Docstoc

Justification

Document Sample
Justification Powered By Docstoc
					CASHEW SECTOR DEVELOPMENT IN VIETNAM
(Nguyen Ngoc Que, Nguyen Tien Manh)

Introduction

The Cashew tree with scientific name - Anacardium Occidentale L., is often called “Dao
lon hot” (means turn-inside-out stone peach) in Vietnam since the nut is outside the fruit.
In fact, the nut is a real fruit, and the cashew apple is a false fruit. Cashew is a fruit tree
originated from Latin America and was introduced into Vietnam since between 16th
century, mainly in southern Vietnam. Initially, it was planted around the house as a shade
tree with healthy fruit and nuts.

Nowadays, cashew nut – the main commercial product from cashew trees – is considered
as a commodity of high value for export. The oil extracted from cashew nut could be
used to produce healthy vegetable butter not causing atherosclerosis. Cashew nut shell
liquid (CNSL) is an important industrial raw material for resin manufacture. Besides,
other by-products of the cashew tree such as cashew apple, cashew shell, cashew timber
and bark, could bring about considerable income if there were suitable processing
technologies.
The cashew tree is evergreen. It grows up to 12 meters high and has a spread of 25
meters. Its extensive root system allows it to tolerate a wide range of moisture levels and
soil types. With a good drought-resistant ability, it could be planted to cover barren hill
& land for environment protection. However, commercial production is advisable only in
well-drained, sandy loam or red soils. Annual rainfall needs to be at least 889mm and not
more than 3048mm. Cashew trees are most frequently found in southern coastal areas.
Shell oil represents about a quarter of the mass of an unshelled nut and approximately
equal to that of the kernel. One ton of raw cashew can produce 220-240 kg kernel and
80-200kg shell oil.

Figure: Cross-section of a Cashew Fruit
                                        At the moment, there are about 50 tropical
                                        countries planting cashew with an area of 1.5
                                        millions ha, producing about more than 1
                                        million tons of raw cashew nut per year.
                                        Biggest cashew nut exporting countries in the
                                        world are India, Brazil, Vietnam, etc. The
                                        cashew nut export volume reached 150,000 tons
                                        and 250,000 tons in 1998 and 2005
                                        respectively.
                                        In Vietnam, the cashew has gained attention
                                        since 1988 and now has been a commercial
                                        plant with an important role in the country’s
                                        agricultural economy. According to Ministry of
                                        Agriculture and Rural Development (MARD),
                                        in 1990 the cashew planted area was only 70
thousand ha, and the output was about 28 thousand tons of raw nuts of which 27
thousand tons were exported, earning US$14 millions. In 2005, the cashew planting area
soared up to 328 thousand ha, producing 370,000 tons of raw cashew nut, bringing about
nearly US$ 500 millions of annual export earning (See table 1).


                                                                                             1
Table 1. Export Performance of agricultural commodities during 1991-2005
 Indicator                            Unit     1991     1995    2000     2005
 Total Agro-Export Value               Mill.USD     803.5 1899.7      2894.4    4088.8
 1. Rice
     - Volume                           1000ton     1,033     1,988 3,476.7 5,162.0
   - Value                             Mill.USD     234.5       530    667.35 1,382.8
 2. Rubber
   - Volume                             1000ton       62.9    138.1     273.4       564
   - Value                             Mill.USD       49.6    187.9    166.02     772.1
 3. Coffee
   - Volume                             1000ton       93.5    248.1    733.94       880
   - Value                             Mill.USD       76.3    598.1    501.45     717.9
 4. Cashew
   - Volume                             1000ton     30.59      98.9      34.2       103
   - Value                             Mill.USD     25.49      88.8    167.32     481.0
 5. Vegetables & Fruits
   - Volume                             1000ton
   - Value                             Mill.USD       33.2     56.1    213.56     234.8
 6. Pepper
     - Volume                           1000ton     16.25     17.95        37       106
     - Value                           Mill.USD     17.58     38.97    145.93     146.1
 7. Tea
   - Volume                             1000ton          8     18.8     55.66        85
   - Value                             Mill.USD        9.2     25.3     69.61      94.9
 8. Groundnut in shell equivalent
     - Volume                           1000ton     165.4       230     76.25        55
     - Value                           Mill.USD      49.7      69.9     41.04      33.4
Source: GSO

With its strong development, cashew has become one of the major agricultural exports of
Vietnam. For the time being, Vietnam is the world’s second largest cashew producing
and exporting country in the world, following India.

OVERVIEW ABOUT PRODUCING, COLLECTING - PURCHASING, AND
EXPORTING CASHEW PRODUCT IN VIETNAM

1.      Characteristics of cashew production

1.1. Technical characteristics
Cashew originates from the coastal tropical area. It belongs to the timber family with the
height of 7-10m, diameter of 20-30cm, and branches out near the root. The cashew is
semi-wild, has outstretched canopy, and a lifespan of 30-40 years. The suitable



                                                                                          2
geographical, climatic, soil condition would determine the distribution of cashew
production. Details are as follow:
-       Cashew tree is a tropical, fast growing evergreen tree, resistant to drought, low
demanding as for soil, although it prefers well-drained, deep, sandy soil. Poor soil types
like yellow-red soil, sandy soil, impoverished grey soil, etc. all are suitable for cashew
tree provided that it is well-drained, soft with deep cultivating layer. These
characteristics have created an extraordinary comparative economic advantage for
cashew against other industrial trees such as rubber, coffee, tea, etc. in term of land use.
In Vietnam, the cashew tree does not compete with other important economic plants for
land. The cashew tree has helped making use of poor quality barren land in Vietnam.
-       Cashew does not require much intensive care and agricultural practices, although
advised for specialized production. Thus, fertilizing, irrigating, spraying against
pests/diseases and pruning can be limited to a minimum in small-holder environments.

                                                     -       The cashew tree generally
                                                     prefers altitudes lower than 600 m
                                                     above sea-level. If the tree is
                                                     cultivated in land elevated too high,
                                                     the tree output will decrease
                                                     obviously.
                                                     -       The cashew trees are
                                                     genuinely tropical, resistant to high
                                                     temperatures,     but    very    frost
                                                     sensitive. Although cashew can
                                                     withstand a wide range of
                                                     temperatures from 5 to 45 0C, a
                                                                                     0
                                                     monthly mean of 24-28 C is
                                                     regarded as optimal. The cashew
                                                     trees cannot bear the frost and long
                                                     lasting cold weather in the North of
                                                     Vietnam.
                                                     -       A moderate annual rain fall
                                                     of 1000-2000 mm with distinct dry
                                                     season at the time of blossoming and
                                                     fruit-bearing      provides      ideal
                                                     conditions, but drier conditions are
                                                     well tolerated. As cashew is a cross-
                                                     pollinating plant, a long lasting rain
                                                     during the blossom season will
adversely affect the pollinating process and reduce the output.
-       Abundant sunlight of 2000 hours per year or more is required. This is the decisive
climatic factor. Cashew trees need much sunlight for blossoming and fruit-bearing to
produce high yield. Therefore, the pruning and forming are essential agro techniques for
cashew tree.
-       High humid conditions will reduce flowering, pollination and fruit set as well as
increase the risk of pest infestation.




                                                                                          3
Crop requirements for cashew
Physical characteristic                           Unit               Crop requirement
                                                   0
Average annual temperature                           C                            27.0
                                                   0
Absolute minimum temperature                         C                           ≥ 5.0
                                                   0
Absolute maximum temperature                         C                            45.0
Average sunlight                                  hour                         ≥ 2000
Average annual air humidity                        %                                85
Average annual rainfall                           mm                    1,000 - 2,000
Average annual wind speed                         m/s                              2-3
Altitude                                          m asl                         < 600

The most suitable ecological area for the cashew to develop and produce high yield in
Vietnam are from 15o north latitude to 15o south latitude. Provinces in southern Vietnam
are very suitable for the cashew to grow.

Regional Characteristics




1.2.   Economic characteristics
Cashew planting for commercial production must strictly follow the technical
requirements such as careful seed/seedling selection, asexual reproduction (vegetative
propagation), moderate density, special cultivating technique, and suitable care taking,


                                                                                      4
forming and pruning for the highest yield cashew grove. Casual planting, ignoring of
technical requirements, and treating cashew as a semi-wild tree will lead to failure. The
effect of bad planting practice would be more serious for a perennial tree as cashew,
since it would last for long period.
-        Cashew has long economic cycle (30-40 years) but a relatively short time for tree
establishment. After 4 year and a half, a cashew trees may produce high yield. This is an
advantage because investment for a newly planted ha of cashew is lower, and the time
needed for retrieving capital is shorter than that of other industrial trees (high rate of
return).
-        Initial investment and annual cost for a unit area of cashew is lower than that of
other perennial industrial crops – equal only 1/3 those of rubber, coffee or tea. Cashew’s
long economic cycle will lead to low depreciation cost – approximately 1/4 those of the
above mentioned industrial crops. Normally, in the regular production time, each ha of
cashew consists of 160-200 cashew trees after pruning. Due to this low number of trees
and to the fact that cashew trees have extended their shade, the labor cost (weeding,
fertilizing, hoeing), and the amount of fertilizer needed for a unit area of cashew decrease
notably. Low initial investment and annual cost in a developing country with poor
farmers like Vietnam will be a very meaningful advantage. (See table 2)


Table 2. Comparison of Establishment cost, annual production cost & orchard
depreciation between cashew-nut and some other perennial crops in Vietnam
 Items                      Unit         Cashew            Tea           Coffee         Rubber
 Establishment cost         USD/ha       700-800          1.970           2.320          2.243
 Annual material cost       USD/ha         118             239             603            146
 Annual labor cost          USD/ha          91             494             277            145
 Annual orchard             USD/ha        25-27             98             93             75
 depreciation cost
 Productive lifecycle         year          30              20             25             30
Source: Vinalimex-1990. Economics Institute - 1991. IAE survey 1995 & 1998.
Note: Labor wage VND10,000 per man-day; Exchange Rate 1 USD = 11,000 VND

-       The seasonality in cashew production is seldom strained, only in 6-8 harvesting
weeks. Also, cashew harvesting is not that complicated and does not take much effort
compared to other industrial crops. For example, rubber and tea producers are year-round
busy with rubber latex extracting and tea bud collecting. Coffee also requires much effort
with watering and cropping.
-       Cashew processing is relatively sophisticated. Products from cashew are mainly
for export; therefore producers have to follow very strict quality requirements. Quality of
cashew nut in the world market is rather high (including 24 grades, classifying by
quality: big nut, as a whole, and in fine white color).
Cashew nut processing is the most important step and takes much labor. This includes
many phases in which the detaching cashew nut from its shell is the most difficult and
labor-consuming one because the cashew pip is very hard, tough, and the cashew shell
contains oil (causing eye stinging and hand burning).
The phase of nut detaching can be done manually but with low productivity and is
harmful. The labor intensive semi-mechanized method – using machine to cut the cashew


                                                                                          5
shell – is popular in Vietnam and India. The strength of this method is the high rate of
cashew nut collected (85-95%), creating many jobs, low initial investment in machinery,
and machine can be manufactured domestically.
-       Cashew oil and other products. Steps taken to extract cashew oil and other drink
from cashew apple are sophisticated and effort-consuming. Especially, producing drink
from cashew pip needs modern processing technology to solve the problem of food
hygiene and safety. At the moment, Vietnam can only extract some cashew oil for paint
and vanish production, and tries some drink from cashew fruit. However, domestic
producers still encounter many difficulties in distribution, technology, consuming taste
etc.

