Export and price behaviour of cashewnut in India

Abstract

India among the 28 other cashew growing countries is the largest area holder (9.53 lakh ha), processor and importer of cashewnuts. India holds a major share of around 54 percent in the global trade from 21 percent of its cashew area. The Indian cashew industry, apart from being a prominent national exchequer, provides sustainable employment opportunities to 5.5 lakh workers annually, mostly women. As any violent price fluctuations can have adverse effects on the industry, reliable price information is an urgent need for all stakeholders. Hence, the present study “Export and price behaviour of cashewnut in India” was taken up with the objective of analyzing the export and price behaviour of cashew in India and evolving a reliable price forecasting model for cashew kernel prices in the domestic (Kollam) and international (London) markets. The study was conducted based on the secondary data published by various institutions. The Compound Growth Rate (CGR) and the trend indices for the post liberalization period (1993-2011) indicated that area under cashew has been steadily increasing but production and productivity showed wide fluctuations in certain years. During the study period, Kerala registered negative growth rates in area, production and productivity because farmers have shifted to more remunerative crops like rubber. The CGR analysis of cashew trade in the pre and post-liberalisation periods revealed that exports of cashew kernels and import of raw nuts fell in the post-liberalization periods. But export of CNSL rapidly grew in the post-liberalisation period indicating its versatile need as raw-material in many industries. An analysis of the net export earnings revealed that earnings have been falling since 2000 stressing the need to boost Indian cashew production to meet the export requirement. The price behaviour of cashew kernels was studied using the techniques of classical decomposition of time series analysis. The monthly average price data on cashew kernels in domestic (Kollam) and international (London) markets were decomposed in to its four components viz., secular trend, seasonal, cyclical and irregular variations. The analysis showed that the cashew kernel prices in both domestic and international markets widely fluctuated during the period 1999 to 2009 February after which an increasing trend in prices was noticed. The prices of cashew kernels in both markets generally increased from 2009 onwards due to global supply constraints but the prices in the domestic market abruptly fell in 2011 July. Seasonal indices revealed that the buoyant phase was observed during June to July with the highest price index in July and the trough period was observed during March to April with the lowest index in the month of April. In the international market, the buoyant phase was observed during June to August with the peak price in August and the trough period was observed from February to May. The cyclical indices for the international and domestic markets showed that no price cycles could be identified in prices for both markets. The irregular indices revealed that there were considerable irregular variations in cashew prices in both the markets. The instability in cashew prices was studied using the coefficient of variation (CV) which was 23.87 per cent for domestic market and 26.46 per cent for international market. The export competitiveness of Indian cashew kernels was measured using NPC under exportable hypothesis. The mean NPC value for the period was 1.02, which is slightly more than unity indicating that the commodity was not export competitive as a whole but a trend towards gain in export competitiveness from 2008 was noticed. Various price forecasting models viz., moving average, single exponential smoothing, double exponential smoothing, ANN and ARIMA models were tried to develop a reliable price forecasting model for cashew kernel prices in both domestic (Kollam) and international (London) markets. While ARIMA model proved to be the best in predicting international kernel prices, no model could suitably forecast the prices in the domestic market. The market integration studies using the co integration technique showed that both domestic and international markets were integrated. The pair wise Granger Causality test indicated that there was influence of domestic kernel prices on international kernel prices and not vice versa. This result is of utmost importance as cashew kernels from Kerala sets the benchmark quality in the world market. Even though India is the largest area-holder under cashew, it lags behind in productivity. Development of new technology and their efficient transfer holds the key to increase productivity and become self-sufficient in raw nut production. More efforts need to be taken to improve cashew plantations in non-traditional areas like West Bengal and other north-eastern states which has contributed to 3 lakh MT of the total cashew production in 2010-11. By maintaining quality standards, India can remain a major player in the export scenario.