ASSESSMENT OF OPPORTUNITIES FOR SMALLHOLDER CASHEW PRODUCERS IN SUPPORT OF UNITED STATES AGENCY FOR

INTERNATIONAL DEVELOPMENT (USAID)/FEED THE FUTURE (FTF) TANZANIA

March 2015

This publication was produced for review by the United States Department of Agriculture and the United States Agency for International Development. It was prepared by 20/20 Development Program with a focus on identifying opportunities to assist small stakeholders in the Tanzanian cashew industry to achieve higher returns from their production efforts and to increase exports of value added cashews.

Requisition number: 729999

Order Number: AG-3151-P-15-0046 Contractor Name: United States Department of Agriculture

(USDA) Date of Report: March 20, 2015 Document Title: ASSESSMENT OF OPPORTUNITES FOR

SMALLHOLDER CASHEW PRODUCERS IN TANZANIA

Author’s Name: Jim Krigbaum, CEO 2020 Development Co. SOW Title: STATEMENT OF WORK FOR SHORT-TERM

CONTRACTOR TO CONDUCT ASSESSMENT SERVICES OF OPPORTUNITES FOR SMALLHOLDER CASHEW PRODUCERS IN SUPPORT OF UNITED STATES AGENCY FOR INTERNATIONAL DEVELOPMENT (USAID)/FEED THE FUTURE (FTF) TANZANIA

Funded By Agency Code: FX00 Budget Yr. Start: ZZ SHC:

55SETCBR7005760RA621P11 BOC: 2595

The views expressed in this publication do not necessarily reflect the views of the United States Department of Agriculture, or the United States Agency for International Development.

Data Page Author: Jim Krigbaum 20/20 Development Company LLC Practice Area: Economic Development Keywords: 2020 Development Company LLC, Auction, Buyer-Seller, Cashews, Development, Economic, European Union, EU, Export, Fairtrade, Global Market, Global Trade, Harvest, Importers, Importing, India, Market, Nuts, Organic, Tanzania, Trade, United States, U. S. Department of Agriculture (USAID), U.S. Agency International Development (USAID), Warehouse Receipt System (WRS).

Acknowledgements This report would not have been possible if it were not for the dedicated work of the field team engaged by Ohio State University led by Dr. Isaac Minde, Deputy Director of the Innovative Agricultural Research Initiative of Tanzania and his team of researchers including Dr. Zena Mpenda and Dr. Adam Akyoo with assistance from Stephen Nyaki of Sokoine University of Agriculture and Researcher Eunice Khaguli of the 20/20DC team.

We would also like to thank all of the individuals and organizations who took the time to assist us with their time for our interviews and follow-up questions.

It is with respect to the vision and leadership of the USAID Tanzania team that this critical issue gets addressed in an effort to help Tanzanian farmers achieve better results from their involvement in the cashew value chain. It is our hope that this report will help move the dialogue forward to achieving greater success across the cashew value chain.

Table of Contents

ASSESSMENT OF OPPORTUNITIES FOR SMALLHOLDER CASHEW PRODUCERS IN SUPPORT OF UNITED STATES AGENCY FOR INTERNATIONAL DEVELOPMENT (USAID)/FEED THE FUTURE (FTF) TANZANIA ..................................................................................................................... 1

Data Page ......................................................................................................................................3 Acknowledgements ........................................................................................................................3 Table of Contents ...........................................................................................................................4 Abbreviations.................................................................................................................................6 Index of Tables ...............................................................................................................................7 Index of Figures ..............................................................................................................................7

Abstract ................................................................................................................................ 9

Executive Summary ............................................................................................................... 9 EXECUTIVE SUMMARY – bottlenecks preventing smallholder cashew farmers from entering the export market ................................................................................................................................9

Warehouse Receipt System .................................................................................................................. 9

Auction System ................................................................................................................................... 10

Export Tax ........................................................................................................................................... 11

Executive Summary –Opportunities for smallholder cashew farmers to enter the export market ... 11 100% Processing in Tanzania .............................................................................................................. 11

De-commoditizing Tanzanian Cashews............................................................................................... 12

Tanzania’s Competitive Advantage ..................................................................................................... 12

Areas of support needed by smallholder cashew farmers to enter specialty export markets .......... 13 Diversify the Buyers ............................................................................................................................ 13

Market Linkages .................................................................................................................................. 13

Summary ..................................................................................................................................... 14

Methodology of study ......................................................................................................... 14

What are the key characteristics of the cashew industry in Tanzania? .................................. 15 Tanzanian Production ................................................................................................................... 23

Tanzanian Cashew Crop (ACI, 2011).................................................................................................. 25

Seasonality of Tanzanian production ............................................................................................ 27 Global and Tanzanian trade of cashews ........................................................................................ 31 Lost revenue from exporting RCN versus processed kernels ........................................................... 35 Export tax .................................................................................................................................... 36 The problem of concentration of markets ..................................................................................... 43 Tanzanian cashew value chain ...................................................................................................... 44 Current industry flow chart........................................................................................................... 44 Issues of concern .......................................................................................................................... 46 Warehouse Receipts System (WRS)............................................................................................... 48 Efficiency of the current system .................................................................................................... 54

Changes that will provide greater returns inside of Tanzania ................................................ 57 Processing .................................................................................................................................... 57 Specific processing opportunity discussed during field interviews .................................................. 60 Olam Profile of a Processor ........................................................................................................... 65 Change in the CBT bid system ....................................................................................................... 65 Eliminate the export tax ............................................................................................................... 66 Developing a niche to capture export market for value added cashews ......................................... 66 Fairtrade niche explored ............................................................................................................... 67 Organic Niche Explored ................................................................................................................ 73 Diversification of buyers ............................................................................................................... 74 Available resources ...................................................................................................................... 75 Stakeholders ................................................................................................................................ 76 Annotated Bibliography ............................................................................................................... 77

Appendix ............................................................................................................................. 91 Appendix A - Importing Companies ............................................................................................... 91 Appendix B - Grading of cashew nuts .......................................................................................... 105 Appendix C - Association of Food Industries (AFI) Specs for cashew kernels ................................. 107 Appendix D - Fairtrade prices 2015 ............................................................................................. 110 Appendix E - Fairtrade Cashew standards .................................................................................... 111 Appendix F - Fairtrade campaign ................................................................................................. 113 Appendix G -Olam company profile and brands .......................................................................... 114 Appendix H - USA imports and price (Assoc., 2014) ..................................................................... 115 Appendix I - The cashew processing flow chart ............................................................................ 117 Appendix J - Glossary of terms .................................................................................................... 119

Bibliography ...................................................................................................................... 120

Abbreviations 20/20 Development Company LLC 20/20DC African Cashew Alliance ACA African Cashew Initiative ACi Agricultural Marketing Cooperative Society AMCOS Agriculture None State Actors ANSA Association of Food Industries, USA AFI Bank of Tanzania BOT Bill of Lading BL British Retail Consortium BRC Coffee and Farmer Equity C.A.F.E Cashew nut Authority of Tanzania CATA Cashew nut Marketing Board of Tanzania CBT Cashew nut Development Center CDC Cashew Industry Development Trust Fund CIDTF Cashew Processing Program CPP Cashew Nut Shell Liquid CNSL Cost and Freight CNF Cost Insurance Freight CIF Euro € European Union EU Fair-trade labelling Organization FLO Food & Agriculture Organization (UN) FAO Farmer’s Cooperative Union FCU Free on board FOB General Agricultural Practice GAP Good Handling Practices GHP Good Manufacturing Practices GMP Government of Tanzania GOT Hazard Analysis & Critical Control Points HACCP International Trade Center ITC Masasi High Quality Farmers’ Products Ltd. MHQFP Metric Tons MT Naliendele Agricultural Research Institute NARI Nuts in Shell NIS Primary Cooperative Society PCS Private Public Partnerships PPP Raw Cashew Nut RCN Tanzanian Shillings TZS Tanzania Warehouse Licensing Board TWLB Technoserve TNS Vietnam Cashew Association VINACAS United Nations UN U.S. Agency International Development USAID U.S. Department of Agriculture USDA U.S. Dollar USD Warehouse Receipt System WRS

