How do rising costs and the attacks on ships in the Red Sea affect the retail price of cashews?

23 Jan How do rising costs and the attacks on ships in the Red Sea affect the retail price of cashews?

The retail price of cashews can be influenced by various factors, and rising costs and security concerns in the Red Sea can have indirect effects on the overall supply chain, potentially impacting prices. Experts point out that the war between Russia and Ukraine may continue to cause disruptions, and the situation in the Middle East is similar. The attacks by Houthi rebels on cargo ships in the Red Sea are currently causing delivery delays and high freight costs, and here too it remains to be seen how the situation will develop. Overall, however, the market is expected to remain at least stable. Here’s how these factors may contribute to changes in the retail price of cashews:

1. Transportation Costs:
   • Attacks on ships in the Red Sea or any disruptions in the region can lead to increased transportation costs.
   • Higher shipping costs can affect the overall logistics of transporting cashews from the production regions to processing centres and eventually to retail markets.
2. Supply Chain Disruptions:
   • Security concerns may disrupt the regular flow of goods along the supply chain, causing delays and potential shortages.
   • Disruptions can lead to increased storage costs, as well as the need for alternative transportation routes, which can contribute to higher overall costs.
3. Insurance Costs:
   • With heightened security risks, insurance costs for shipments may increase.
   • Higher insurance premiums can be passed on to various participants in the supply chain, potentially leading to higher costs for processors and, eventually, retailers.
4. Impact on Processing Facilities:
   • Processing facilities located in regions affected by security concerns may face challenges in ensuring a steady supply of raw cashews.
   • If processing facilities are forced to shut down or operate at reduced capacity due to security issues, it can affect the overall supply of processed cashews in the market.
5. Market Speculation:
   • Uncertainties and risks in the Red Sea region may lead to market speculation, influencing commodity prices.
   • Traders and investors may adjust prices based on perceived risks and uncertainties, even if there is no immediate impact on the supply chain.
6. Global Market Dynamics:
   • Cashews are traded on the global market, and any disruptions in one region can have ripple effects on prices worldwide.
   • Global market dynamics, including demand and supply conditions, can also play a role in determining retail prices.
7. Consumer Demand:
   • Retail prices are also influenced by consumer demand. If demand remains strong and supply is constrained due to external factors, prices may rise.

It’s essential to note that the impact of rising costs and security concerns on the retail price of cashews can vary based on the degree of integration of the affected regions into the global cashew supply chain. Additionally, the overall stability of the global economy, currency fluctuations, and geopolitical factors can further influence price dynamics.

While security concerns and rising costs may contribute to increased prices, other factors such as competition among retailers, consumer preferences, and the overall economic climate also play significant roles in determining retail prices for cashews.