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Cashews

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Panel▪ Chair:

Hari Nair President, Western India Cashew Co Pvt Ltd, India

▪ Panel:

Marc Rosenblatt, Partner, The Richard Franco Agency, USA

Vincent Rieckmann Managing Director, August Topfer & Co, Germany

Rahul Kamath Partner, Bola Surendra Kamath & Sons, India

Vu Thai Son CEO, Long Son Joint Stock Company, Vietnam

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Program1. Welcome

2. Presentation of Statistics

3. Discussion: 2019 & 2020 crops

4. Discussion: Markets

5. Alternative uses and new trends

6. Developments in processing

7. Round up

8. Q&A

Antitrust Statement: The fundamental purpose ofthis session is for the participants to discuss differentaspects of the nut and dried fruit industry. It is thepolicy and practice of the INC Foundation to conductall its meetings and activities in strict compliance withantitrust and competition laws. There shall be nodiscussions of competitively sensitive information,including but not limited to prices, rates, coverage,market practices, claims settlement practices,customers or any other competitive aspect of anindividual company’s operation. INC participants tothis meeting commit not to enter into any agreementsbetween undertakings, decisions by associations orundertakings and concerted practices which mayaffect trade and which have as their object or effectthe prevention, restriction or distortion of competitionwithin the internal market. Each participant isobligated to prevent any discussion from fallingoutside these bounds.

Copyright Notice: All images used in thispresentation are for educational purposes only. Theyare either in the public domain and not subject tocopyright, or have been purchased. All images usedin this presentation are the property of theirrespective copyright owners.

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Cashew Production 2019-20 & Estimate 2020-21

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Raw Cashew Nut (RCN) · Metric Tons 2019/2020 2020/2021*

COUNTRYBEG.

STOCKCROP

TOTAL

SUPPLY

ENDING

STOCK

BEG.

STOCK CROP

TOTAL

SUPPLY

ENDING

STOCK

CAMBODIA n/a 210,000 210,000 n/a n/a 250,000 250,000 n/a

VIETNAM 30,000 375,000 405,000 45,000 45,000 450,000 495,000 n/a

INDIA 45,000 742,000 787,000 40,000 40,000 691,000 731,000 n/a

NIGERIA n/a 250,000 250,000 n/a n/a 225,000 225,000 n/a

BENIN 5,500 130,000 135,500 n/a n/a 130,000 130,000 n/a

TOGO n/a 20,000 20,000 n/a n/a 20,000 20,000 n/a

GHANA 28,000 110,000 138,000 n/a n/a 90,000 90,000 n/a

COTE D'IVOIRE 20,000 785,000 805,000 n/a n/a 740,000 740,000 n/a

BURKINA FASO n/a 120,000 120,000 n/a n/a 120,000 120,000 n/a

MALI n/a 46,000 46,000 n/a n/a 46,000 46,000 n/a

GUINEA CONAKRY n/a 50,000 50,000 n/a n/a 50,000 50,000 n/a

GUINEA-BISSAU n/a 200,000 200,000 n/a n/a 200,000 200,000 n/a

SENEGAL n/a 47,000 47,000 n/a n/a 47,000 47,000 n/a

GAMBIA n/a 18,000 18,000 n/a n/a 18,000 18,000 n/a

Sub Total Western Africa 53,500 1,776,000 1,829,500 n/a n/a 1,686,000 1,686,000 n/a

SUB Total Northern Hemisphere 128,500 3,103,000 3,231,500 85,000 85,000 3,077,000 3,162,000 n/a

MOZAMBIQUE n/a 70,000 70,000 n/a n/a 70,000 70,000 n/a

TANZANIA 220,000 245,000 465,000 117,000 117,000 250,000 367,000 n/a

KENYA n/a 6,000 6,000 n/a n/a 6,000 6,000 n/a

Sub Total Eastern Africa 220,000 321,000 541,000 117,000 117,000 326,000 443,000 n/a

INDONESIA n/a 115,000 115,000 n/a n/a 115,000 115,000 n/a

BRAZIL n/a 150,000 150,000 n/a n/a 150,000 150,000 n/a

SUB Total Southern Hemisphere 220,000 586,000 806,000 117,000 117,000 591,000 708,000 n/a

OTHERS n/a 54,000 54,000 n/a n/a 54,000 54,000 n/a

WORLD TOTAL 348,500 3,743,000 4,091,500 202,000 202,000 3,722,000 3,924,000 n/a

Sources: Global Cashew Council and INC.