Index of Tables Table 1 Global cashew harvest table ........................................................................................30 Table 2 Leading process comparison ........................................................................................31 Table 3 Leading Cashew consuming countries .........................................................................32 Table 4 Tanzania RCN exports .................................................................................................34 Table 5 Revenue lost by exporting RCN vs. Kernel calculations ...............................................35 Table 6 CBT fund allocation from export tax .............................................................................36 Table 7 Return to Farmer Historic calculations ..........................................................................37 Table 8 Importers of Tanzanian cashew kernel .........................................................................42 Table 9 African RCN exporters as percent of crop ....................................................................43 Table 10 SWOT Analysis of Product (ACI, 2011) ......................................................................48 Table 11 Freight and associated costs from Farm Gate to FOB ................................................55 Table 12 Farm Gate as percentage of India Imported price (African Cashew Initiative, 2011) ...56 Table 13 Processors chart ........................................................................................................57 Table 14 SWOT on processing opportunities (African Cashew Initiative, 2011) ........................59 Table 15 Cashew processing capacity and technology .............................................................61 Table 16 Competitiveness of African cashew industries ............................................................63 Table 17 SWOT Market linkages (African Cashew Initiative, 2011) ...........................................63 Table 18 Fairtrade Coffee percentage of company volume .......................................................68 Table 19 Good Practice examples of processors ......................................................................72 Table 20 Free Trade Zone buyer ..............................................................................................74

Index of Figures Figure 1 2012 Cashew production ranking (Factfish, 2015).......................................................15 Figure 2 Trademap data of Cashew trade .................................................................................17 Figure 3 Exporters of RCN ........................................................................................................18 Figure 4 Tanzania exports and destinations ..............................................................................18 Figure 5 Cashew Kernel Exporters (ITC, 2014) .........................................................................19 Figure 6 Tanzania RCN Destinations and volume (ITC, 2014) ..................................................20 Figure 7 India RCN Imports.......................................................................................................21 Figure 8 Tanzania Cashew Kernel Importers (ITC, 2014) ........................................................22 Figure 9Tanzania cashew production (FAO Stats, 2015) ..........................................................22 Figure 10 Annual Growth rate of Cashew production in Tanzania (FAO Stats, 2015) ...............23 Figure 11 Tanzania cashew crop characteristics .......................................................................25 Figure 12 Top 30 country cashew yields ...................................................................................26 Figure 13 Global cashew harvest seasons (African Cashew Initiative, 2011) ............................28 Figure 14 India cashew imports ................................................................................................28 Figure 15 India's cashew export destinations ............................................................................33 Figure 16 EU importers of cashew nuts from DC in 1000 MT ....................................................38 Figure 17 Suppliers share of cashew nut kernel into EU ...........................................................39 Figure 18 African share of cashew kernel into EU (CBI Ministry of Foreign Affairs, 2013) .........39 Figure 19 Current cashew industry flow (ACI, 2011) .................................................................45 Figure 20 Cashew product flow (ANSAF, 2013) .......................................................................46 Figure 21 Shared Vision cashew kernel value chain (ANSA, November 2013) ........................46

Figure 22 Where does the money go as percent of FOB sale (ANSA, November 2013) ...........48 Figure 23 Procedures for WRS in Tanzania (Cashewinfo.com, 2014) .......................................52 Figure 24 Historic events with Harvest overlay (African Cashew Initiative, 2011) ......................52 Figure 25 Leading Investors in Tanzania (US Dept. of Commerce, 2014) .................................64 Figure 26 OLAM global activity in cashews (Olam Corporate website, 2015) ............................65

Abstract Tanzania is a major global trader of cashews and has a competitive advantage in the market place because of the harvest time of Tanzanian cashews. Despite the strong market demand, recent high prices for RCN and cashew kernels, and the competitive advantage the Tanzanian cashew, farmers have seen their incomes decrease since the implementation of governmental policies put in place to protect the farmers.

Tanzanian cashew producers’ yields rank number 27 globally out of 30 cashew producing countries. This poor efficiency ranking is the outcome of a combination of several factors including environmental and governmental elements and market influences. Since the 1970’s, the Government of Tanzania (GOT), the international development community, and the private sector have been investing in Tanzanian cashew production and processing. However, despite the best intentions and efforts of the sector, the results have not helped the farmers achieve sustainable incomes.

This report addresses these issues and presents a view from outside the industry looking in with the objective of providing an unbiased view of how actions, both macro and micro, can be directed to assist the producers of Tanzanian cashews.

Executive Summary The Tanzanian cashew industry directly employs more than 360,000 farmers, primarily in the southern Mtwara and Lindi region. Despite governmental efforts to improve the income of these producers and a strong cashew international price and market, the income of these producers has failed to achieve desired results.

Extensive debate has occurred over the last several years about the impact of government actions, specifically the Warehouse Receipts System (WRS), the Auction System and the loss of income from Tanzanian exports of Raw Cashew Nuts (RCN) rather than processing them in country. This report addresses these issues with summaries presented here with details following in the body of the report for those wishing to dig deeper into the subject to more fully understand the dynamics of the situation.

There is no easy answer on how to create and capture better income at the producer level. This report, the result of our field and available media study, takes a look at several options including the possible development of niche markets (Fairtrade and Organic) wherein the Tanzanian producers could achieve a greater return on their efforts in cashew production. Unfortunately due to several factors, including limited markets and transition time coupled with administrative barriers, these options do not create a quick fix for the issue of raising farmer income.

Structural changes and focusing on their natural competitive advantage may prove to be the best means to achieve the objectives of increasing farmer income and profitability.

EXECUTIVE SUMMARY – bottlenecks preventing smallholder cashew farmers from entering the export market Warehouse Receipt System A Warehouse Receipts System (WRS) concept is a globally accepted means of providing secured finances for the farmers. With the WRS programs, commercial and government

supported banks utilize the farmers product stored in an approved (and often controlled) warehouse as collateral for payment or loans to the farmers. The Tanzania system differs however from many similar systems in that farmers do not have a choice - they must participate in this system. Therefore, 100% of cashews officially sold go through the WRS system. The fact that the inventory is then sold through the Auction System does provide the banks with 100% confidence in receiving payment when the product is sold. This creates a single buyer for cashews from the farmers and without competition to keep things open and fair the farmers are not receiving the most for their product.

While our field work and desk research found that there are examples of small “specialty” cashews being sold without involvement of the WRS system, this is a small exception and documentation of this occurring remains elusive.

In Tanzania, the WRS system for cashews is mandatory. It is also mandatory that all of the product be supplied to the WRS and ultimately to the Auction come exclusively through the Agricultural Marketing Cooperative Society (AMCOS). Herein lies another problem with the Tanzanian system in that the AMCOS are not audited, their transactions are not transparent to their members, and only 25% of the farmers are members of the AMCOS. The AMCOS take a significant and mostly undocumented fee for their services. This fee is high and the AMCOS is not required to allow their members or non-members to review their records and they are not required to be audited.

