sales of finished products have been very slow, making it difficult for businesses to pay bank debts.

Meanwhile, according to Vinacas, enterprises have been unable to get tax refunds due to the fact that importers are tardy in making payments.

Going in for fraud, exporters hurt themselves

In fact, exporters have also been killing themselves.

In mid 2008, foreign cashew nut importers threatened to sue Vietnamese exporters for breaking contracts. Vietnamese exporters did not deliver products under the signed contracts, but sold products to others when the prices went up. The exporters planned to fulfill the contracts later, but they could not do that as the material prices increased sharply. If they still purchase materials to fulfill the contracts, they would suffer the loss of VND176bil.

Therefore, cashew producers have sent dispatches to relevant ministries, asking for tax reductions to help the cashew processing industry survive.

Cashew processors also came up with the clever ‘initiative’ of using 502 glue to repair broken cashew nuts. As importers discovered the fraud, they refused the consignments.

$1bil in export turnover? Just a dream

The continued failures in business have prompted farmers to give up growing cashews. The income brought by cashew growing is about VND20mil/ha, lower than rubber, at VND60-70mil/ha, and cocoa VND70mil/ha.

In cashew-growing areas like Binh Thuan, Binh Phuoc and Binh Dinh, farmers have chopped down cashews to grow other plants.

The Ministry of Agriculture and Rural Development has forecast that the cashew growing area will be 400,000 ha instead of 450,000 ha as previously forecast. Meanwhile, cashew enterprises cannot use imported materials, as they have to bear high interest rates for bank loans, while market prices always fluctuate.

As such, the dream of exporting $1bil worth of cashew products by 2010 may not come true.