2.     Cashew production in Vietnam

2.1. Area – Yield – Output
The cashew has presented in Vietnam for more than 300 years. Previously, the cashew
tree was only scattered around home garden, hill, and did not have an economic role. It
was not until the early of 1980s that the cashew had gained attention and been developed
and planted in large scale and more densely. Vietnam lies completely in the tropical belt.
The Bach Ma Mountain – the end of the Truong Son Range – lies vertically to meet the
South China Sea and separates Vietnam’s climate into two different climatic regions. The
North of Vietnam, located in sub-tropical climatic region with a cold winter, is not
suitable for cashew growing. The South of Vietnam, affected by south-western monsoon,
has two seasons, dry and rainy ones; the dry-hot and humid climate here is suitable for
cashew growing. Therefore, cashew trees are grown mainly in the southern provinces of
Vietnam.
By 1988 – after nearly 10 years of development, Vietnam’s cashew area has increased
from 30,000 ha (in 1982) to about 100,000 ha. In 1989, due to the plunge of cashew pip
price (down to USD 350-400/ton), farmers in many places had not paid attention to
investment in intensive farming and caring and cut down the cashew grove. Afterwards,
cashew pip price increased, sometime reached USD 850/ton (1991), cashew has been
grown again and in 1993 the area of cashew in Vietnam reached 140,000 ha. In 2000,
2004, and 2005 the area reached 250,000 ha and 350,000 ha and nearly 400,000 ha
respectively. (See table 3).

Table 3. Acreage, yield & production of cashew nut in Vietnam
         Year                 Acreage                Yield              Production
                               (ha)                 (kg/ha)                (ton)
         1982                        30.500                                       1.300
         1987                      104.500                     400                1.500
         1990                                                                    28.000
         1993                      122.530                     580               70.000
         1995                      188.285                     628             110.000
         1997                      250.000                     777             140.000
         2000                      280.000                     535             150.000
         2002                      335.000                     740             248.000
         2004                      350.266                    1.100            350.000


                                                                                          6
        2005                  400.000                          1.100             370.000
Source: MARD 2000 & 2005. VINACAS, NIAP

The imprudent movement of cashew planting & the unsecured market cause the
instability in cashew production, the rise and fall in the cashew industry of Vietnam.
Cashew is planted mainly in southern provinces of Vietnam (from Quang Nam – Da
Nang southward) and the distribution among regions is not even because each region has
its own natural, economic and social conditions, in which the climate and land conditions
play the major roles. Cashew trees are concentrated in the South-East and Coastal
Central of Vietnam, accounting for more than 90% of the whole country’s cashew area.
Provinces having largest cashew area are Binh Phuoc (47%), Dong Nai (20%), Binh
Duong (7%), Ninh Thuan (3.4%), and Binh Dinh (2.8%).
In general, cashew growing in Vietnam is spontaneous, does not have a particular
planning and not appreciate intensive farming. The phenomenon of growing, cutting
down, and growing again happens frequently, thus, the economic effectiveness is not as
expected. The instable cashew price also makes farmers indifferent to intensive farming
and caring, leading to low yield and quality (see table 4).

Table 4. Cashew area by regions in Vietnam (Ha)
         Region              1982       1987        1993         1995        1997      2004
 1. South Central Coast      20.000      40.000     18.350        22.473      61.000    47.000
 2. Central Highland          2.500       3.000     13.760        28.462      27.000    19.266
 3. South East                7.000      55.500     90.420       137.414     149.000   278.000
 4. Mekong River Delta        1.000       6.000            -           476    13.000       6.000
     Whole country     30.500          104.500     122.530       188.285     250.000   350.266
Source: MARD, VINACAS.

In the previous period, the highest yield was only 500-700 kg/ha. Many years witnessed
lower yield. According to Vietnam Cashew Association, only 25-30% of Vietnam’s
cashew area reached the yield of above 1,000 kg/ha (1999). The main explanations for
this low yield are: lack of good seed, little concentration on intensive farming, lack of
strictly conformity of the production process, large area of old cashew trees requiring
improvement (about 250,000 ha), competing in purchasing raw cashew that leaded to
massive harvesting which in turn caused unstable quality, high rate of unripe and low
quality cashew fruit. Aside from these reasons, the dry climate in 1998, pestilent disease
and seed degrading in 1999 also contributed to the low yield of cashew in Vietnam.
In recent years, more attention has been paid to solving the above problems: hybridizing
to create high yielding cashew varieties, intensive farming, improving old cashew grove
etc. As a result, the country average yield has increased to above 1,000 kg/ha and the
cashew pip output has been increasingly gone up. In 1990, the cashew pip output of the
country as a whole was only 30,000 tons. This number increased to 110,000 tons in 1995,
150,000 tons in 2000, 350,000 tons in 2004, and 370,000 tons in 2005 – 12 times higher
than that of 1990. Today, the cashew has gradually consolidated its important position in
Vietnam’s agriculture economy. Cashew is a valuable export, creates many jobs,
recovers barren hill and land, and protects the ecological environment. Vietnam is one of
the three world’s largest cashew-nut producing and exporting countries.




                                                                                           7
2.2. Production Model
Cashew production in Vietnam is mainly undertaken by farming households. Before,
there was a little cashew area managed by some plantations and agriculture co-
operatives, but now, all the area has been handled to households. Thus, the farmers have
been enabled to proactively invest in intensive farming, raising the yield in the cashew
industry. In the years of good cashew price, high income from cashew tree has been the
driving force for farmers to enlarge the cashew area, pay more attention to intensive
farming, and take good care of the cashew grove.
The ability to attract labor to the cashew industry in Vietnam is relatively good. With
400,000 ha of cashew area at the moment and 500,000 ha in future, and with a norm of
0.8-1.0 labor/ha, the total number of regular labor working in the cashew grove is about
300,000 – 350,000. In the harvesting and pre-processing time, the seasonal labor may
increase about 20%. The total number of people working directly in Vietnam’s cashew
industry is about 310,000. In terms of household, there are about 180,000 households
growing cashew. The number of people relating to the cashew tree (both planting and
processing) is about 1.3 – 1.5 millions. In short, the cashew industry in Vietnam has
helped solving the problem of labor in the society remarkably.

Table 5: Labor in Cashew nut production
          Province                 1995                     1997                   2004
                              Area      Agro-         Area       Agro-       Area       Agro-
                               ha       labor          ha        labor        ha        labor
 I. South Central Coast       22.473 17.737           61.000     50.200      47.000     48.300
 1. Quang Nam                    897       718         4.000       3.200      3.500       2.800
 2. Quang Ngai                   265       212         3.000       2.500      3.500       2.900
 3. Binh Dinh                  5.657     4.526        15.000     12.000      10.000       8.500
 4. Phu Yen                       64        50         8.000       6.500      7.000       5.600
 5. Khanh Hoa                  1.864     1.490         7.000       5.500      7.000       5.500
 6. Ninh Thuan                   446       357         3.000       2.500      4.000       3.000
 7. Binh Thuan                12.980 10.384           21.000     18.000      12.000     20.000
 II. Central Highland         28.462 22.850           27.000     23.300      19.266     15.700
 8. Kon Tum                       11        90           500         450         266         200
 9. Gia Lai                   11.482     9.190        10.500       9.450      3.500       2.800
 10. Đắk Lắk                   9.627     7.700        10.000       9.000     11.500       9.200
 11. Lam Dong                  7.342     5.870         6.000       5.400      4.000       3.500
 III. South East             137.414 124.000         149.000    135.300     278.000    238.300
 12. Dong Nai                 32.990 30.000           35.000     31.500      70.000     63.000
 13. Song Be                  77.539 70.800           82.000     75.000     190.000    160.000
 14. Tay Ninh                  7.506     6.000        10.000       9.000      8.000       6.500
 15.TP Ho Chi Minh             2.133     1.700         2.000       1.800       -           -
 16.Ba RiaVungTau             17.246 15.500           20.000     18.000      10.000       8.800
 IV. Mekong River Delta          476       400        13.000     11.000       6.000       5.000
       Whole country         188.825 164.591         250.000    210.800     350.266    307.300

Exports
Vietnam earns 400-500 million dollars a year by exporting more than 100 thousand tons
of cashew kernels and the country's trade-links are spread over 35 countries. The top ten
buyers account for more than 90% of its total cashew export. Cashew is a craze in the



                                                                                            8
United States which is by far the largest buyer. The other major purchasers are China,
Holland, Australia, Canada, Russia, German, Japan and Italy.