The industry reviewers’ and spokespeoples’ support for a WRS system is relatively universal and experiences in other countries where WRS is an option for the producers, proves a significant value for the farmers and benefit the system. However, it is also nearly a consensus opinion that the WRS system should be optional to the farmers and that requirements for having the product only transfer through the AMCOS should be removed to allow farmers to work directly with the WRS system. Interestingly, Ethiopia, which faces similar issues of attempting to protect the income of the farmers, requires the use of a WRS and Exchange system for some products (sesame for example) yet allows the Cooperative Unions to sell outside of the Exchange. This allows cooperatives to benefit from the development of niche products, markets and relationships with long-term buyers, an option which is not available with the Tanzanian WRS system. This proves to be a limiting factor in the ability for farmers to produce specialty crops which could demand a premium on the global market.

Auction System The second area of near universal concern in our research is the Auction System, which like the WRS system, is required for 100% of all cashews produced in Tanzania. Like the WRS there are reports of some cashew sales which are untraceable, however, these are difficult to document and track.

The Tanzanian Cashew Auction is a closed bidding system and the logic behind keeping it a closed system is not articulated anywhere in the research or interviews that we performed. In fact, we encountered no viable logic to support such a system during our interviews and research. The closed bidding system eliminates transparency. Without transparency, the confidence in a fair system is minimized or eliminated completely. There is no evident support for the closed auction with the exception of those who benefit from the system which are the approved buyers which secure 88 percent of the product for the Indian market. In fact buyers

from other importing countries have publically expressed their unwillingness to participate in such a closed system where transparency does not exist.

A transparent working auction is the best way to maximize the price of a product or service. And, it is said that an auction is a perfect way to ensure that they buyer pays above the market price (a good thing for the farmers) because the competition isn’t willing to meet their last bid therefore the natural market price is the 2nd to last bid rather than the last bid which is “too high” for the market. With an open bid the price continues to go up until only one buyer is willing to pay that price. This is not the case with a closed bid system.

The lack of competition in both the WRS and Auction system eliminates the market drive for efficiency, via the invisible hand of competition. This lack of efficiency is seen in the high transaction costs associated with the system. Extensive studies have been completed reflecting the high transaction costs in Tanzania when compared with competing countries. The added costs of the WRS and Auction system are borne by the farmer whose return is reduced by the amount of the high transaction costs.

Export Tax In an effort to curb the export of Raw Cashew Nuts (RCN), the government of Tanzania has implemented a 15% export tax placed on the ex-Auction price. Throughout existing reports it is documented that this tax impacts the farmers through reducing their income by the amount of the tax. It is widely accepted by the industry and economists that study the industry that the export tax hurts the farmers not the buyers as intended and has done nothing to stimulate domestic processing. The external competitive market and the closed auction fixes the price that the buyers get through the auction and these prices take into account the export tax. While the revenue generated from the tax is utilized to support the industry it is in practice a self-tax and at 15% is a significant reduction in farmer income.

Executive Summary –Opportunities for smallholder cashew farmers to enter the export market 100% Processing in Tanzania While there is nearly universally agreement that the three elements above (WRS, Auction and Export Tax) do not in fact support the farmers but protect the buyers, another element which has received extensive debate in recent years is the goal to achieve 100% processing in Tanzania of their cashews by the year 2020. While this is a valiant recommendation considering the value of exports of RCN and cashew kernels of $550 million USD over 5 years, however, there are many elements that need to come into line in order for this goal to be achieved.

Since the 1970’s and the World Bank investments in processing plants in Tanzania, millions of dollars have been invested by the private sector, the Government of Tanzania, and the development community in an attempt for Tanzania to process more of their cashew crop internally in order to capture the jobs and added value in country. All of these efforts have ultimately failed with only a small sliver of the potential processing ability currently producing with plants mothballed and closed over the years. The failure of governmental efforts at processing is also echoed and experienced within the private sector. For example Olam, a company that claims a near 20% market share of global cashew trade has recently began

leaving their Tanzanian facilities to put their emphasis on exporting RCN from Tanzania and processing elsewhere, including Mozambique. Without significant changes to the system, it is difficult to justify further investment when “for profit” operations like Olam are not achieving their objectives.

In order for 100% processing to occur inside of Tanzania, many factors have to fall into place. These are addressed in our report in further detail.

De-commoditizing Tanzanian Cashews In addition to addressing the above elements the question remains how does Tanzania increase their sales and the return to the farmers? One area which has been successful on other products is to de-commoditize the product through market segregation – in the case of cashews this could be Fairtrade and/or organic. Examples of the success of Tanzanian coffee have been presented as a system which could be duplicated for cashews. Unfortunately coffee is quite different from cashews in that product differentiation (de-commoditization) is much easier in coffee. Through our research we were in touch with Chris Von Zastrow a primary architect of the specialty coffee niche in Tanzania, who points out some of the difficulties of duplicating coffees success with cashews. (Details of his reply are below)

One potential target market for specialty cashews, assuming they could even be sold outside of the WRS and Auction system, is to target the Fairtrade market for cashews. Unfortunately the global sales of Fairtrade nuts of all kinds is only €3 million Euros (2013) of which many of these are certified both Fairtrade and Organic. It is not possible with current available data to identify what percentage of this €3 million is cashews and which of these have both Fairtrade and Organic certification. Even if cashews represented 50% of the Fairtrade nut sales and Tanzania were able to double that volume, the increase in sales would only be €1.5 million Euros. Not a large number considering the unlikelihood of this near best case scenario. Given this low potential for success what level of investment is justified in supporting the development of a Fairtrade niche for Tanzanian cashews?

Organic is another niche which has been discussed as an option to de-commoditize cashews from Tanzania. Because of the wide range of certifying agencies for Organic it is difficult to get a global number on the trade of organic cashews traded. However, a study of markets in Europe and the USA where organic has its largest sales per capita, organic cashews are “reasonably” available at retailers like Whole Foods and Trader Joes in the USA and Aldi and Carrefour in Europe. Therefore, the potential for organic cashews to fill a market niche exists, the question remains can it be done competitively and efficiently within Tanzania and can they avoid losing their premium by going through the WRS and Auction system? Unfortunately, not only does organic expose the farmer to lower quality yields but it also requires a three year transition period to go from conventional agriculture to organic. This transition period is costly and requires stamina for the producer to overcome the reduced yields without the premium for their transitional crop.

Tanzania’s Competitive Advantage Tanzania has a competitive advantage with the seasonality of their cashew harvest. The Tanzanian cashew harvest occurs when global available inventories are lowest and processing countries like India and Vietnam are lowest on their inventory. Therefore, Tanzania could utilize this competitive advantage and with an effective marketing system, maximize their returns

without the need of risky investment in processing, which to date has not proven effective, and without requiring changes in the WRS or Auction system, though change is recommended.

Processors in India, Vietnam and Brazil work with their domestic crop and with imported RCN to subsidize their available product for processing. Through this system they operate their factories 12 months out of the year (even with efficient inventory, storage and capital it is estimated that Tanzania would only be able to process 8 months of the year without importing of materials.) The utilization of the factory and workers 12 months of the year reduces the marginal cost of production and makes equipment and labor more efficient. These 12 month processors have made that fact their competitive advantage, not provided by nature but by strategy.

