Vietnamese cashew entrant takes on Olam in Africa deals

Bloomberg

A Vietnamese conglomerate is entering the cashew market with possible deals in West Africa for more than a 10th of global output, a bold start to take on the $7 billion 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 cashews by a single company could sway prices in a market that’s not traded publicly and dominated by a handful of traders. It could also offer poor, small-scale African farmers better assurance that their crop would be bought.
Hanoi-based T&T Group JSC, which holds investments that range from motorcycle parts to banks and real estate, will purchase 200,000 metric tons of raw cashews this year from the world’s No. 2 producer, Ivory Coast, said Adama Coulibaly, the head of the local Cotton and Cashew Nut Council.
The volumes may increase to 400,000 tons 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 tons of nuts this year, said Jaime Gomes, the head of an association of farmers.
“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 tons 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.

Signing Contracts
“They’re attempting to become a major player, but I doubt that they have the capability to do that,” said Sampat. “Signing contracts doesn’t mean much.”
If T&T goes ahead with its cashew purchase of 50,000 tons 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.
A representative for T&T declined to respond to questions. Emails to Chairman Do Quang Hien remain unanswered.
Regardless of the potential pitfalls of a deal, farmers in Guinea-Bissau are optimistic that a large purchaser would cut out layers of intermediaries and give them a bigger slice of the value chain.
Last year, they were stuck with unsold stock when traders refused to purchase nuts at the government’s minimum level after a sharp drop from record global prices, leaving producers struggling to pay for food, medicine and school fees.