Top ten of Vietnam's Cashew Buyers over 2003-05
                                             2003-2005
           Country name               '000          mill.
                                       ton   %      US$   %
 Total Vietnam's Export of 3 years    288.2 100.0 1185.3 100.0
 of which:
 Top Ten largest buyers               269.2 93.4 1101.2 92.9
 1. US                                108.1 37.5    434.5 36.7
 2. China                               58.3 20.2   220.0 18.6
 3. Holland                             31.9 11.1   140.6 11.9
 4. Australia                           31.5 10.9   135.2 11.4
 5. UK                                  15.2  5.3    66.5  5.6
 6. Canada                              12.0  4.2    50.1  4.2
 7. Russia                               3.7  1.3    17.4  1.5
 8. German                               3.1  1.1    14.7  1.2
 9. Japan                                2.7  0.9    12.1  1.0
 10. Italy                               2.7  0.9    10.2  0.9
Source: the Customs Office of Vietnam

2.3.   Cashew planting

2.3.1 Seed Selecting and multiplying
Domestic and international research papers agree that the cashew yield and output are
determined by the seeds. Binh Duong Cashew Research Center has pointed out 2
important indicators to select the cashew seeds: (1) the yield must be more than 10 kg of
cashew nut per tree at the seventh year – the time the cashew tree becomes fully matured.
With the density of 185 trees/ha, the output would be over 2 tons of cashew nut/ha/year.
(2) The cashew nut’s weight must be 6 grams or higher, the ratio of cashew kernel in
total fruit weight must be 25-26% - about 160-180 nuts/kg.
Recently, Vietnam has been studying to hybridize some high yielding cashew varieties,
the testing yield reached from 2 to 3 tons per ha. In fact, the country’s average cashew
yield is quite low (500-600 kg/ha in the past and is 1,000 kg/ha today). Vietnamese
farmers normally used mixed varieties of cashew originating from various locations or
some imported ones without careful selection. The states of hodge-podge cashew grove,
stampeded pollination, and farmers do not concentrate in intensive farming are popular,
affecting the country’s average cashew yield. (See table 6).

Table 6 - Vietnam historical cashew yield, kg/ha
            Year            1995 1997 1999             2000     2002     2004     2005
            Yield            628     777      320       535      740      999     1.060
Source: MARD, Vietnam Cashew Association

Usually, farmers can grow cashew by seedling from seeds (Self-pollination/cross-
pollination), or by grafting and layering (Clonal reproduction).
Growing by seedlings. Firstly, farmers have to choose seeds collected from trees that
bear rich fruit, have big pip basing on their own experience. If they want to have good
seeds, farmers will have to put much effort to the artificial pollinating process to pick out


                                                                                           9
good characteristics of parent trees; however, the number of good seeds collected is very
limited. Growing by sowing is very simple: dig a hole of 30x30x30 cm, put in humus,
rotten grass and rubbish, then put 2 cashew seeds at 6cm apart in each whole at the
beginning of May, (in future, we can remove 1 tree or move it to another place), then
cover the seeds with a 3cm layer of soil. After some days, the seeds will germinate. After
a month it can grow to the height of 20-25 cm. Farmers have to do the weeding every
two months. After 6 months, the young cashew trees may reach the height of 60 cm.
After 3 years, the cashew trees begin to bear fruit. After 5 years, each cashew tree can
bear as many as 1,000 fruits.
Bag seedlings: Each bag contains humus and rotten rubbish, and one cashew seed. Cover
the seed with a soil layer of 2 cm thick; water once everyday. After one month, the
cashew trees can be 25 cm high and can be brought to the cashew grove to plant. With
this method, farmers can choose strong seedling trees which can be cared from the
beginning so that farmers can be firmly sure of the tree survival. In general, growing by
seedlings cost less trees but with very low yield.

Layering and Grafting
Layering: Choose strong and good looking branches from high yield cashew tree and cut
into mulberries (mulberries should have diameter of 0.8 cm, length of 15 cm and are cut
from branches of more than 1 year old). Put the mulberries into the mixture of sand and
peat etc. with some NAA, IBA hormone. After 3 -6 weeks, the mulberries begin to root,
and then the young cashew trees could be planted in the groves. This new method is
being tested because its application in Vietnam is encountering many difficulties.
Grafting: Grafting is the asexual reproduction method that is popular to cashew and
many other crops. The cashew grafts are prepared from Feb. and Mar. to be planted in
Jun. – Aug. The process of grafting is as follow: choose the branches that will be grafted
from previous year, these branches should have a diameter of 0.8-1.0 cm and have not
blossomed yet. The technique of grafting and cutting the grafts from the mother cashew
tree is similar to that of other crops. The grafts are planted at the beginning of the rainy
season (Jul. – Aug). The survival rate of planted grafts is quite high at 80-85%.
Aside from the raising and grafting methods, people are also using the method of branch
and node transplanting which bring about satisfying results and is applied in many
regions.
As a whole, reproducing the cashew by asexual methods usually brings out even
seedlings that have similar growing and maturing abilities, yield, fruit and pip quality.
Cashew trees developed by this method are low in height, high yield, soon to bear fruit,
easy to harvest and protect from pests.
In the past, Vietnamese farmers usually planted cashew using local, sexual reproduced,
and degraded seeds that led to the low and decreasing yield. In 1999, MARD instructed
research institutes to import, study, hybridize, test, and introduce high yield cashew
varieties into production. At the moment, 8 high yield cashew varieties have been
approved by MARD to test in some regions to prepare for the large scale production. The
8 varieties include:
-        3 varieties approved in 1999 namely PN1, CH1, and LG1 have the potential yield
of 2.5 – 3.0 tons/ha, high rate of nut (27-34%) and large nut dimension.
-        5 varieties approved in 2000 including MH5/4, MH4/5, MH2/7, MH2/6, MH3/5
that originated from MH seeding corporation have very high potential yield of up to 3.0 –
4.0 tons/ha.
In the Central Coast of Vietnam, some drought-resistant cashew breeds have been
introduced to some pilot sandy sites and are producing optimistic results.


                                                                                         10
For the time being, there is a group of 42 potential asexual varieties is expected to be
planted since 1999, 15 promising and 14 hybridized varieties imported from Thailand
and Australia are being tested, and more than 1,000 first-class cashew tree are
investigated, collected, and kept at research institutes. It could be said that Vietnam
possesses a very valuable and rich genetic source of cashew which will help to boost up
our cashew’s yield and quality, serving the sustainable development of Vietnam cashew
industry.
A network of cashew seedlings producing has been formed in every cashew planting
province in Vietnam. Farmers have been instructed about the process of producing
cashew seedlings by transplanting and grafting, the process of large scale planting, of
improving low yield cashew groves by intensive farming, the technique of fertilizing and
pest prevention etc, contributing to relaxing the previously-popular concern.
In general, the researching and transferring of new cashew varieties and the growing
technique have been put under special attention and are successful extensively. Due to
the fast increase in cashew yield and quality which in turn bring back more income,
households have been encouraged to extend their cashew area and pay more attention to
the intensive farming, creating stable raw cashew sources.
The policy of seedling support has been under special attention of local authorities.
Every province has checked its development plan, allocated more budgets to the
extending of cashew area, doing research, and supporting the introduction of new
varieties. Many policies considering price, tax, credit and investment have been applied.
In the past 5 years, enterprises have invested VND hundreds of billion to develop the
cashew area for their input. Some enterprises also support farmers with high yield
cashew varieties. The typical case is Dong Nai who invested in DONAFOODS company
VND 4.550 million (over USD 3 million) to develop the first-generation high yield
seedling grove, in which VND 1.000 millions is from state budget and the rest is
preferential loan. In 2 years from 2003-2004, DONAFOODS provided over 20.000
cashew seedlings – more than VND 80 millions worth – for farmers in 7 cashew planting
provinces. In Tay Ninh province, some enterprises such as Bimico, Tan Thanh, Thien
Long, Hoang Long, Tan Viet Thang etc. have supplied over 20.000 high yield cashew
seedlings for the provinces’ cashew planting program (nearly VND 100 millions worth);
also, VND 150 millions from the province’s budget was used to purchase 80.000 cashew
seedlings to provide to cashew growers.

2.3.2 Cashew Growing and Caring
The cashew is easy to grow and to live in the conditions of poor quality soil and harsh
weather. Therefore, the techniques of cashew growing and caring are simple and take not
much labor. There are some considerations in planting the cashew: provide enough water
in the blossom season and avoid water logging in the rain season; do the weeding twice a
year, fertilize moderately. Protecting the cashew from pests and diseases is the most
important thing in the caring phase. The popular diseases of the cashew are: leaf rotten,
root ulcerate, leaf brown spots, dry death etc.
Planting method: farmers can choose the suitable planting method depending on the
quality of the soil, the level of intensive farming, the mixed or mono-crop cultivation etc.
The general principle is to plant the cashew densely at first for high yield right in early
stage, then remove gradually according to each development period of the cashew trees.
In the past, the cashew is planted mainly by sowing seeds (using bags or put the seed
directly to the hole), with the distance of 5m X 5m or 6m X 6m. This casual way of
planting produced bad cashew groves with low rate of survival. This forced the farmers
to replanting some trees and produced low yield.


                                                                                         11
Fertilizing: Fertilizers in use are mainly rotten muck, rubbish, inorganic fertilizers, etc.
According to the long term research by the India’s National Center for Cashew
Researching, each cashew tree needs at least 500 g N, 120g P2O5, and 120g K2O or 1 kg
Urea, 0.6 kg Super Phosphate, and 0.2 kg KCL, equivalent to 250-300 kg of Urea, 150-
180 kg of Super Phosphate, and 50-60 kg of Potassium for one hectare of cashew.
Cashew fertilizing in Vietnam’s cashew groves has not received sufficient attention so
far. Many households usually do not apply fertilizer or apply just a little which is
insufficient and imbalanced (among types of fertilizers).
-       Taking care of the cashew groves: In early years when the cashew has not
extended its shade, doing the weeding and earthing up the trees are very important. The
main work in caring the cashew groves is forming and pruning. Experiences from India
shows that formed and pruned cashew groves have a yield which doubles that of the
untouched ones. In Vietnam, the caring of the cashew groves is very unmethodical;
farmers almost do not pay attention to the forming and pruning. In the future, this must
be put under special attention if we want to raise the cashew yield.
-       Improving the old cashew groves: An old or low yield cashew grove could be
improved to a young, high yield one by the “Top working” method – the method of
transplanting nodes or branches taken from high yield cashew trees to the stump shoots
of cashew trees requiring improvement after cutting the trees at 0.5 – 1.0 m apart from
the ground, combining with fertilizing adequately, and protecting them from pests and
diseases. This is a very economic and of great effectiveness. This economic technical
method becomes more meaningful in the case of Vietnam as the area of low yield and
old cashew trees is quite large.
-       Harvesting and preserving: Harvesting when both forged fruits and pips are ripen.
When a cashew pip is fully ripens, its shell has grey color, is smooth bright; the ripened
fruit has red, pink, or yellow color depending on each variety, looks juicy, shining
smooth, and has specific cashew fragrant. There are two ways of harvesting the cashew:
harvest when the fruits are still in the tree or wait until they drop to collect. The second
method takes less labor but easily mix up fruits with impurities.
After harvesting, the pips are separated from the forged fruits (remove the pulp from the
pip’s peduncle, then rinse the pip with water), dried in sunshine from 2 to 3 days, pre-
classified, packed, and preserved in dry and cool place. There are 3 best ways to preserve
cashew: Store in cold warehouse at 4-5oC (warehouses must be built in high, dry, and
cool places, and must be cleaned and disinfected periodically), preserve in sugar, and
preserve in salt. The method of soaking in 5% salt water is suitable and easy to
implement for farming households. Prudent after-harvest caring could reduce losses up to
10-15% of cashew output.
At the moment, due to the huge fluctuation in cashew price, farmers take advance of the
high price by competing to sell their product, harvesting unripe cashew that causes the
low and unstable nut quality, low export price, and loss of prestige. Besides, farmers do
not pay reasonable attention to the preserving phase, leading to the big output loss.