Tanzania has the 27th lowest yield of 30 cashew producing countries. Perhaps the effort to support in country processing should be targeted toward increasing efficiencies in production an allowing Tanzania to capitalize upon their naturally provided competitive advantage of timing on their harvest. Increasing efficiency is more than providing training and improved trees but requires an economic incentive, driven by the market, to increase farmers’ participation and adoption of these technologies, to stimulate efficiency driven by market conditions. This economic stimulation will not occur as long as the inefficiencies of the system do not drive the benefits of improved efficiency to the farmers.

Areas of support needed by smallholder cashew farmers to enter specialty export markets Diversify the Buyers Another and nearly painless means to improve farmer returns is through increasing demand and competition for their products. Currently 88% of Tanzanian cashew exports go to India. The crop and inventory conditions that India suffers at the time of the Tanzanian harvest is not unique to India. Therefore, other buyers including Vietnam and Brazil have an interest in the Tanzanian crop. While administrative and phytosanitary issues need to be addressed with Brazil, and we understand these are currently under process, exports to Vietnam and other countries remains an attractive option to near exclusive exports to India. In multiple publications by Cashewinfo.com, Cashew News, and Cashew Week, Vietnamese and USA buyers and others have expressed their lack of confidence with the Auction system treating them fairly in their efforts to purchase from Tanzania. Therefore marketing efforts alone will not bring these buyers to purchase more product from Tanzania. The system needs to change in order to provide appeal to these buyers.

Market Linkages While the objective of this research was not to provide specific targeted customers, our report dose provide feedback from two interested participants in the Tanzanian cashew industry. The first is Lemberona, an Austrian company that is interested in working with Tanzania on Fairtrade and Organic certified cashews. The second is a Turkish company that is the #1 exporter of nuts in the Middle East that has a FTZ in Mersin that is able to repackage bulk cashew kernels and export them to the Middle East region. Both of these companies are ready and willing to be involved and details on them are found in the report, however, securing product a limited amount of product outside the Auction is probably not going to be sufficient enough for them to build a sustainable business on and therefore will need to be addressed prior to and throughout

their involvement. We also provide a list in the Appendix of hundreds of known cashew importers.

Summary There are several issues which need to be addressed in order to increase the farmers’ return on cashews produced in Tanzania. None of the options provide low hanging fruit and all require a disruption of the status quo and a loss of power by those who now control the system. Finding niche markets without changing the system will only provide short term, if any, results.

Tanzania has a competitive advantage provided by nature. There are ways to capitalize upon this competitive advantage, increasing yields, improving the efficiencies of the system by providing competition at all levels, diversifying buyers and markets, and developing a system which allows for niche products to provide premium markets and provide the farmer with options. Until these issues are addressed, building a sustainable and profitable processing industry may prove no more successful than past efforts to process inside of Tanzania. By focusing on the existing competitive advantage, Tanzania can build the foundation through which processing and capturing lost revenue will be the natural step in the process of developing a sustainable industry where farmers, processors ad exporters can all profit.

Methodology of study 20/20 Development Company LLC (20/20DC) in cooperation with the Ohio State University (OSU) International Programs in Agriculture were contracted by the USDA to review the Tanzanian cashew industry in an effort to identify areas where donors and investors can enhance farmer incomes by supporting the industry with specific attention on identifying a niche which allows them farmers to export their product or to sell to an exporter who is working within a niche market which pays a premium and allows for the producers to sell outside of the WRS and Auction system.

This effort consisted of two steps. The first was field interviews which were conducted in cooperation between 20/20DC and OSU and were orchestrated by Dr. Isaac Minde, on behalf of the OSU team, including Doctors Isaac Minde, Zena Mpenda and Adam Akyoo with assistance from Stephen Nyaki of Sokoine University of Agriculture, and attended and recorded by Researcher Eunice Khaguli of the 20/20DC team. These interviews are documented at the end of this report with the following summary.

• 22 interviews (13 individual & 9 group interviews with 2-4 participants) • 5 field team meetings (planning, debriefs, report discussions), • 1 Ambassador briefing • 1 courtesy call Tandahimba District Executive Director In addition to the field interviews, desk research was completed which included the review of over 60 documents and websites to gather historic and current data from the available research in the industry. This data review was combined with the completed field research to develop the following report which includes an annotated bibliography which is included at the end of this report.

This research attempts to review the industry through a different lens than many of the existing reports. Through our review, we have found that much of the available research and data was

written by a handful of individuals who are focused on the cashew industry. It is our hope that our review, which to a great extent is an outside of the industry, will shed some fresh light on the ongoing debates facing the Tanzanian Cashew industry.

What are the key characteristics of the cashew industry in Tanzania? World Bank data reflects the fact that currently 30 countries produce cashew nuts for export and/or domestic consumption.

Tanzania is one of the top 10 cashew producing countries in the world. In 2012 they ranked #8 in the world with a world share of nearly 3% of global production.

Figure 2 2012 Cashew production ranking (Factfish, 2015)

The above map reflects the export of RCN with Tanzania being a major exporter. In comparison the map below reflects the trade of nuts without shell where Tanzania I not a global factor in the market.

Figure 1 Trademap data of Cashew trade

This chart from UN ITC data reflects the position of Tanzania as an exporter of RCN. It is important to note that Côte d'Ivoire and Ghana primarily sell to Vietnam while Tanzania primarily sells to India.

The chart below from UN Comtrade data reflects the production, export, price and destination of Tanzanian cashews. Similar data is available for other origins via the Cashew Handbook published by www.cashewinfo.com

Figure 2 Exporters of RCN

Figure 3 Tanzania exports and destinations

The above chart reflects global trade in cashew nuts without shell. This clearly illustrates the dominance of Vietnam and India in the cashew nut processing. Both of these countries produce cashew nuts and import nuts to utilize their processing facilities 12 months out of the year.

Figure 4 Cashew Kernel Exporters (ITC, 2014)

This chart, also from UN ITC data reflects the importers of Tanzanian cashews and the dominance of the Indian buyers.

Tanzanian cashews imported into India demanded the highest price of all of India’s sourcing origins. There are several factors influencing this including those listed next to the chart below. The chart is provided by ANSAF.

Figure 5 Tanzania RCN Destinations and volume (ITC, 2014)

(ANSAF, 2013)

Figure 6 India RCN Imports

Figure 7 Tanzania Cashew Kernel Importers (ITC, 2014)

The above chart illustrates the limited exports of shelled cashews from Tanzania. While we cannot tell from these statistics there is a strong possibility that the shipments to the Netherlands is Fairtrade or organic and re-exported to other countries inside of the EU.

