Cashew Value Chain Features

For Costa & Delgado (2019), unlike in Brazil, India and Vietnam, the features of the cashew value chain in Mozambique are not so well developed, with the main cashew-related activities concentrated in exporting in-shell cashew nuts rather than processing into kernel exported for roasting abroad for final consumption. The three leading cashew processing countries absorb nearly their whole in-shell cashew nut production and imports from other countries, including Mozambique, to meet their full processing needs. They have developed their cashew value chain to exploit a broad range of cashew by-products. Value-added by-products comprise a wide and diversified variety of food, feedstock, and

55 other industrial products such as kernels, cashew apple, juices and spirits, confectionery and bakery products, cashew flour and meal used in animal feed, residual cashew skin for tanning, cashew nut shell for fuel, and Cashew Nut Shell Liquid (CNSL) which is used in a diversity of industrial applications such as antioxidants, fungicides, and anti-termite treatment of timber (Costa & Delgado, 2019).

Mozambique’s cashew industry develops two main activities: in-shell cashew nut production and cashew nut processing. Researchers assert that in-shell cashew nut processing consists of two steps.

First, to produce white kernel to be exported to foreign roasters. Second to roast and flavour the kernel within the country for selling domestically or for selling outside of the country. Roasting activity is performed by very few small units, most of them exploring the tiny domestic market, still in its infancy. Mozambique has produced and exported CNSL, but the collapse of the international CNSL market had an extremely negative impact on this activity. Given that the market has shown new signs of attractiveness, processors have increased the capacity to the point that the level of production is now approaching the critical mass that will make the activity viable once again. With regard to cashew apple production, most of it is lost, although some rural households produce spirits for their own consumption and sometimes to pay for hired services, but this insignificant production is not widely commercialised, a situation that is aggravated by the absence of any legislation or regulation on this activity.

In Mozambique there is a coexistence of informal and formal flows through which cashew products circulate in the value chain, before reaching processed cashew nut end consumers in domestic and international markets, as well exporters of in-shell and processed cashew nuts. Formal trading is dominated by individual growers or growers’ associations who sell their cashew nuts to small, medium, and large-sized traders, in-shell cashew nut exporters, or processing factories. The informal channel consists essentially of women, who use traditional home methods to process in-shell cashew nuts in very small processing units. They are essentially buyers who add some processing value and sell the cashew kernels directly to markets, bazaars, street vendors, or door-to-door. Once in a while some of the women also sell small quantities to neighbouring countries such as Malawi, Zimbabwe, South Africa, and even Zambia, through informal border trading, locally known as mukhero.

The three basic stages of the cashew value chain products flow comprise (Costa & Delgado, 2019): i) The value chain is characterised by smallholder producers, the overwhelming majority of which are the heads of rural families and households. Sometimes they organise themselves into associations and usually produce many different crops. Recall that cashew is grown along the coast in remote areas, making it difficult for producers to collect and sell their products. Most of the producers on various occasions largely do not have market price information, while buyers are better informed and have more bargaining power. Producers have no alternative but to sell the in-shell cashew nuts, irrespective of quality or size. Smallholder seller producers and collectors and buyers don't have

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control over the quality of the in-shell cashew nuts; ii) The cashew nuts are collected and transported for export either in-shell or processed by local industry or the informal sector. Cashew growers and simple collectors sell locally to retail and wholesale traders, processors, brokers, and the informal sector. At this stage there is some quality control: exporters must measure the OTR of each lot for export, and processors usually do the same to control kernel quality; iii) In-shell and shelled cashew nuts, crude or flavoured, are exported to international markets. It is an established fact that a considerable share of the marketed in-shell cashew nut surplus is exported without being processed (Costa & Delgado, 2019). Cashew nuts processed by the domestic processors are sold to both domestic and international markets.

There are twelve stakeholder groups, inasmuch as cashew nut value chain is concerned, namely:

Producers - Rural families responsible for nearly all cashew production (Costa & Delgado, 2019).

According to official statistics, about 1.4 million smallholding producers are involved in cashew production and trading. Small Intermediate Traders – They are very small, as a rule, but they play an important role in cashew marketing, and during the harvesting season they can number in the thousands. They are usually self-employed, and given the limited access to finance, they mostly work on behalf of others. Wholesalers - These are basically traders who export in-shell cashew nuts, but they can be intermediary suppliers to other exporters or processors. Primary Processors - These are the established processing industries, which process kernels in all stages like de-shelling, peeling, selecting, grading, and export in-shell kernel to the international market where further processing for final consumer markets takes place. Cottage Processors – These are agents, essentially women who buy or collect their own production to shell, peel, and roast cashew nuts manually in their respective backyards. Secondary Processors (roasters) – The practice of frying and adding flavours to kernel for final markets has not found favour or tradition in Mozambique. The domestic market for secondary processing products is small. Transporters – These are a few professional transporters who operate within the value chain, although usually the agents involved in trading cashew products (medium-to-large traders, wholesalers, processors, exporters, have their own transport capability. Retailers – Flavoured and unflavoured cashew nuts are available throughout the country at shop outlets, roadside stands, bazaars, mini markets, and larger supermarkets, despite the tiny domestic market for kernels.

Street Vendors – These individuals trade in cashew kernels in urban areas along main roads and near traffic lights. Brokers – These are individuals who act as intermediary traders for exporters. Exporters - These six domestic and foreign operators buy nuts in the national market through a purchasing network—field agents, cantinas, warehouses, and others—established in areas where production takes place. They operate with their own funds or loans from credit institutions, but also act on behalf of financing importers. International Market Buyers – It is worth recalling that the market is divided into two vectors: i) In-shell cashew nuts are normally exported to India and Vietnam, and ii) Partially processed (primary processing) and processed (secondary processing) kernels are essentially sold to

57 European markets (Netherlands, France, Portugal, among others), and North American (US, Canada) markets.