2.3.3 Production scale of farming households.
The area of cultivating land of each farming household in Vietnam is relatively low, in
which the area assigned to cashew ranges from 1.0-4.0 ha/household (averaged 1.5-2.0
ha/household). Narrow area leads to low cashew output per household. Income generated
from cashew accounts for just only 20-25% of total household income from cultivating.
The ratio of households having high and main income from the cashew is low in Vietnam
(See table 7).



                                                                                         12
Table 7: Land size & crop production in surveyed households
             Indicators            Binh Thuan Binh Phuoc         Phu Yen       Average
 I. Average land per HH (m2)             13.685        30.740      15.932       20.119
 1. Agro-land                            13.164        29.402       9.599       17.388
  - Annual crops land                      3.565        8.189       3.822        5.192
  - Perennial crops land                   9.598       21.213       5.736       12.182
 2. Other land                               521        1.338       6.333        2.731
 II. Output (kg)
  - Paddy                                  2.500        5.200        3.500          3.733
  - Raw cashew                               260          840          250            450
 III. HH total crops revenue               9.200       21.740       11.600         14.180
 (VND1,000)
  - Annual crops                           5.000       10.600          7.000        7.533
  - Raw cashew                             2.200        7.140          2.100        3.813
  - Other                                  2.000        4.000          2.500        2.834
Source: Survey data in 1998

The reason is the yield of cashew trees planted in 1990s is low, bringing about low
income, which in turn does not encourage household to invest in cashew production.
In recent years, the increased cashew price, thus higher income from the cashew
growing, has encouraged households to do intensive cultivation and raise productivity.
Many households have high yield from 1.6 to 3.0 tons/ha (See table 8).

Table 8: Performance of some High-Yield Cashew Producing Farmers
 Order       Farmer Name            Province       Area,      Yield,      Output,      Gross
                                                    m2        Kg/ha         kg         output
                                                                                       Value,
                                                                                      VND1,000
   1     Nguyen Van Truong        Dong Nai         10.000      2.200       2.200        18.000
   2     Nguyen Van Bang          Dong Nai         23.000      2.100       4.800        40.000
   3     Tran Cong khanh          Binh Phuoc       10.000      3.000       3.000        25.000
   4     Nguyen Duc Thu           Binh Thuan       20.000      1.050       2.10         17.800
   5     Nguyen Van Phuc          Binh Thuan       24.000      1.600       3.800        32.300
   6     Vu Trong Kiem            Dong Nai         40.000      1.500       6.000        51.000
   7     Truong Van Buu           Dong Nai         20.000      1.250       2.500        20.000
         Average                                   21.000      1.660       3.486        29.160
Source: Reports in the Cashew Farmer Conference in Vietnam in 2000


2.3.4 Initial and annual cost for 1 hectare of cashew
According to the surveys by Vinalimex (1993) and the Institute of Agriculture
Economics (1995), the initial cost for one newly planted hectare of cashew in the
establishment period is about VND 7.5 – 8.0 millions (USD 700). The depreciation time
is 30 years; the depreciation cost/year is VND 250.000 – 260.000 on average. The annual


                                                                                       13
caring cost is about VND 2.55 – 3.0 millions per hectare. These are the national
averages. However, these costs somewhat varies depending on regional economic and
ecological conditions. The structure of the initial cost for a newly developed hectare of
cashew in Vietnam is relatively similar to that in Brazil. (See table 9)

Table 9. Cashew Tree Establishment Cost and Annual Cost (Average per hectare)
                   Items                                      Value                    Ratio
                                                Mill. VND                USD            (%)
 1. Establishment Cost
 - Land reclaim & preparation                    4,5 - 4,7             409 - 427         60
 - Seedlings, planting & care                    1,5 - 1,6             136 - 146         20
 - fencing & guarding                             1,5 -1,6             136 - 146         20
   Sub-total                                     7,5 - 8,0             680 - 725        100
 2. Annual production Cost
 - Material cost                                 1,3 - 1.5             118 - 136         51
 - Labor cost                                    1,0 - 1,2             91 - 109          39
 - Orchard depreciation                         0,25 - 0,30             23 - 27          10
 Sub-total                                      2,55 - 3,0             232 - 272        100
Source: Vinalimex, IAE 1995. Note: 1 USD = VND11,000

The low initial and annual unit cost is positive factors and advantages of cashew against
other perennial crops. However, if the economic return goes down, farmers are ready to
replace their cashew trees by other crops.
The yield of the cashew grove depends on the annual investment and expenditure of the
intensive farming. The higher the investment, the higher the yield. In the past, the annual
cost for one hectare of cashew in many surveyed provinces was very low (from VND
800.000/ha to VND 1.147.000/ha, the depreciation cost was from VND 25.000/ha to
VND 177.000/ha), only about 40-50% half of the needed expense, resulting to low yield
(400 kg/ha), and low economic return. After 1995, to achieve higher yield (500-700
kg/ha), many provinces like Binh Phuoc and Binh Thuan have invested in caring and
intensive farming cost up to VND 3.5 – 4.0 millions/ha/year.
According to a survey was conducted in 1998 by the Institute of Agriculture Economics
on the annual cost for one hectare with the sample taken from some representative
provinces, Binh Phuoc and Phu Yen had the average yield of 480-500 kg/ha. As for Binh
Thuan, although the investment in cashew was higher than other provinces but the yield
here was still low (only 400kg/ha) due to bad soil quality. The survey data was presented
in table 10.

Table 10. Per-Hectare Cashew Annual Production Cost (in survey localities), VND/ha
   Cost Items        Binh Phuoc      Binh Thuan         Phu Yen          Average     Share
                     (500kg/ha)      (400kg/ha)        (480kg/ha)                     (%)
Production cost         4.187.349       5.869.035        2.702.267       4.072.670   100,0
- Fertilizer               740.230      1.113.606            511.002       788.279    17,6



                                                                                        14
- Pesticides               214.593       330.855           196.319     247.256            5,6
- Harvest                  721.628       832.454           440.961     665.014           15,3
- Transport                 82.944       126.097            61.186       90.075           2,0
- Tools                     85.908        91.784           146.503     108.065            2,7
- Labor                    959.687     1.695.502           791.800    1.148.996          25,4
- Financial cost             5.428        -                 18.793           8.074        0,2
- Depreciation             405.678       437.435           243.252     362.122            8,4
- Other cost               577.578       802.045           401.022     593.548           13,4
- Agro-Tax                 393.674       439.257           351.329     394.753            9,3
Source: 1998 IAE Survey Data.

The production cost for a hectare of cashew today is fluctuating at VND 4.5 millions or
higher (USD 320-USD 360), in which labor cost accounts for approximately 25.4%,
fertilizer cost 17.6%, harvesting cost 15.3% etc. Practice shows that the regions having
high level of investment also have high cashew yield. There are some particular cases
like Binh Thuan where the soil and the seedling quality are bad leading to low yield
against much of investment. The biggest differences among provinces are the fertilizer,
labor, harvesting, and transportation cost. That the labor cost accounts for over 25% is
showing that cashew planting in Vietnam is mainly extensive farming (see table 10).

2.3.5 Economic effectiveness of cashew production
Value of cashew output and production cost depend closely on the total annual
expenditure for the cashew grove, cashew yield, and the purchasing price of raw cashew
each year. That higher investment leads to higher yield, lower cost price, and higher
profit is the typical relation in cashew production. This relation is shown in table 11
based on survey data.
To increase the yield of raw cashew to above 800kg/ha, farmers need to increase their
intensive farming cost. Especially they must double their expenditure on fertilizer
comparing to that of low yield cashew grove. Labor cost spent in the caring and intensive
farming tasks must increase by 1.5 times accordingly. The reasonable annual investment
per one hectare of cashew to achieve the yield of above 800kg/ha can be defined here at
the average level of above VND 5 millions/ha/year. (See table 11).

Table 11. Cashew Yield, Production Cost & Profitability in Vietnam
      Chỉ tiêu     Yield of 400kg/ha            Yield of 600kg/ha              Yield of 800kg/ha
                    Vol.      Unit     Value       Vol.     Unit     Value       Vol.       Unit    Value
                               cost    VND                  cost     VND                    cost    VND
                              VND      1,000                VND      1,000                 VND      1,000
 1. Fertilizer                            725                         1.450                          2.050
 -N                 200kg      2.500      500      400kg    2.500     1.000      500kg      2.500    1.250
 -P                 100kg      1.000      100      200kg    1.000      200       300kg      1.000     300
 -K                  50kg      2.500      125      100kg    2.500      250       200kg      2.500     500
 2. Pesticides                            100                          200                            300



                                                                                          15
 3. Deprec.                                    250                                250                           250
 4. Agro-tax                                   400                                400                           400
 5. Financial cost                              50                                 80                           100
 6. Labor cost           80 md   15.000       1.200    100 md     15.000         1.500   120 md       15.000   1.800
 Total Cost                                   2.625                              3.880                         4.900
 Unit cost, kg                                  6,6                                6,5                           6,1
 Gross Value             400kg   11.000       4.400     600 kg    11.000         6.600      800 kg    11.000   8.800
 Income                                       2.975                              4.220                         5.700
 Profit per 1 ha                              1.775                              2.720                         3.900
 Interest rate (%)                             66,8                               70,1                          79,6
Source: IAE (1998). VINACAS (2000).
Note: Price of raw cashew is assumed to be 11.000 VND/kg

According to data reported by Vinacas (3/2000) and survey data from the Institute of
Agriculture Economics (1998), the price of raw cashew in 1998 was VND 11,000/kg, in
1999 was VND 17,500/kg. With the yield of 400kg/ha, the output value was VND 4.4
millions/ha and production unit cost was VND 6,600/kg or USD 475 equivalent; with the
yield of 600 kg/ha, the production unit cost was VND 6,500/kg - USD 468/ha; with the
yield of 800 kg/ha, the production unit cost was the lowest, equal VND 6,100 – USD
439/ha. The profit rate reached 67%-80%. It is clear that although the yield is low at 500-
600kg/ha but the farmers still earn profit because the price of raw cashew is always much
higher than annual expenditure (production cost). The profit rate is always over 65%.
The economics return of cashew is always higher than that of other industrial crops like
rubber, coffee, tea, groundnut, soybean, etc. With low infrastructure investment, simple
plantation without soil selection, low annual caring cost, long exploiting time, cashew
cultivation has low depreciation cost and high rate of return (see table 12).