Figure 8Tanzania cashew production (FAO Stats, 2015)

Figure 9 Annual Growth rate of Cashew production in Tanzania (FAO Stats, 2015)

In a good season, Tanzania produces up to 20% of the African production and up to 10% of World production of in shell cashew nuts. (ANSA, November 2013)

Tanzanian Production “Cashew nut farmers were among the poorest farmers in Tanzania due to poor production methods and marketing, wrong taxation policies, and poor regulation.” (Policy Forum TZ, 2008) Tanzania has in excess of 360,000 cashew farmers (ACI, 2011) with the average cashew farm owner in his fifties (Technoserve, 2005). The challenge is how to keep the youth on the farm producing cashews when other jobs offer better returns for the youth. This is a global problem as farmers’ age and incomes on the farm don’t provide incentive for youth to stay. This problem can be addressed by providing a better income and standard of living for farmers producing

cashew nuts. Tanzania production has ranged between 39,300 MT in 1993 to a peak of 160,000 MT in 2012 with a decrease in 2012 to 127,947 MT in 2013 with some sourcing claiming 200,000 MT in 2014. Despite considerable effort by the Government of Tanzania (GOT) and extensive support from the development community the yield has been decreasing over the last several years from a high in the 1990’s in excess of 12,000 to slightly over 3,000 in 2013

This has created a situation where production and acreage increases yet yield decreases. The fact 80% of the farmers have less than 1 acre is not a major factor on their uncompetitive yields as most of the producers across Africa are also on small plots (ACI, 2011). In fact, World Bank data also reflects the fact that more than 40% of the global cashew crop is produced by about 2.5 million small farmers across Africa. The vast majority of these farmers live in rural areas and struggle to make as little as € 90 to € 300 per year through the production of cashews. Such low incomes results from a number of factors, including low yields, poor quality nuts, and a lack of business skills. According to estimates from the World Bank, around 97% of world cashew production comes from wild growth and small farms while remaining 3% come from planned plantations. (ITC Factsheet, 2011)

Tanzania nut prices are at a higher level as compared to other African nations due to its bigger nuts of 50 to 52 lbs. outturn and the arrival of the crop coinciding with the end of the Indian / West African crop season. (Cashew Info, 2104) Unfortunately this premium is not passed on to the farmers due to the grading system of the Auction (discussed below in detail.)

Tanzanian Cashew Crop (ACI, 2011)

Figure 10 Tanzania cashew crop characteristics

(ITC MNS, 2011)

Of the 30 countries producing cashews, Tanzania is ranked as #27 for yield per hectare. This does not make for an efficient industry as 26 other countries produce more marketable cashews per hectare and in several cases thousands of hectograms per hectare more. (Interestingly Brazil is one of only three countries producing less per hectare than Tanzania yet is a leading global producer for total harvested cashews and cashew processing. Brazil imports to supplement their domestic harvest and to operate their factories 12 months of the year.)

Despite this poor yield per hectare, Tanzania has the recognized leader in cashew research with Naliendele Agricultural Research Institute (NARI) in MTWARA. According to several sources, NARI is the only African institute that can draw on cashew-specific scientific knowledge, improved germ-plasm and large mother gardens for multiplication. Tanzania has also had millions of dollars invested by the government and by the development community in cashew production extension and training. Technoserve and other agricultural development experts have been working in Tanzania for decades (TNS for 20+ years).

Cashew trees are increasing in quantity in Tanzania with support from the CBT and other agencies including the CIDTF which is working under a 3 year strategic program to grow and distribute a massive 10 million cashew grafted seedlings for farmers in various districts. (All Africa, 2015) To date the CBT claims to have planted 10 million trees under this program. While the number of trees is increasing the question still remains will the yields increase?

Despite these investments and support, the yields have been decreasing consistently over time. Some of this decrease can be explained by natural conditions (weather and tree maturity), however, a portion of this is attributed to poor adoption of recommended practices by farmers. This is most likely a result of farmers not having the economic incentive to adopt or utilize

Figure 11 Top 30 country cashew yields

improved production techniques. Several reports have documented the poor return on investment to farmers from their efforts in cashew production with causes including the closed bid system, lack of transparency at the cooperative level, high costs associated with services and transportation of the product to the port and the export tax. This report will illustrate how many of these factors limit the farmers return and henceforth their incentive to adapt new technologies.

Development experience has shown that the adoption of new technologies is not exclusively driven by the availability of information. In this case, hundreds of thousands of producers have received technology assistance in production; in fact .Technoserve alone has impacted more than 700,000 small producers in Tanzania. (Technoserve, 2015) The adoption of new technologies is driven by success of the early adopters becoming role models and mentors for others to form a cluster behind them emulating their practices to achieve success. If farmers do not see results, increased income, from new efforts, they will abandon the efforts and others will not adopt the new technology as they cannot see success. We have seen this across Africa with the adoption of “modern hives” for the apiculture industry. Without the early adopters achieving success others will not attempt to adopt the new technology. When success for adoption of the new technology moves the adopters forward, others will emulate the efforts that helped their neighbor achieve success. We have seen this in Ethiopia and elsewhere when success is achieved with modern hives, or other forms of new practices.

Seasonality of Tanzanian production One competitive advantage for Tanzania is that their harvest comes in at a time when world stocks are the lowest and buyers are anxious to buy inventory to fill their production lines.

Tanzania’s harvest is the first of the season when only 18% of the world crop is harvesting. Therefore, Tanzania benefits from unknown harvests in other countries and low inventories at processors. “Southern crop” countries in East Africa, Brazil and Indonesia are the only ones able to assure supplies to the world market in the period from end of September until February when the processing industry is in dire need of raw material to keep installed capacities running.

In processing plant operations, running a plant 24 hours a day (3 shifts) 7 days a week, 365 days a year is the best way to reduce the cost per unit on your product (with appropriate shifts for maintenance and sanitation). When working with local supplies a processor is limited to available harvest or product stored for further processing when fresh harvest is not available.

To store cashews for an extended period of time is a difficult process. Not only does it require capital to sit tied up in inventory, it requires storage conditions which maintain moisture (humidity) at a stable 6 – 8%, and is also free from pests. All of this requires capital which is not required if new inventory is entering the plant every day.

India is the world’s largest importer of RCN and the largest exporter of shelled cashews. India purchases 88% of Tanzania’s exported RCN.

As India has a strong market share of cashews purchased from Tanzania the share of cashews imported into India from Tanzania is also a strong dependency of 78.5% in terms of volume and an 80.4% in terms of dollar value. While this does suggest that the product purchased from

Tanzania exceeds the average price from other origins, the fact that they have such a large share of the market does give Tanzania a position of strength with India. While it is always risky being a bully of a supplier, they are in a position to consider flexing their muscle to secure better prices. http://www.seair.co.in/product-import-data/raw-cashew-nuts-import-data.aspx

Figure 12 Global cashew harvest seasons (African Cashew Initiative, 2011)

Figure 13 India cashew imports

These high percentages could be a significant function of the seasonality of Tanzania’s crop; India has few viable options but to purchase from Tanzania.

India is the largest producer of raw cashew nuts in the world with 1.01 million ha area under cultivation and 0.75 million tons production in 2013. (Cashew Info, 2104)

Vietnam is the 2nd largest processor of cashews and was the largest cashew kernel exporter in 2006. It has been successfully holding on to its position for eight consecutive years.

In the 1990’s Vietnam invested in improving productivity of its farms including high-density planting, commercial farming, and seed programs which ensured the yield levels are one of the highest in the world. (Cashew Info, 2104) Prior to the 1990’s, Vietnam did not produce or process cashews in significant volumes. Additionally, Vietnam invested heavily in mechanizing the entire cashew process to save on labor, bring in consistency, and cost competitiveness. (Cashew Info, 2104)

In order to supply their processors with raw materials, Vietnam works closely with the Cote d’Ivoire. (Cashew Info, 2104)

Therefore the processing plants in India, Vietnam and Brazil that operate most efficiently are those that import raw cashew nuts in shell (RCN) to supplement their own local production. The imported RCN are utilized to move their average cost of production down, utilize their fixed costs more efficiently, employ their workers annually rather than just seasonally, increasing their market dominance and ability to ship 12 months of the year. Griffin Murray of BlackIvy states that in Tanzania an inventory can be kept for 8 months, which with available capital, a processor could hold inventory for processing 8 months of the year. This however would require capital, storage and interest to carry the inventory versus a just-in-time inventory flow from a balanced local supply and import program.