*Harvest from January'20 through June'20 (Northern hemisphere), from September'20 through February'21 (Southern hemisphere).

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Processing of Cashew Kernels - 2019

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India39%

Vietnam55%

Brazil3%

Indonesia1%

Others2%

COUNTRY Domestic ImportedKernels

Produced

RCN (MT) RCN (MT) (MT)

INDIA 787,000 763510 341,112

VIETNAM 405,000 1809990 487,298

Western Africa

NIGERIA 19,000 0 3,800

BENIN 12,000 0 2,400

GHANA 5,000 0 1,000

COTE D'IVOIRE 70,000 0 14,000

BURKINA FASO 5,000 0 1,000

Sub Total Western Africa 111,000 0 22,200

Eastern Africa

MOZAMBIQUE 25,000 0 5,000

TANZANIA 10,000 0 2,300

KENYA 6,000 0 1,200

Sub Total Eastern Africa 41,000 0 8,500

INDONESIA 24,000 0 5,040

BRAZIL 150,000 0 30,000

WORLD TOTAL 1,518,000 2,573,500 894,150

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World crop 2019 & 2020

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India20%

Vietnam10%

Cambodia6%

W.Africa47%

E.Africa9%

Indonesia3%

Brazil4%

Others1%

2019 RCN (MT) 2020 (E) RCN (MT)

Opening Stock 348,500 202,000

Crop 3,743,000 3,722,000

Total Supply 4,091,500 3,924,000

Total usage 3,889,500

o 2019: Opening stock 348,000 MT; 220,000 MT in Tanzania. o 2020: Opening stock of 220,000 MT vs normal ~60,000 MT.

West Africa o 11 West African countries supply 1.78 mio MT.o Low 2nd and 3rd flowering reported in CiV & Ghana.o Logistics issues: Inland transport & Shipments delayed.o The quality and yield are lower than normal.o Total WA Crop projected 90K MT lower.

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Vietnam & Cambodia Crops

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VIETNAM 2019 2020

Total Acreage (Ha) 290,400 310,000

Total Crop (MT) 375,000 450,000

o Cashews are grown mainly in a small contiguous region in South Vietnam.o Productivity has varied from 1.2 MT to 1.8 MT per Hectare depending on the weather.o 2020 weather conditions were very good. The crop was very good in both quality and quantity.o The farmers also released the crop quickly due to the Covid uncertainty.

CAMBODIA 2019 2020

Total Crop (MT) 210,000 250,000

o Area of production is growing in Cambodia.o 2020 weather conditions were very good, as in Vietnam.

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Vietnam Export of Kernels: Jan-May 2020 vs 2019

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MONTH 2019 (M.Ton) 2020 (M.Ton) DIFFERENCE

JAN 33,169 26,248 -20.87%

FEB 14,596 27,874 90.97%

MAR 33,013 47,242 43.10%

APR 36,877 45,914 24.51%

MAY 41,718 40,481 -2.97%

TOTAL 5 MONTHS 159,373 187,759 17.81%

USA CHINA EU + OTHERS

2019 2020 %∆ 2019 2020 %∆ 2019 2020 %∆

JAN to APRIL 34,385 49,178 +43% 14,103 8,482 -40% 69,167 89,618 +30%

o Export to China in Feb-April was affected due to port and shipment issues due to Covid. o Chinese consumption is expected to catch up in the next few months.

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Indian Crop

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100K

115K

121K

70K

70K69K

23K

2020 Crop (E): 691 K MT vs 2019: 742 K MTo COVID 19 lockdown during the peak

harvesting season affected the crop both in terms of Quality and Quantity

o Tea Mosquito and other pests in the West.o As the flowering was delayed, many trees

had only one flowering cycle.o Cyclone and other unfavourable weather

conditions last yearo Crop is down by 20% in Western coast

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Consumption 2019

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2019 Kernels ‘000 MT

India 275

N. America 184

Europe 141

Japan/Australia + Others 129

China 77

Middle East 51

India32%

N.America21%

Europe17%

China9%

Middle East6%

Japan, Australia + Others

15%

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Long Term Price Trend of Whole and Broken cashews