Table 12. Economic Efficiency of Cashew and Some Other Crops
               (For hectare at 1994 prices)   Unit: VND1,000
Indicato      Cashew       Rubber    Coffee      Tea      Ground       Soy-       Spring      Winter
   rs                                                      nut         bean        rice       Maize
Output           4.500       9.305    8.700     8.950       5.214      2.742        3.630       3.080
Value
Income           2.975       4.300    4.190     4.590       2.438      1.342        1.871       1.313
Profit           1.775       2.420    1.472     1.472            998       217       431             503
Income         22.880       18.500   12.000 12.000          7.619      3.368        6.236       7.294
per md
Source: IAE, 1998.

A comparison between cashew and rubber shows that the initial investment for one
hectare of cashew is VND 7.5-8.0 million against VND 22-25 millions for one hectare of
rubber. The mature time of cashew is 3-4 years while that of rubber is 7 years. The labor



                                                                                                      16
cost for one hectare of cashew is 130-150 labor/ha/year while that of rubber is 230-250
labor/ha/year.
In general, cashew has many advantages over rubber and other crops. Survey data shows
that although the output value of one hectare of cashew is lower than that of other
perennial and some annual crops, but the profit and income per one labor day is not
lower than that of other crops and is much higher than that of annual crops.
We have full reason to affirm that the cashew is the crop with high economic return and
is the key commercial crop of Vietnam.

3.      Cashew processing in Vietnam
For the time being, cashew processing in Vietnam only focuses on separating the nut
from shell, separating the husk, endothermic treating, and packaging. Producing other
crops from cashew has yet to gain much attention.

3.1. Processing facilities and factory capacity
Cashew processing industry in Vietnam began to develop since the emergence of the
cashew exporting market. In 1988 Vietnam has only 3 cashew processing factories with
total capacity of 1,000 tons/year; in 1999 the number increased to 62 factories with the
total capacity of 250,000 tons/year. By that time, these factories were mainly located in
the South East of Vietnam (42 factories with the total processing capacity of 175,000
tons of cashew pip per year); the Mekong Delta (9 factories with capacity of 10,000
tons/year); the Central Coast and Central Highlands (9 factories with the total capacity of
37,000 tons/year). In 2005, Vietnam had more than 110 factories with the total
processing capacity of 450,000 tons of raw cashew per year (See table 13).

Table 13. Cashew Nut Processing in Vietnam
     Year        Output of Raw        Processing         Processing         Labors for
                    Cashew             Factories          Capacity          Processing
                     (ton)                               (ton/year)          (person)
     1988                    468           3                     1.000
     1989                 12000            7                    13000
     1990                 30000           19                    17000                7000
     1994                 90000           30                    75000              35000
     1995                110000           40                   100000              45000
     1996                126000           52                   150000              60000
     1998                128000           60                   220000              90000
     1999                 70000           62                   250000             110000
     2004                350000          100                   400000             162000
     2005                370000          110                   450000             200000
Source: MARD, VINACAS,2005.

In general, the total processing capacity of domestic factories is higher than the national
cashew output. Therefore, Vietnam has to import raw cashew every year. In 1998,
Vietnam had to import 10,000 tons; in 1999 the number was 33,000 tons; in following
years, the number was about 40,000-50,000 tons on average. In 2005, Vietnam imported


                                                                                         17
80,000 tons of raw cashew to meet the demand for input of the domestic processing
industry. However, the import of raw cashew is facing increasing difficulties due to the
competition from other countries such as India, Brazil – who import large amount of raw
cashew, process, and re-export it. The increase in the number of processing factories as
well as their capacity is deemed an index showing the economic effectiveness of the
export of the processed cashew nut over the previous export of raw cashew. This truly
reflects the export strategy of Vietnam’s agriculture sector, helps to make use of local
abundant and cheap labor force. The number of people working directly in processing
factories is increasing. Beside managing staff and indirect workers, the number of direct
workers in processing factories is over 200,000.

3.2.   Cashew processing technique
So far, the cashew processing technique applied in Vietnam is the heat treatment by
soaking in hot oil dressing, then separate the nut from its shell (see graph 1). Recently,
the processing technique using hot steam has been under research but yet to be applied
(see graph 1).

Graph 1. Cashew Nut Processing Procedure.
     Raw                   Cleaning,                     Moisturiz                  Heating
   cashew                   grading                         ing
     nut



                                                                     Nut cooling, cleaning &
Nut in Shell                       Shelling                        grading




Centrifugatio                     Kernel                     Kernel                Peeling testa
      n                                                      Drying



  Cashew                  Waste for fuel, raw                                      Kernel Re-
  Shell Oil                   material                                             moistening




   Export,                                                                       Kernel grading
 Consumption                     Storage                 Packaging




                                                                                       18
                                  In recent years, Vietnam’s cashew processing factories
                                  are all using domestic technology with cheap domestic
                                  machinery, quick return time, and simple operation,
                                  suitable for Vietnamese working habit. With important
                                  phases such as shell cutting, nut separating, and husk
                                  removing, it is difficult to ensure the rate of unbroken
                                  cashew nut if machinery is used; therefore, enterprises
                                  have deployed labor to manually handle these phases
                                  rationally. This on one hand creates jobs and income for
                                  rural labor, on the other hand ensures the rate of
                                  unbroken cashew nut and higher quality, enhancing the
                                  competitiveness of Vietnam’s cashew-nut in the global
                                  market.
The most important step in cashew processing is separating the nut from its shell.
Separating by machines has higher productivity, but the rate of broken nut is high too, at
10-12%. Separating by hand has lower rate of broken nut (1-2.5%) but requires more
labor. According to Brazil data, if the nut is separated by machine (including husk
removing), the broken rate may be very high at 40-50% but the overall cost is still lower
than that of manual separating.
From 1988 to 1990, the Institute of Forestry Science implemented many studies relating
to the processing process of 10 products from cashew: syrup, cashew juice, refreshing
powder, soda, multi-mineral soft-drink, alcohol, etc. The two testing products - alcohol
and syrup - have been introduced to the market (500 bottles each). The result was not
satisfactory: only the alcohol was sold out with cheap price. The syrup was not consumed
because it was not tasteful, difficult to preserve, and was not suitable to consumption
customs.
In recent years, some factories have been doing research proactively into technology to
produce products from cashew nut such as salty roasted cashew nut, confectionery with
cashew nut, cashew shell oil etc, but the results are limited. The main reason is that
cashew-nut processing technology is relatively complicated because of its special
composition high rate of protein, vitamin C, and tannin, causing difficulties in
preservation during harvesting, transporting, and processing. Besides, the research and
development of cashew processing technology has not drawn adequate investment and
attention of scientists, and the government has not allocated enough budgets to cashew
research institutions.
In short, the processing technology used by factories in Vietnam is modern, satisfying
foreign customers in terms of product quality and food safety. Many businesses have
paid attention in intensive investment, warehouse and cold storage facility upgrading,
waste treatment, and ecology environment protection. They also concern about product
diversification, job generation and effectiveness improvement.

3.3.   The economic effectiveness of cashew-nut processing
The main product from cashew is the cashew-nut for export. The price of cashew nut is
usually very high, thus cashew nut export will bring back a considerable amount of
foreign exchange. The transfer from raw cashew export to processed cashew-nut export
is a rational one to relentlessly increase the value added of Vietnam cashew industry. The
number of cashew processing factories has increased dramatically.
In 2005, there have been more than 110 factories throughout the country with the total
processing capacity of over 450,000 tons per year. With such huge processing capacity,


                                                                                       19
apart from the 350,000 tons of raw cashew produced domestically, Vietnam has to
import a considerable amount of raw cashew each year. Through processing, the export
value of raw cashew has been increased about 15%-20%.
At the moment, the cashew processing technology in Vietnam is mainly semi-
mechanized, attracting a lot of labor - labor cost accounts for 50%-60% of the cost for
cashew-nut processing. The cost of nut processing usually fluctuates depending on each
stakeholder in the cashew value chain. This cost tends to reduce a little recently owing to
the reduction in costs of management, purchasing and transporting, and interest payment.
Today, the processed cashew product of Vietnam is only the nuts packed in aluminum
cans for export. This product has been assessed as of good quality.
In 1998, some advancement against 1997 has been made in processing factories. Some
costs such as management, interest, fuel cost have decreased dramatically. However, the
processing cost of these factories has still been affected significantly by purchasing price
of raw cashew from growers, especially when raw cashew supply is limited, which leads
to high production cost and low profit. For this reason, stakeholders in cashew processing
are all using price as an instrument to adjust raw material purchasing. This makes the raw
cashew price floating and more difficult to keep track of (See table 14).

Table 14. Cashew Nut Processing Cost in Vietnam
                                                 1997*                          1998**
    Cost items                            Value           Share          Value           Share
                                        (VND/kg)           (%)         (VND/kg)           (%)
 1. Packaging & tools                          1.370          10,7           1.796              16,3
 2. Energy                                       526           4,1             387               3,5
 3. Wage & Insurance                           6.123          47,9           6.621              60,2
 4. Depreciation                                 410           3,2             266               2,4
 5. Over-head cost                             2.519          19,7           1.333              12,1
 6. Financial cost                             1.845          14,4             600               5,5
 I. Total processing cost                     12.793         100,0          11.003             100,0
 II. Raw material: 4kg raw nut                30.000                        44.000
 - Exchange rate VND/US$                      12.700                        13.900
 - Unit cost VND/1kg kernel                   42.793                        55.003
             USD/kg kernel                     3,367                         3,957
 - FOB price US$/kg                            4,030                         4,500
 - Profit-cost ratio (%)                                      19,7                              13,7
Source: * State Price Committee, 1997. ** Vinafimex, 1999, MoT, IAE
.
4.      Cashew consumption market
The main product from Vietnam’s cashew is its nut. Most of cashew-nut is exported for
foreign exchange (95%-97%). Domestic consumption of cashew-nut is limited and
mainly is of low quality (that cannot be exported). According to economists, due to
economic development in many countries, the demand for cashew-nut and other cashew
products will increase; meanwhile, cashew production in many countries is encountering
several obstacles such as drought, war, and famine that lead to the instability and decline


                                                                                         20
in cashew output. Supply cannot satisfy demand resulting in fast increase and volatility
in price. This is also an opportunity for cashew producing countries including Vietnam to
push up cashew production.