India has made their own competitive advantage by processing year round and thus lowering their cost of production and increasing their ROI. This competitive advantage is not exclusive to India but can be duplicated by any processor able and willing to work with RCN supplied from geographic locations that are contrary to their production season. Tanzania could achieve this advantage as well if their plants were willing to import and the government allowed the importation of RCN (not sure of the status of this at this time.)

(ITC MNS, 2011)

The chart below reflects a comparison between major producers and exporters of cashews.

(ANSAF, 2013)

Table 1 Global cashew harvest table

Table 2 Leading process comparison

Global and Tanzanian trade of cashews The Harmonized System (HS) is the internationally standardized system of names and numbers to classify traded products. There are two HS numbers utilized for cashes depending upon if they are RCN or a nut without shell. These numbers are as follows:

Product: 080131 Cashew Nuts in shell, Fresh or dried Product: 080132 Cashew nuts, without shell, fresh or dried

(Cashew Week, 2015) In 2013, Tanzania exported 15.4% of the world’s cashews and ranked as the #3 exporter globally. Interestingly they have 3% of the global production yet 15.4% of global export. This is partly a reflection of the lack of domestic market for their product. The global trade for the HS number for RCN 080131 is as follows: four countries imported more than 99% of the RCN exported by Tanzania with India importing 88%, Vietnam 7.8%, Singapore 2.2% and Mozambique 1.2%. (There is a strong possibility that the Singapore product was re-exported to Vietnam for processing. It is expected that Mozambique volumes will increase with the recent closure of the Olam plant in Tanzania.) The pie diagram below reflects the export market for Indian cashews. This chart is important for Tanzanian processors and exporters to understand the final market for the finished goods produced from the RCN that they export to India.

Table 3 Leading Cashew consuming countries

Figure 14 India's cashew export destinations

List of importing markets for the product exported by Tanzania, United Republic of in 2013

Product: 080131 Cashew nuts, in shell, fresh or dried Tanzania, exports represent 15.4% of world exports for this product, its ranking in world exports is 3

Sources: ITC calculations based on UN COMTRADE statistics.

Importers

Trade Indicators

Tariff (estimated)

faced by Tanzania,

United Republic of

(%)

Exported value 2013

(USD thousand)

Trade balance

2013 (USD thousand)

Share in Tanzania,

United Republic

exports (%)

Exported quantity

2013

Unit value (USD/unit)

Exported growth in

value between

2009-2013 (%,

p.a.)

Exported growth in quantity between

2009-2013 (%,

p.a.)

Exported growth in value between

2012-2013 (%,

p.a.)

Ranking of

partner countries in world imports

Share of partner

countries in world imports

(%)

Total import

growth in value of partner

countries between

2009-2013 (%, p.a.)

World 164905 164904 100 150882 1093 24 12 16 100 25

India 145181 145181 88 131967 1100 22 11 7 1 70.7 14 0

Viet Nam 13004 13004 7.9 12591 1033 105 90 595 2 21.5 58 5

Singapore 3654 3654 2.2 3488 1048 26 15 -7 10 0.2 10 0

Mozambique 1934 1934 1.2 1793 1079 -37 6 98 0 0

Indonesia 726 726 0.4 669 1085 19 0.1 -44 5 United Arab Emirates 251 251 0.2 232 1082 24 5 -79 9 0.2 24 5

China 75 74 0 72 1042 7 0.5 126 0 Hong Kong, China 75 75 0 70 1071 6 0.7 45 0

Germany 5 5 0 1 5000 42 0 14 0

Brazil 3 2.6 372 10

Thailand -1 14 0.1 168 Table 4 Tanzania RCN exports

During the 2014/15 season to date, Tanzania has made $225.5 million from exporting 149,742 tons of raw cashew nuts. (All Africa, 2015) This reflects a 28% increase from last season. Africa produces 42% of the estimated 2.6 million MT of cashews produced annually. African exports 90% of the cashews it produces. (Cashew Info, 2104)

In 2013 nearly $165 million USD worth of RCN were exported with more than $145 million of that going to India.

Lost revenue from exporting RCN versus processed kernels Tanzania has no significant domestic consumption to absorb available supply and create competition for foreign buyers. Much of the product selling in the domestic market may be “flying under the radar” and not going through the WRS or Auction system.

A recent study conducted by ANSA concluded that Tanzania exports of up to 90% of production in shell sacrificing an estimated US$550 m in value addition alone over the five year period 2008 - 2012. (ANSA, November 2013) This number of potentially lost revenue has become an industry, government, and development community rally cry to achieve more processing of

cashews inside of Tanzania.

(ANSAF, 2013)

In addition to creating revenue through processing and exporting, it is estimated that 100% processing in country would generate up to 45,000 jobs. Unless cashews are imported, it is estimated that these jobs would be for the harvest period (4 months). If inventory is procured and carried, with all the associated costs of financing and storing inventories, a period of eight months could be possible.

Table 5 Revenue lost by exporting RCN vs. Kernel calculations

Based upon this calculation, there is a drive to increase processing in country to 100% of the available crop by 2020. While this is an ambitious goal based upon actual numbers, the straightforwardness of the numbers does not take into consideration several factors that are discussed below including the need to find a viable market willing to change from importing from India to importing from Tanzania.

Export tax In an effort to encourage processing inside of Tanzania the government instituted a tax on RCN exports in 2007. Currently this tax is 15% of the export value on RCN with 85% of the proceeds from this tax is allocated as below for promotion of the cashew industry. (A discussion on the impact of this tax will occur below.)

Cashew Board Of Tanzania(CBT) Percentage - area allocated 10% - Research 35% - Cashew 5% - Support 5% - Fungicide Subsidy 25% - Processing & Marketing 5% - Packaging 10% - CBT Operations

Table 6 CBT fund allocation from export tax

An export tax of 15% is placed on all exports for RCN, however, as noted by other researchers and economists Mitchell and Baregu (2011, p.4) “An export tax may be justified if it allows local processing to develop and become competitive. However if local processing is not competitive, then the export tax is simply a transfer from producers to processors and the government.” (Baregu, n.d.)

(SERA Policy Project, 2014)

While many of these taxes and fees are placed on the farmer to “protect” them from the competitive nature of the market, it is in fact this lack of competition in the market which is harming them. Many of the policies in place in fact impact the return that the farmer receives negatively and the Tanzanian cashew farmer is harmed by this effort. When compared with farmers in other cashew nut exporting countries that allow market forces to drive price and flexibility and choice in the farmers’ sales channels, the Tanzanian farmer is penalized by the very efforts intended to support them.

During the field studies conducted by the 20/20DC and Ohio State University (OSU) team they found that the definition of “processed” is broad and therefore minimal processing has been used in export documentation to avoid this tax. It is impossible to see this in the official statistics. However, we have seen this done in other industries where the government attempts to penalize the exports of raw materials yet doesn’t define “processed” sufficiently to ensure that their objectives are achieved. The export of wood blanks from Peru to China is an example where an export tax was put on unprocessed wood to China in an effort to discourage export of unprocessed wood and to stimulate employment in Peru. In that case the processors and Chinese buyers found a way around the tax by putting a slight edge on the wood to call it processed while in fact most of the processing was done in China yet the tax was avoided. It is believed that this may be occurring in Tanzania on the cashews to avoid the taxes on RCN.

Further research into the exact terminology of the law for processed versus raw would need to be conducted to confirm this statement made during the interviews.