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• It took a long time for USA retail prices, and thus consumption to react to lower FOB prices• The high prices of 2017 / 2018 had an especially large impact on the consumption of brokens• Consumption for whole grades was accelerating in 2019; broken grades were taking longer

Year 2007 to 2020

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USA Market – Covid & Beyond

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• Supply chain concerns during Q1 resulted in increased imports of safety stocks

• March saw a consumption surge (30%+ at many retailers) as consumers filled their pantries

• April sales remained high (~10%) due to increase in at home snacking

• Some customers are reporting a hangover effect in May

• The impact was not uniform. Some did better than others. Food service hurt badly.

• Future is an unknown and forecasting is very difficult. • Will the country continue to open? • Will there be a second wave (now or in the fall)?• Will consumption patterns (online vs. in store, planned vs. impulse) revert back? • What is the short and longer term economic impact? • How will each of these impact future consumption?

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European Market

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o EU consumption was good in 2019. ~10% up in major markets like Germany.

o Importers bought good volumes in December due to good sales and attractive prices.

o Importers bought even more in Q1 as insurance, anticipating supply chain issues.

o Arrivals actually went up in March-May due to record shipments from Vietnam.

o Retail Sales grew in March by 30%, but growth slowed to 10% in April and was flat in May.

o Buyers are asking for delivery delays, and order-sizes are smaller due to uncertainty.

o So, high stocks with importers now.

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Middle East Market

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Country Approx Market Size Main Sales Trigger COVID 19 effect

UAE 23000 MT Trading Hub -20 to 30%

Saudi Arabia 11000 MT Religious Tourists - 30 to 40%

Kuwait 2000 MT Small country, captive market -10 to 20%

Qatar 1800 MT Small country, captive market -10 to 20%

Others 11000 MT Captive markets -10 to 20%

Prospects for rest of 2020

o Economy is dependent on recovery of crude oil priceso Some countries like Saudi Arabia have announced increases in taxes and tariffs o Mainly a spot market; hence lower prices are quickly passed on to consumers.

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Indian Market

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Product % of Market

% Change Expectation - Near Future

Snacking Wholes 30% - 10 to 20 % Likely do be steady to good

Gifting Wholes 10% N.A Depends upon economic recovery

Bakery & Confectionery Broken 15% + 50 to 70 % Growth may taper a bit

Sweets Broken 10% - 50 to 70% Likely to recover from lows

HORECA Broken 10% - 50 to 70% Likely to recover from lows

Frozen Dessert Broken 10% - 50 to 70% Likely to recover from lows

Marriages/Functions Broken 5% - 50 to 70% Likely to recover from lows

Temples Broken 5% - 50 to 70% Likely to recover from lows

SavouriesBroken & Wholes 5% - 10 to 20% Will continue to be steady

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Alternative Uses and Health Perceptions in the USA

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o Perception of nuts as a healthy snack has helped drive consumption growth

o Increase in healthy options: Organic & Unsalted

o Large growth, off a small base, on confectionary uses:o Trail mixes, blends, etc.o Cashew Buttero Cashew Milko Bars / bakery

o Covid-19 has had an uneven impact depending on channel (store vs. restaurant)

o Cashews have ridden the coattails of other nuts rather than lead.

o Significantly more can be done to promote cashew specific benefits and uses

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European Market - Alternative usage of cashews

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o Food Trends in Europe− Wholefoods - raw, less additives, less salt, less fat, etc.− Various diets - vegan, vegetarian, low-carb, high-protein, etc.− Organic - additional impulse for organic consumption

o New innovative cashew products are growing in popularity− Cashew cheese − Cashew yoghurt− Cashew shakes− Cashew protein snacks

o Prospects / Further growth − Strong demand for cashew pieces− Attractive price level helps to create new markets/products− Quality essential to build long term usage as ingredient

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Mechanization and capacity-expansion in India

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• India was circumspect in mechanizing cashew-shelling.

• Indian domestic market does not accept the taste-difference of machine-shelled nuts.

• Now, mechanization is possible with precautions to ensure product quality

• So, investment for rapid expansion of processing capacity is now happening.

India: Investment in Automation

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Thank you

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