4.1. Domestic Market.
Before, state-owned cashew exporting enterprises take responsibility for purchasing
cashew pips for processing or exporting (each province has 1-2 sole export agents).
Besides, there are also private entities participating in this business. Because of the poor
arrangement, there have been cases of selling/purchasing competition or grade/price
depression following price skyrocketing, which lead to losses for farmers in particular
and for the cashew industry in general. Recently, each cashew import-export company in
Vietnam has established its own processing factory, purchasing agents and network, and
raw material area through supporting growers with capital, high yield varieties, fertilizer,
and other inputs. This is also the closed cashew producing model that has been brought
into play effectively.
Since 1990s, the cashew has become one of valuable commercial agricultural crops in
Vietnam. The domestic purchasing price of raw cashew is highly dependent on world
market price. In short, domestic price fluctuates with large amplitude.
In 1993, the average purchasing price of 1 kg raw cashew was VND 6,000 (USD 0.56).
The price in 1994, 1996, 1998, and 1999 was VND 8,000 (USD 0.73), VND 9,200 (USD
0.83), VND 11,000 (USD 0.80), and VND 17,500 (USD 1.23) respectively. In early
2000, the price of local cashew was VND 3,000 higher than imported cashew, but then
stood at VND 8,000 (USD 0.55) at the end of that year. In 2005, the price jumped to
VND 14,000 (USD 0.90) per kg (See table 15).

Table 15. Price of raw cashew nut and kernel at different level in the supply chain
                                                                    Unit: VND/kg
                                    1995       1998       1999        2000      2004       2005
1. Price of raw cashew nut
- At farm gate                       5,878      8,433     15,333       7,780    10,000     13,000
- At factory gate                    8,766    10,880      17,300      10,000    12,500     14,330
2. Price of processed kernel
- At farm gate                      26,450    37,950      69,000      35,000    45,000     58,500
- At factory gate                   39,450    48,953      78,000      45,000    52,000     64,500
- At wholesaler                     54,000    67,000      84,000      65,000    61,000     68,000
- At exporter                       56,000    69,000      86,000      80,900    63,500     72,680
- At retailer                 60,000 75,000              100,000      86,000    80,000     82,000
Source: - MARD, FAO TCP/VIE/8821, VINACAS.

A large share of production cost is spent at the field for producing raw cashew pips. With
cashew growers: low production cost, low cost price, and high domestic purchasing price
of raw cashew pips will lead to high profit. Cashew growers’ production cost accounts
for about 55%-60% of total cost spent in processing cashew nut. This share is 17%, 15%,
and 12% for processing factories, wholesalers, and retailers respectively. Therefore we
can assert that using domestic raw materials will have improved farmers’ income.



                                                                                         21
Moreover, exporters will have the opportunity to increase their profit when this
commodity becomes more competitive in the world market.
Higher purchasing price will encourage cashew growers in stepping up their production;
but too high price will have bad effect to enterprises specializing in cashew processing
and exporting. These enterprises can bear losses or even go bankruptcy if they have not
been well organized. This is the harsh competition among stakeholders in the value chain
(See graph 2).

Graph 2. Marketing Channel for Cashew nut in Viet Nam.

                                                   Small
                                                   mills


                                                                               Consumer


 Farmer
                              Collector




                                                 Processors &
                                                   Traders
                                                                                     Export




Domestic consumption of cashew is trivial including a small amount of packed oil-
dipping nut and low quality nut used in confectionery production, sold at restaurants,
hotels, and shops in border gates, airport, and sea ports. Therefore, domestic cashew nut
price is always very high from VND 80,000 to VND 120,000 per kg and some time
higher than export price (USD 5-6/kg). It is estimated that in Vietnam, about 3%-5% of
total cashew output is consumed domestically.
That producing cashew nut for export from domestic raw cashew has production cost
much lower than price of cashew nut selling in world market has created additional
competitiveness for Vietnam’s cashew industry.
Due to special characteristics of exports, there are several stakeholders joining in the
process of producing, processing, and exporting cashew nuts. Main stakeholders in the
cashew value chain are farmers (cashew growers), purchasers, small processors, and
companies specializing in processing and importing-exporting cashew nuts (private or
state owned).
Raw cashew pips are consumed through several channels. Farmers (or cashew growers)
can sell their raw cashew to private traders (this channel accounts for the most part,


                                                                                      22
involving 2/3 cashew growing households), to small local processing units, or sell
directly to factories belonging to Cashew processing enterprises (higher price, but
farmers have to transport raw cashew to the factories, and the nut quality must be higher,
therefore this channel accounts for just a small share). Then, raw cashew pip is processed
into nut for export; a small quantity of nut is for domestic consumption.
In Vietnam, every cashew import-export company has its own processing factory. Each
company establishes from 5 to 7 purchasing agents to purchase local cashew, satisfying
its processing need. Some companies have developed their own raw material areas.
However, the competition in purchasing raw cashew has sometime become very fierce
among stakeholders in terms of purchasing volume, price, and counterparties in the value
chain.

4.2.   Vietnam cashew export
Before 1994, Vietnam mostly exported raw cashew to main markets such as India,
Indonesia, Thailand, etc, but was always in passive position, had low bargaining power,
and could not create jobs for domestic labors. In 1995, Vietnam switched to exporting
cashew-nut with more stable markets, and economic effectiveness of 1.3-1.4 times higher
than that of exporting raw cashew.
After 1995, Vietnam’s nut exporting has increased tremendously both in export volume
and turnover. In 1995 Vietnam exported only nearly 20,000 tons; in 2000 the number
was 34,200 tons; and in 2004 the number was 105,000 tons – 3 times higher than that of
2000.
Cashew export turnover has also increased relentlessly from USD 133 millions in 1997
to USD 167 millions in 2000, USD 436 millions in 2004, and USD 488 millions in 2005.
In summary, in the course of development, Vietnam’s cashew industry has brought in
USD 2,492.2 millions (1988-2000: USD 925.5 millions; 2001-2005: USD 1,566.7
millions) (See table 16).


Table 16. Vietnam's Export & Import of Cashew nut
            Export of raw     Export of kernel  Export value (Mill.        Unit FOB (US$/ton)
  Năm        cashew (ton)          (ton)              US$)
  1990          27.000              400
  1991          30.000             1.000
  1992          40.000             2.000
  1993          35.000             6.500               28,0                        4.300
  1994          50.000             9.526               42,8                        4.500
  1995             -              19.800               90,0                        4.545
  1996                            23.791              110,0                        4.623
  1997                            33.300              133,0                        3.994
  1998                            25.700              117,0                        4.550
  1999                            18.400              100,0                        5.438
  2000                            34.200              167,3                        4.892
  2001                            43.700              151,7                        3.471
  2002                            62.200              209,0                        3.360
  2003                            84.000              282,0                        3.357
  2004                           105.000              436,0                        4.152
  2005                           107.000              488,0                        4.560



                                                                                       23
  Source: MARD, VINACAS, GSO

 Export market of Vietnam’s cashew-nut has been extended more and more, and its
 market share in the most picky markets like the US, Western Europe, Japan, etc, has also
 increased incessantly. We used to export cashew to China (up to 88% of cashew export
 value in some years); today, Vietnam’s cashew-nut has penetrated and opened up market
 in many developed countries including the US. In 1995, Vietnam exported USD 1.15
 millions of cashew-nut to the US, accountings for 1.4% of total value of exported
 cashew-nut. In 1996, 1998, 2000, and 2004 this number was 8.4%, 15.7%, 26.7% and
 40.8% respectively. Vietnam’s cashew-nut has been successful in penetrating and
 withstanding in the US and other developed markets, and this is the right track in the
 development strategy of our agriculture sector (See table 17).

 Table 17.   Market share of Vietnam Export Cashew Nut
                                                                                   Unit:
 %
Markets          1995       1998     2000      2001      2002     2003     2004      2005
China             88.6      64.3     33.2      29.1      22.0      20.0     20.0     20.5
USA               1.3       15.7     26.7      29.1      34.2      35.1     40.8     32.1
Canađa            0.8        2.5                3.0       3.0               4.6       4.1
Australia         2.9       18.9     13.2      12.6      10.5      9.6      10.5     11.2
EU                                   17.1      19.3      21.8      19.8     18.9     23.4
UK                                    5.4       4.4       6.0      5.0      5.4       5.6
HolLand                                        12.5                10.0     10.6     12.3
Other             6.2        9.1     21.5       9.3       8.5      15.5     5.2       8.7
countries
 Source: MoT, GCO, GSO, MARD, VINACAS.
 Note:The share is calcualted based on annual export value, data for China includes
 Hong Kong.

 Due to the trend that supply lower than demand, the world and Vietnam price of both raw
 cashew and nut tend to increase. However, the export price in Vietnam depends on each
 specific period and is still lower than the world price. In the period of 1994-1999,
 Vietnam’s export price increased from USD 4,500/ton to USD 5,500/ton, decreased
 down to USD 3,300 in the period of 2000-2003, then increased again in the period of
 2004-2005, and stand at more than USD 4,200/ton at the moment. According to the
 forecast of economists, price of cashew nut will increase at the rate of 5-7% per year in
 the years to come.
 There is a close relationship among export price of cashew-nut, exchange rate and
 domestic raw cashew price. Fluctuation of export price affects directly domestic price of
 raw cashew. Export price changes bring in changes of domestic purchase price
 correlatively. Sometimes, domestic purchase price is even higher than import price of
 imported raw cashew. The major reason is that domestic cashew output is in short for
 processing capacity of booming system of processing manufactories (a little cashew-
 grown area, low productivity and insignificant amount of imported cashew). Negative


                                                                                       24
activities such as struggle for buying or selling, and grade/price depression happen
frequently. There is also a clear interrelation between purchase price of raw cashew and
exchange rate of USD and VND (See Table 18).