The HS code for processed cashews nuts, without shell, fresh or dried is 080132. UN data for this code are found in the chart below.

Table 7 Return to Farmer Historic calculations

Again it is impossible to tell from the data below however given the countries that are reflected as importers of processed cashews (080132) we may be able to draw the following assumptions:

Netherlands – this is a transshipment entry point for goods entering Europe and chances are the goods were re-exported from there. Given this volume, 7.375 million USD, and the high value per ton $6,841 it is very possible that this volume reflects product that is either organic or Fairtrade certified. Given the chart below from the Fairtrade Label Organization we can see that Europe is a major importer in Fairtrade product.

Figure 15 EU importers of cashew nuts from DC in 1000 MT

Figure 16 Suppliers share of cashew nut kernel into EU

Figure 17 African share of cashew kernel into EU (CBI Ministry of Foreign Affairs, 2013)

India – based upon the statement above about semi-processed cashews avoiding the RCN cashew tax, can it be assumed that this volume of $2,962 million USD is in fact semi-processed cashew nuts avoiding the RCN tax? Further study would need to confirm this assumption but given our field study it is a definite possibility. Given India’s processing industry, there is no reason for them to import processed nuts, other than to avoid the taxes.

Vietnam – the same assumption may be accurate for the $574 thousand USD that are shipped to Vietnam.

United Arab Emirates (UAE) imports nearly eight times more processed cashews from Tanzania than they do RCN. This is a probably a reflection of the close ties between processors in Tanzania and the UAE and their low processing industry due to their high wages and limited food processing in the UAE.

The other importers of processed nuts (080132) are probably a result of many factors including organic and Fairtrade certified or other niche aspects which could be addressed and expanded to increase overall exports of processed cashew nuts.

List of importing markets for the product exported by Tanzania, United Republic of in

2013 Product: 080132 Cashew nuts, without shell,

fresh or dried Quantitates Metric

tons

Importers

Trade Indicators

Tariff (estimated)

faced by Tanzania,

United Republic of

(%)

Exported value 2013 (USD

thousand)

Trade balance

2013 (USD thousand)

Share in Tanzania,

United Republic

exports (%)

Exported quantity

2013

Unit value (USD/unit)

Exported growth in

value between

2009-2013 (%, p.a.)

Exported growth

in quantity between

2009-2013 (%,

p.a.)

Exported growth in value between

2012-2013 (%,

p.a.)

Ranking of

partner countries in world imports

Share of partner

countries in world imports

(%)

Total import

growth in value of partner

countries between

2009-2013 (%, p.a.)

World 23269 23267 100 3821 6090 -2 -24 22 100 10

Netherlands 7375 7375 31.7 1078 6841 -7 -11 6 2 8.3 3 0

India 2962 2962 12.7 539 5495 18 -2 228 17 0.8 66 30

United Arab Emirates 1931 1931 8.3 347 5565 47 36 485 4 5.8 9 5

United States of America 1798 1798 7.7 265 6785 -40 -57 284 1 34.6 11 0

Russian Federation 1057 1057 4.5 206 5131 111 89 -17 10 2.1 10 0

Germany 747 747 3.2 111 6730 96 62 -42 3 8.2 12 0

Lebanon 716 716 3.1 143 5007 231 16 0.9 10 5

Lithuania 660 660 2.8 95 6947 50 45 0.2 20 0

Viet Nam 574 574 2.5 111 5171 -26 -8 25 0.6 26 25 United Kingdom 563 563 2.4 79 7127 1 -6 -66 6 3.7 5 0

Australia 536 536 2.3 81 6617 122 50 339 5 3.9 12 0

Canada 534 534 2.3 80 6675 -9 -15 72 7 3 15 0

Sweden 514 514 2.2 79 6506 -60 21 0.7 1 0

Israel 464 464 2 79 5873 26 26 -16 19 0.8 12 4

Italy 455 455 2 79 5759 -16 -26 -14 14 1.1 19 0

South Africa 391 391 1.7 64 6109 -29 -30 -57 28 0.5 24 0

Turkey 359 359 1.5 49 7327 42 0.3 -1 30

Saudi Arabia 333 333 1.4 64 5203 -52 15 1.1 5

Denmark 238 238 1 32 7438 2 38 0.3 90 0

Spain 232 232 1 32 7250 -13 -16 -51 13 1.4 8 0

China 201 201 0.9 107 1879 26 0.6 -36 0

Kuwait 201 201 0.9 29 6931 27 0.5 21 5

Singapore 116 116 0.5 16 7250 22 0.7 22 0

Japan 109 109 0.5 16 6813 -49 -33 9 2.3 16 0

Egypt 92 92 0.4 14 6571 36 0.4 16 5

Oman 91 91 0.4 14 6500 66 0.1 57 5

Kenya 23 21 0.1 12 1917 -32 -53 -87 104 0 -5 0

France 8 2.5 17 0 Table 8 Importers of Tanzanian cashew kernel

The problem of concentration of markets The Tanzanian cashew industry is dependent upon the Indian buyers to support their industry. With 88% of their RCN and 12.7% of the processed cashew exports going to India, this gives India a total market share in terms of dollars in excess of $148 million USD of a total exports of $188 million or 78% of total cashew nut exports. While the Indian market provides a solid foundation, this market concentration is not prudent or safe for an industry to be so dependent upon a single buyer.

This type of buyer concentration is referred to by economists as a monopsony which is defined as a state in which demand comes from one source (in this case India). A monopsony is a buyer’s monopoly, reflecting the demand side not the supply side. Under a true monopsony, which very seldom exists in the real world, a common theoretical implication is that the price of the good is pushed down near the cost of production. When it gets to this level, the producers have little or no incentive to produce, hence the low yields of Tanzanian cashew producers.

Under the control of the supplier there are two ways to move away from the control of a monopsonistic buyer like India. The first is to change regulations to discourage or ban purchases by the monopsonistic buyer. The second is to diversify the market to other buyers. Tanzania has applied the first strategy by means of the export tax and has yet to effectively achieve their objectives of market diversification.

There are two ways to diversify the buyers. The first is to create your own buyer, which in this case would be through the establishment of a successful processing industry. The second is to find new buyers of the same product (RCN and processed kernels). Each of these two strategies will be discussed later in this report.

Tanzania is not alone in their export of nuts in shell versus shelled nuts. The chart below reflects processing rates across Africa.

(ANSAF, 2013)

Table 9 African RCN exporters as percent of crop

Tanzanian cashew value chain While the value chain for cashews has changed over the years, the Tanzanian cashew industry has a history of heavy government involvement at all levels. In addition to production support (extension) provided by the government, often in cooperation with the development community, the government of Tanzania currently has two major interventions in the cashew industry.

The first intervention is the Warehouse Receipts System (WRS) and the second is the Auction System for selling cashews. Both of these systems have been studied and written about extensively from both supporters and foes of the system. While there is statistical evidence to support both positions there appears to be a preponderance of evidence that these systems need to change in order to advance the cashew industry.

There are several things which need to be addressed in the Tanzanian cashew industry including the following:

• Low yields achieved at the production level. This can be addressed by increasing the farmers’ incentive to be productive through the utilization practices to increase production which are a cost, either direct or hidden (for example family labor). With a better economic incentive the farmer will adapt new technologies. (addressed above)

• The lack of transparency at both the Agricultural Marketing Cooperative Society (AMCOS) and the Cashew Marketing Board of Tanzania (CBT) are a hindrance to an efficiently functioning market.

