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West African cashews draw Vietnamese buyer to challenge Olam

Highlights

  • T&T Group eyes deals for more than a tenth of global output
  • Company seeks to buy nuts from Ivory Coast, Guinea-Bissau

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.

Going Nuts

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.

Lifeline

First brought to Africa from Brazil by Portuguese colonizers in the 16th century, cashews have become a lifeline for one of the world’s poorest nations, where the nut accounts for about 90 percent of exports and two-thirds of the population grows the crop to make a living.

“This could be good for us,” said Moises Ca, a cashew farmer who lives in an adobe home that lacks electricity and running water, half an hour’s car ride from the capital, Bissau. “We will get more out of our crop.”

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