Table 18. Price of Raw Cashew and Export Price of Vietnam Cashew kernel
            Buying Price of         Exchange Rate         Buying Price of           FOB for Cashew
Year       Raw Cashew Nut                                 Raw Cashew                    kernel
                                                          Nut in US$
          VND/kg     1993=      VND/US$         1993=     USD/       1993=         USD/      1993=
                     100%                       100%       ton       100%           ton      100%
1993         6.000      100,0          10.720     100,0      560,0      100,0        4.300     100,0
1994         8.000      133,3          10.980     102.4      728,6      130,1        4.500     104,6
1995         9.000      150,0          11.050     103,1      814,5      148,4        4.929     114,6
1996         9.200      153,3          11.400     103,0      833,3      148,8        4.623     107,5
1997         7.500      125,0          12.700     118,5      590,5      105,4        4.030      93,7
1998        11.000      183,3          13.900     129,7      791,3      141,3        4.553     105,9
1999        17.000      253,3          14.200     132,5    1.197,1      213,8        5.438     126,5
2000         8.000      133,3          14.500     135,2      552,0          98,6     4.892     113,8
2003         8.000      133,3          14.800     138,1      540,5          96,5     3.357      78,1
2004        12.000      200,0          15.300     142,7      784,0      140,0        4.152      96,6
2005      14.000    239,3       15.500            144,6      903,0      161,2        4.560     106,0
Source: MARD, VINACAS, MoT, GCO

The export price of cashew-nut increased 26.5% from 4.300 USD per ton in 1993 to
5.438 USD per ton in 1999. This led to a correlative increase in domestic purchase price
from 6.000 VND/kg to 11.000 VND/kg and then later to 17.000 VND/kg – a threefold
increase. From 1999 towards, export price decreased bringing about purchase price of
raw cashew decreased by 8.000 VND/kg in the period of 2000-2004 – i.e. a decrease
more than twofold and then increased again in 2005.
In recent years, there have been efforts to ensure sufficient supply of raw material by
means that processing factories gave support to cashew growers in order to create their
own raw material source. In the other hand, cashew growers actively expand cashew
grown area because cashew is a commercial crop with generous returns.

5.    Evaluation of Vietnam’s cashew export competitiveness
Vietnam takes many advantages in cashew growing – trading to ensure a high
competitiveness in the short-run as well as in the long-run.

5.1. For cashew production:
Cashew is grown rapidly and vigorously even on exhausted land. In the southern
provinces of Vietnam, the area having the set of conditions of land, climate and
ecological environment preferable for cashew growth is relatively large area, of
potentially 500.000 hectares. At present, the total area of cashew in Vietnam is 400.000
hectares. Therefore, in the next time, we could invest in cultivating about additional


                                                                                       25
100.000 hectares of cashew as well as improving about 250.000 hectares of old and
stunted cashew, seed-grown cashew and low productivity cashew (about 50.000 hectares
under improvement per year).
The fact that new system of high-yield cashew varieties being introduced to gradually
replace jumbled (mishmash-like) degenerated varieties and that stunted cashew groves
being improved with grafting measure will give a great opportunity for Vietnam to
steeply increase domestic productivity and output of raw cashew.
Average yield of Vietnam cashew currently reaches 1.1 tons per hectare - a relatively
high productivity. However, there is still a high rate of low-yield cashew areas (500-600
kg per hectare), mainly due to low annual investment in intensive cultivation each year.
At present, there are many cashew grove models which grow cashew varieties of high
yield of 2-3 tons per hectare. These are good foundations to enhance leveling
productivity of Vietnam cashew in the future. Changes in practice of cultivating cashew
will play an acting role in strengthening domestic supply for processing manufactories.
This is the most important and essential potential factor to increase competitiveness of
Vietnam cashew.
In some regions of which climate and land are suitable for ecological features of cashew,
cashew becomes a cash plant. Also, if existing policies are effectively implemented to
expand cashew growth in upstream and coastal protection areas, forests would be well
maintained and afforest men’ income is increased.
Labor supply in cashew areas is relatively abundant with cheap labor cost. Planting and
processing cashew in these areas give chance to create more jobs and increase income for
laborers. That is why cashew development draws special attentions of bodies at different
levels, industries and enterprises.

5.2. For capital construction investment, improvement and caring of cashew
Initial capital investment for new one hectare of cashew is around 7,5-8,0 million VND,
capital for improving one hectare of old cashew grove is around 2,0-2,5 million VND,
annual caring expenses for one hectare is around 3-4 million VND to reach the yield of
800 kg per hectare. This investment has low depreciation rate, being suitable with
producing condition and poor living standard of Vietnamese farmers. Purchase price of
raw cashew currently is relatively high; production cost price is low and decreasing. This
encourages farmers to increase investment for intensive cultivation and still get generous
profit. Initial capital investment amount for cashew is a half of that for rubber or coffee.
Therefore, the State and enterprises are able to increase capital investment in cashew
industry in order to create stable raw materials sources for processing manufactories.
Taking cost competitiveness and advantages of cashew production into account, Vietnam
has favorable conditions such as low cost of input; high yield, resulting in higher
competitiveness.

5.3. For cashew processing industry
Potential capacity of cashew processing industry is still high. There are 110 processing
factories with processing capacity of above 450.000 tons per year. However, only 60-
70% of their demand for raw materials is met domestically, the remaining has to be
imported. Owing to processing method suitable for abundant cheap manual labors,
cashew production cost is low; processing and exporting activities bring in high profit
(about 20%). Trend of strengthening and developing cashew processing industry in
Vietnam will be speeded up in the next time.
Processing industry of cashew-derived products such as confectionary, wine, syrup, soft
drink, etc. is almost nothing. There is much potential for them but still leaves empty both


                                                                                         26
in foreign and domestic markets. In the future, this potential should be exploited
intensively.

5.4. For market
Market for cashew in Vietnam is still large. Currently, supply has yet to meet demand in
the world cashew market. According to the estimation of leading experts in the sector,
while living standards is increasing and the demand for cashew-nut and cashew – derived
products is also increasing, the world demand for cashew would increase by around 5%
per year.
Boosting export of high processing content cashew products into developed countries
such as Japan, Korea, United State, EU and Middle East courtiers; developing new
markets such as Russia, Eastern Europe countries and countries belonging to the old
Soviet Union; reinforcing and promoting barter (rice, foods, etc. in exchange for raw
cashew) with Africa partners in order to get enough raw materials of cashew, are all
needed.
Domestic market with 85 million inhabitants still leaves open with annual consumption
of about 5% of domestic cashew output. It is necessary to increase this number to 20-
25%. Generally, Vietnam cashew takes advantages and be feasible in terms of market
development.

5.5. For price competitiveness
-      Export price:
Vietnam has got high competitiveness in cashew production in comparison with other
countries. There is a gap between Vietnam cashew export price and that of other
countries (see Table 19).

Table 19. Comparison of Vietnam's Export Price with some other exporting
countries
                                                       Unit: USD/ton
   Countries             2001               2002               2003                2004
 Vietnam                 3.454              3.381              3.357              4.152
 India                   4.057              3.252              3.665              4.694
 Brazil                  3.831              3.493              3.464              3.932
Source: VINACAS, MARD, FAOSTAT Database

During the development of Vietnam cashew industry, export prices of raw cashew and
cashew-nut have been always in upward trend, so that cashew industry has continuously
expanded in terms of area, output and export turnover as well.
-       Domestic price and world price:
Domestic price of raw cashew and export price of cashew-nut depend heavily on the
world cashew price. As shown in the figures, yearly domestic cashew price has been
always much lower than world cashew price. The annual nominal protection ratio of the
cashew industry is positive (NPR>0). This means state policies give protection to
domestic cashew growers (tax policies impose on imported raw cashew, additional levied
tax on export of raw cashew, on the other hand, quality of domestic cashew improved
recently, etc.) (see Table 20).




                                                                                     27
Table 20. Norminal Protection Rate (NPR) of Cashew nut Commodity
                           Domestic price          World price             NPR
         Year                (US$/ton)             (USD/ton)
         1995                    4,930                  5,727              0.86
         1996                    4,624                  5,667              0.82
         1997                    4,600                  5,947              0.77
         1998                    4,553                  5,300              0.86
         1999                    5,438                  6,600              0.82
         2000                    4,892                  5,000              0.98
         2001                    3,454                  3,865              0.89
         2002                    3,381                  3,470              0.97
         2003                    3,357                  3,500              0.96
         2004                    4,152                  4,300              0.96
         2005                    4,560                  5,000              0.91
 Source:VINACAS, MoT, FAOSTAT Database, Cashew nut World.

-       Competitiveness of Vietnam cashew export in term of domestic resource cost
(DRC)
Using survey data in the period of 1995-1999 in the formula, the Institute of Agriculture
Economics calculated the DRC for Vietnam cashew industry of 0,301. DRC <1
demonstrates that Vietnam export cashew get very high export efficiency with a
relatively big gain of foreign currency from one unit of cashew export. Every 1 USD
export turnover of cashew, enterprises pay only 0,301 USD for domestic input cost.
Above-mentioned analysis and evaluation of cashew manufacturing, processing and
selling have drawn an overall picture of Vietnam cashew industry in the last time. At
present, Vietnam takes many advantages and opportunities to reinforce the cashew
industry’s growth both in quantity and quality as well as the competitiveness of cashew
export and the industry’s economic effectiveness. (See Table 21)

Table 21. Domestic Resource Cost (DRC) for Vietnam Cashew Industry
                     Indicator                    Unit          Average for 1995-1999
  1. Value of product                           VND/kg                            4.098,0
  2. Share of Non-Tradable Items                    %                               65,0
  3. Farm gate price                            VND/kg                            9.142,0
  4. Border Price                                US$/kg                            4,742
  5. Farm gate Border Price Equiv.              VND/kg                          10.867,0
  6. VoP/Border Price Equiv.                                                       0,391
  7. DRC                                                                           0,301
Source: IAE, 2000.




                                                                                      28
6.      Vietnam Cashew Association (VINACAS)
VINACAS was established in 1990. It is the professional socio-economic organization in
which associates participate on voluntary basis. These members are legal entities, natural
persons who are in the line of cashew business such as producing, trading, processing,
importing - exporting and in some cashew-related industries. State-own enterprises play
the decisive role in the VINACAS.

