Being the largest exporter of cashew nuts in the world but being reliant on foreign inputs is a dilemma that the cashew industry needs to be solved.

After more than three decades of development, Vietnam is ranked first in the world by cashew nut shipment, second by productivity and third by output. In 2016, Vietnam exported 347,000 tonnes of cashew nuts worth US$2.84 billion, an increase of 12.2 per cent from a year earlier.

Nevertheless, domestic inputs currently meet only about 20 – 25 per cent of demand by 345 export processors. Meanwhile, the cashew nut output growth has been lower than the demand growth for many years. In 2017, input cashew supply increased only 3.5 per cent per year due to crop failures, droughts and climate change. In the meantime, the demand side grew 6 per cent.

Like other agricultural exports like rice and tea, unfair competition has been also seen in the cashew industry. Up to 73 per cent of 345 cashew companies have annual export value of less than US$5 million. Vietnamese cashew companies engaged in only processing stages, which account for 18 per cent of cashew value chain. The biggest profit pie (nearly 60 per cent) in salt roasting and distribution is beyond the reach of Vietnamese firms. Therefore, Vietnam’s cashew industry faces many challenges integrating into big markets such as the United States, Europe and Japan.

Additionally, domestic input supply in the country is fluctuating mainly because of shrinking farming area and aging trees. In 2016, Vietnam imported more than 1.1 million tonnes of raw cashew, resulting in higher production costs but unstable product quality.

Binh Phuoc province, the largest producer of cashew nuts in Vietnam, has a cashew growing area of 180,000 ha on which 80 per cent of trees are grown from unselected seeds. About 30 per cent of cashew area in Binh Phuoc province is aging (over 20 years), typical of low productivity.

The country’s cashew productivity is 1.35 tonnes per hectare and Binh Phuoc province’s yield is 1.4 tonnes. According to international studies, cashew productivity may rise 30 – 40 per cent if cultivating science and technology is applied.

In the past few years, the cashew area has decreased by about 100,000 ha as trees are unproductive due to climate change and pests.

Not only weak in technology, the cashew industry is still scattered in development. The concentrated cashew cultivating area accounts for 61.7 per cent of the total area and the dispersed area makes up for 38.3 per cent. The sector lacks close cooperation among the government, farmers, entrepreneurs and scientists to develop to the full potential.

Minister of Agriculture and Rural Development Nguyen Xuan Cuong said at the conference on “Sustainable cashew industry development in global value chains” in late September that “We need to untie the knot in production. We must reorganise input production because it largely affects processing and market access.”
He pointed out that the cashew industry is now facing challenges in all three areas: production, processing and marketing. Although the sector has much potential for development, it will still decline if all these three areas are not improved. We can unite the knot in input production first.

An important and urgent task of the cashew industry is converting the current 300,000 ha of cashew trees into new-generation trees to enhance productivity. In the transitional period, it is necessary to have supportive policies and actions to help farmers to have stable incomes and livelihoods.

A new factor has recently appeared to bring new hopes for the Vietnamese cashew industry. Pan Group revealed the cashew re-cultivation strategy to engage cashew production in Binh Duong province into global value chains. Mr Nguyen Khac Hai, General Director of Pan Group, said the company will pilot the new farming model on 10,000 ha. It has cooperated with farmers via cooperatives to cultivate cashew trees. The firm will provide seedlings and techniques for farmers to plant trees on their lands and will acquire all output. Then, it will expand and transfer farming techniques to all farmers in the region.

The participation of Pan Group, a successful agricultural firm in the country, is expected to have a strong ripple effect on the industry to remove the hurdles to the development of the Vietnamese cashew industry.