Côte d’Ivoire: Processing cashew nuts to fight the smugglers
Dekel Agri-Vision will be relying on processing raw cashew nuts in Côte d’Ivoire to limit the financial impact of volatile palm oil prices, executive director Lincoln Moore tells The Africa Report.
The company, which has stock trading on London’s Alternative Investment Market (AIM), is “basically focusing on cashews” in addition to its core palm oil business, says Moore. “We want to get that right before spending on other projects.”
Côte d’Ivoire is one of the world’s largest producers of cashews, and a more developed processing industry would allow it to keep a greater share of the value. Less than a fifth of domestic production is processed inside the country, with the bulk being exported for processing in India, Vietnam and Brazil before reaching final consumers in Western Europe and Asia.
Adding value through processing would help Côte d’Ivoire to reduce cashew smuggling.
- The country’s output fell 17% in 2019, with the country’s cashew council estimating that between 150,000 and 200,000 tonnes of cashews were smuggled out, mostly to Ghana.
- The Côte d’Ivoire government had cut the minimum farmgate price for cashews from 500 CFA francs per kilo to 375.
- The increase back to 400 CFA francs in February this year leaves most of that cut in place.
Dekel needs to reduce its exposure to the palm fruit harvest in Côte d’Ivoire and to international palm oil prices.
The company said last week that the first milling equipment shipment from Italy for the cashew project had been delivered to the project site at Tiebissou in Côte d’Ivoire.
- Moore expects the cashew plant to be commissioned in April 2021 and says it can become profitable within six months.
- The aim is to raise an initial 10,000 tons of raw cashew nut capacity to 30,000 tons by 2023.
- Social distancing won’t be a problem. The cashew nut milling will be done outdoors meaning there is no need for people to be in close proximity, says Moore.
Renewable Power On Hold
International palm oil prices were hit by lockdown after reaching a high around $870 in January. Dekel can still produce profitably at around $700, Moore says, with international prices recently having recovered to that level. The company says that there is usually a lag of four to five weeks before local prices adjust to changes in international markets. So it expects to see a “material improvement” in the palm oil prices it receives in August compared with July.
The impact of COVID-19 has delayed the company’s other diversification projects. A planned renewable power project using waste products from palm oil production has been put on hold due to the “significant” capital expenditure needed, he adds.
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The company has not needed to lay people off due to COVID-19. Dekel “should be OK” without needing to raise further financing, he said. If more money is needed, equity financing, bonds or bank debt could be appropriate avenues, he adds.
Dekel is also planning a project involving an unnamed new commodity, says Moore. This will be able to “sit side by side” with palm oil, using the same infrastructure and labour force.
Commodity-producing companies and countries need to add value to have the best chance of riding out the economic consequences of COVID-19.