6.1.   VINACAS’s mandates
1. Ensuring the balance between raw materials supply and processing capacity of
factories.
In order to fulfill this task, the association often checks to make recommendations to
industries: (i) had better not invest in construction of new factories; strengthen quality of
the existing factories, and merge or dissolve small, inefficient ones; give directions to
members whose capital, technique and import-export experiences have great potential to
help boost import of raw cashew from Africa countries, Indonesia, etc. (ii) create stable
areas of raw materials with high productivity to provide for members by encouraging
members to invest in their own raw materials areas in the form of giving capital or
selling shares to owners of cashew groves; be the hub to direct signing purchase
contracts between members and science research institute, farm owners, etc.
2. Organizing national conferences and seminars on Vietnam cashew related issues
(production plan, plan of processing factory system, product quality investigation and
management, environment pollution, etc.)
3. Building information processing center to provide for members (information about
market, price, new domestic and foreign policies relating to Vietnam cashew industry).
4. Gathering existing troubles, difficulties, proposals of members to report and make
recommendations to the Government and State.

6.2. Operations of the VINACAS
During the VINACAS operations, the main targets are shown by the data system in the
Table 22.

Table 22. Vietnam Cashew Association (VINACAS) Performance
             Indicator                   1990          1994          1996         1999           2000
 1. Number of members                           22            35            53           82         90
 2. Number of Factories                          4            34            50           60         48
 3. Labor in Factories (person)            1.500           8.000      25.000       60.000        50.000
 4. Cashew Nut Production (ton)           28.000         80.000      110.000       70.000       100.000
 5. Export (tons, Raw Nut Equiv.)         14.000         40.000      110.000       90.000       130.000
    Export value (Mill. US$)                    14            50         110          140          140
Source: VINACAS, 2000.

7.     Overall assessment on Vietnam cashew industry
7.1. Achievements:
1. Cashew grown areas in Vietnam increase relatively fast. Although cashew production
was developed spontaneously and quickly in a short period, it still achieved a remarkable
number of area and output. In 2005, Vietnam stood the third in the world in cashew area
with 400.000 hectares, the second in the world in production of raw cashew with 370.000


                                                                                          29
tons. Vietnam cashew productivity is at the high level in the world - 1.1 tons/hectare and
there is potential for further increase.
2. Up to now, cashew has been asserted to be the important foreign exchange inflow.
Export turnover of cashew in 2005 nearly reached 500 millions USD. On the other hand,
it also created jobs for over 300.000 farmers and nearly 300.000 workers in processing
industry, giving considerable earnings for the poor. Although initial capital investment
per hectare is low and output of cashew per hectare is lower than that of other industrial
trees, production of cashew still gets profitable and attracts many workers thanks to low
cost and not being a soil-selective crop.
3. During its history of cashew export, Vietnam has changed from export of cashew pip
in the period of 1988-1994 to export of processed product - cashew nut, since 1995. This
is a right trend which increases product value and export turnover, expand export market,
and reach more and more stable price.
4. Having built a system of technical-material bases which are mainly industrial
processing bases (more than 110 processing factories with the total capacity of 450.000
ton/year); having ensured to process all domestic output of cashew pip and a volume of
imported one; having selected equipment and technique which are suitable with
Vietnam’s conditions.
Thanks to the processing model which well combines man-made and machinery,
production cost is low and reasonable, return ratio and product quality is high. These
factors bring in the competitiveness of Vietnam cashew in the world market.
5. Owing to the advantages of cashew growth in recent years, the State in the first step
reinforced the investment in building technical material bases, scientific research,
especially in implanting of high-yield cashew and building advanced technical process.
That is why the cashew productivity rapidly increases, the processing technique is
suitable and production is profitable.
6. Incas was established with efficient operations, gathering the strength of both cashew
processors and traders, unifying the orientation of production-business development, thus
creating new momentum to compete in the international market.

7.2.   Some existing matters
Vietnam has been advantageous in production and export of cashew nut. However,
Vietnam cashew’s competitiveness is limited: low investment for intensive cultivation,
unselected cashew varieties, shortage of good seed for production, relatively large
expanding of cashew area (500,000 hectares) but the area having high-yield is small
(about 250,000 hectares of old garden needs improving), shortage of capital for
processing industries and for new technology application. Many factors that affect to
production lead to lack of enthusiasm of cashew farmers. Main reasons are:
Firstly, the planning task:
Scheming and planning for cashew development was floated in the past years. There is
short of overall scheme and detailed plan for each region. The State did not directly
control but left spontaneous production. Farmers themselves grew cashew. When they
found difficulties in cashew growth, they cut down trees, broke up cashew garden. These
lead to decrease in area and output of cashew.
For example, according to the report of Dong Nai department of Agriculture and Rural
Development, the province had 42.741 hectares of cashew in 1996, of which 7.700
hectares were broken down by the end of the year, decreasing its output by 2.315 tons.
The major reasons are shortage of capital investment for intensive cultivation and garden
improvement, low productivity causing no profit. Therefore, cashew trees were cut down



                                                                                       30
for growing other more efficient trees. Other reasons are re-growth of cut-down cashew
trees, industrial zone planning, house building, and forest fire...
Secondly, the development of raw materials area: A good cashew variety is the most
important factor which decides productivity and output of cashew. In fact, cashew
production in Vietnam has not drawn any attention. Cashew was grown by seed which
was not selected carefully and is normally mixed/local variety. Therefore, it is easy to be
infected by worms, strongly separated and quickly deteriorated. At present, attention is
paid to variety study and selection, but there is still not enough good seed for production.
There has not been a professional body to control variety quality and provide good
quality seed for farmers. Technical process of cultivation (growing, caring, improving
and harvesting) is still inconsistent. Cashew gardens have not invested enough for
intensive cultivation.
Area of old low-yield cashew are pretty large – about 250.000 hectares. It is necessary to
have plan of improving these areas by implanting high-yield cashew and investing in
intensive cultivation annually. It is planned to improve about 20-25% of bad cashew
areas. Therefore, it takes 4-5 years ahead to finish improving and to have about 350.000-
400.000 hectares of high-yield cashew area.
It is due to such above reasons that raw materials areas and processing bases are
separated and processing bases are hungry of raw materials.
Recently, some factories have invested to create their own raw materials area but the
number of such factory is quite a few. Negative activities happen often such as unfair
selling or buying, grade/price depression, etc.
Thirdly, processing: At present, cashew processing system has been quickly developed.
It is not suitable, separated from the raw materials area (domestic raw materials is not
enough for processing capacity, some places having processing factory but being in short
of raw materials, while some others having materials but no factory). Researches on
applying new technology have not been implemented to make variety of products from
cashew. At present, process of cashew now includes: peeling, heat treatment, packaging
and exporting of cashew nut. Processing bases are not associated with cashew growers.
This is also the reason why processing factories are in passive status of raw materials.
The fourth is the capital needed for the cashew industry:
-        Cashew production now mainly takes place at household level. The source of
capital is from the farmers themselves, but Vietnamese farmers are still poor - their
capital accumulation is not enough to invest in production. Therefore farmers are still in
short of capital, especially those living in the low quality soil areas. As calculated, to
achieve high yield, the initial investment must be VND 7.5 – 8.0 millions per hectare of
cashew. However, in many regions, farmers in fact invest only VND 2-3 millions
initially, and only VND 50,000 – VND 100,000 annually for caring (comparing to the
standard of VND 3-4 millions per hectare). With such low investment, the maximum
yield can only be about 400-500 kg/ha.
-        There has been not much research in selecting, hybridizing high yield cashew
varieties. Investment in doing research into new processing technology and diversifying
cashew products has also been lack of capital.
-        As for enterprises doing business in the cashew industry, the lack of capital for
production and material storage is common. This leads to the instability of purchasing
price. Some enterprises and people have only paid attention to the at sight benefit, thus
have not invested in the research for the renewal of technology satisfying higher and
higher requirements on quality, food safety, and environment protection. The processing
technology is still not of high standard, using much unskilled labor, has low productivity,



                                                                                         31
and has high cost production. The number of factories satisfying ISO, GMP, and HACCP
standards is still in limited.
-        Over the year, other industrial crops such as rubber, coffee, and tea have been
under big development programs of the government, have been invested from state
budget, and have benefited from loan, thus have developed firmly. The cashew has only
been paid attention by the government only in recent years; however the capital invested
in the cashew is limited and not adequate.
The fifth is market:
-        The export market of Vietnam cashew nuts is quite stable and could be extended
due to higher demand. However, the annual domestic raw cashew supply is still smaller
than the processing capacity; therefore, Vietnam has to plan to import raw cashew pips.
-        In the near future, due to the improvement of old cashew areas and the planting of
new ones, the cashew output may decrease; the shortage of raw material is inevitable,
possibly causing the deterioration of Vietnam’s reputation and export market. The import
of raw cashew will also encounter difficulties. Therefore we need concrete plans and
preparation to overcome these obstacles: have plan to improve old cashew groves by
better varieties, mobilize enough capital to invest in intensive farming, have plan to
import raw cashew and store raw material, enhance the processing technology to improve
product quality and reduce after- harvest and processing loss, etc.
-        Some enterprises have not paid much attention to the building up, consolidating
their brand names, creating and preserving their global commercial reputation.
Information forecasting and analyzing, especially market information, of Vietnam’s
enterprises, are still limited.
There have been many changes in organizing the system of cashew exporting and
trading; however the business capability and co-operation are ineffective and still expose
many shortcomings. The overlapping in cashew purchasing and transporting, and the sell
and buy competing have had harmful effects to the common benefit of producers.
-        The domestic market has not received adequate attention. For the time being,
there are about 30 factories and processing units having instant cashew products
consumed domestically like salty fried cashew-nut, oil-soaking nut, and cashew-nut
confectionery (about 7,000 – 9,000 tons of cashew-nut). In addition, the material used for
domestic consumption is the one that cannot satisfy export quality. With the increasing
living standard, the domestic demand for cashew products has become higher and higher
– this is a high potential market that needs to be exploited.
The sixth is about the cashew development policy:
The set of policies encouraging the development of the cashew industry is not adequate
and comprehensive. The government has not paid adequate attention to the investment in
developing the cashew industry. Some policies have been made, but have not been joint-
carried out effectively by different authorities. For example, farmers have not been
benefited from the policy that gives support to cashew growers at the protection land
according to Decision No 661 signed by Prime Minister due to the lack of close co-
operation among the forestry sector, local authorities, and growers etc.
The government needs to invest in the cashew industry through programs and projects
such as the program of high yield cashew variety, the program of building up research
stations that carry out the tasks of doing experiment, selecting, reproducing good
varieties, and transferring seeds and specific technique to particular ecological regions.
This is the important factor that can help us to improve our yield in future.
In general, we are in short of particular policies such as capital, credit, import-export tax
policy that encourage the development of the cashew production.



                                                                                          32

				
DOCUMENT INFO
Shared By:
Categories:
Tags:
Stats:
views:168
posted:7/28/2011
language:English
pages:32