• There is extensive research and documentation that indicate the logistics charges from the warehouses to the port for export are unreasonably high and add significantly to the costs of exports.

• There is significant evidence to conclude that the 15% export tax has not increased the price to the importer but has reduced the money received by the farmers.

Each of these points will be addressed below in detail. The nature of the Tanzanian cashew value chain is complex with a history of the government reacting to crisis, many times crisis far beyond their control, to patch a current problem only to create another one when the market conditions change.

Current industry flow chart

Figure 18 Current cashew industry flow (ACI, 2011)

Figure 19 Cashew product flow (ANSAF, 2013)

The above diagram reflects the physical flow from farmers to export or domestic processors.

The diagram below reflects the “Shared Vision” of the cashew value chain with the modifications recommended by the ANSAF report which supports local processing, allows farmers to sell directly to processors and exporters and provides transparency for the value chain. This model does not have to be dependent upon the goal of 100% cashew nut processing by 2020 as it provides transparency in the market and will allow market forces to bring efficiencies to services including logistics, cooperative support and warehousing.

The hurdle with adopting this system is that those in control of the WRS and CBT lose their control and power and are forced to work with market principles rather than controlling their market through the infrastructure and legislation which is currently in place.

Figure 20 Shared Vision cashew kernel value chain (ANSA, November 2013)

Issues of concern According to a 2011 African Cashew Initiative report on Tanzanian cashews, five aspects are mentioned that bear the risk of hampering private sector investments:

1. The closed marketing system 2. The insufficient public-private dialogue on strategies for cashew value chain

development 3. The unintended side-effects of the export tax on raw cashew nuts (RCN) 4. The ambiguous role of parastatals in Tanzania’s liberalized economy 5. The generally useful but inflexible system of the indicative farm gate price (ACI, 2011)

In this report we address each of these issues as viewed upon completion of our field interviews and review of available data.

The chart below was developed by the African Cashew Initiative (The ACi does not include Tanzania as one of their countries of operation). This SWOT analysis reflects the strengths, weaknesses, opportunities and threats in the production of cashews in Tanzania.

The above chart from the ANSA report CASHEW: Addressing Poverty through Processing in Tanzania derived from an undefined USAID Comparison Study reflects the distribution of revenue from the sale of cashews under the current system.

Of significant interest in this chart is the unreasonably high RCN Farm to FOB costs of $460 USD compared to as low as $82 USD in Ghana. This cost is significant and reflects the fact that the system, as a closed and protected system, does not need to be competitive and therefore charges that would be brought down by market forces now reflect reductions in income to the Tanzanian farmers as a result of the inefficient system.

Warehouse Receipts System (WRS) Since 2007, a warehouse receipt system has operated in Tanzania which means that all cashew production has to be auctioned via cooperatives at an auction managed by the Cashew Board of Tanzania. As a result of this system, coupled with the CBT (below) Tanzanian cashew processors cannot secure product directly from the farmers.

The concept of the Warehouse Receipts System (WRS) system is a globally recognized system which allows the farmer to receive partial payment for his crop at the time he turns it into a recognized warehouse. This system is used in both developing and advanced economies as it

Table 10 SWOT Analysis of Product (ACI, 2011) Figure 21 Where does the money go as percent of FOB sale (ANSA, November 2013)

serves a need for the farmers to get paid and the banks to have confidence that the product will be sold through a channel which ensures that they loan will be repaid.

In Tanzania the farmer receives three payments against the receipts issued by the recognized and licensed warehouse. The AMCOS often pre-finances farmers’ inputs and usually pays 60% of the indicative price as a first installment after delivery. The second instalment of 40% of the indicative price minus AMCOS charges and the pre-financing credit is paid at the end of the season. Furthermore, there is the “promise” of a premium to be paid if auction prices turn out to be largely above the indicative price. As illustrated above, prior to auctioning, the produce is stored (either in cooperative or private warehouses) while the Cashew Board of Tanzania (CBT) establishes a sales catalogue of lots received accompanied by a certificate of quality that indicates moisture content and RCN outturn. (ACI, 2011)

In developed economies, the sale of product through the warehouse and the WRS system is optional as the farmer is free to sell his product through another channel, or even store it in his own warehouse. Banks don’t like risk, so when they have a receipt for goods delivered to a warehouse, where they have confidence that the product will be sold, they make payment to the farmer.

In Tanzania it is a law that 100% of the cashews go through the WRS and CBT, however, our field interviews confirmed that there are some exceptions which “fly under the radar” for specialty processors and local consumption. (Local consumption is not a significant factor with estimates ranging from only 1% - 5% of production.) Our field interviews (notes below) provided us with the understanding that organic and Fairtrade cashews were marketed and stored outside of the WRS and CBT system. The documentation that we have available from export statistics does not provide us with proof of this one way or the other. Additionally, according to the Fairtrade Labeling Organization (FLO) website there are currently no Fairtrade certified processors of cashews in Tanzania, however, our field interviewers were shown an expired Fairtrade certificate when they were at Masasi High Quality Farmers’ Products Ltd. (MHQFP). (More on Fairtrade below)

During our field interviews, we found that according to MHQFP, specialty farmers are not accorded special consideration when supplying warehouses with their produce. They are

Masasi High Quality Farmers Produce Masasi High Quality Farmers

Produce (MHQFP) - Deals with Specialty cashews - organic and Fairtrade however their Fairtrade certificate may not be current.

Membership: 5 years ago 6 villages,

810 farmers currently 25 village groups, totaling 3016 farmers. All from Masasi and Nanyumba villages.

Started with Swiss aid in 2008 this

changed in 2014.

Currently MHQFP is only involved in the first stage of processing; removal of the outer shell because of lack of appropriate machinery and strict specialty processing guidelines that require specialty cashew to be separated from conventional cashew during processing.

subjected to the same grading and price checks as conventional cashews and have often received not more than Tshs.20 /kg over their conventional farmer counterparts

Another part of the cashew system in operation in Tanzania is that all cashews have to be sold through the Agricultural Marketing Cooperative Society (AMCOS). However only 25% of farmers are members of the Primary Cooperative Society (PCS) (ACI, 2011) but 100% are required to sell their nuts through the PCS and the WRS/Auction system. While the concept of the cooperative society is that the farmers own the cooperative and therefore manage the cooperative and are active in all aspects of cooperative decisions with full transparency within the cooperative, this transparency and involvement in the decision making process seems to be a non-factor in Tanzania. During our field interviews, our team got the impression from cooperative management that they operated the cooperative as it were their own company and the other farmers had little or no input into decisions or transparency into the profitability of the cooperative.

In WRS, exports of RCN must go through Primary Cooperatives (AMCOS) where the exporters and processors bid for RCN through the WRS/CBT auction process.

When selling to AMCOS, farmers receive a first payment which is normally financed by credits undertaken by the AMCOS. The AMCOS charges a fee for their services.

The AMCOS are not currently subject to audit or required to provide farmers with financial statements. Changing this fact alone would make a significant difference in the transparency of the AMCOS and the trust which farmers place in these organizations. Our field studies, and most of the written reports available, reflect a distrust between coop members and the AMCOS leadership. Without input from the farmers, ownership by the farmers and decision making ability by the farmers the cooperative is only a cooperative by name and not by function.

It is not the recommendation of this report, and as found in our study of available data not the recommendation of others, that the WRS system be scrapped as it serves a critical need for the farmers to finance their crop at harvest time and for banks and other lenders to have collateral sufficient to make a payment for the cashews against the warehouse receipt. It is the recommendation of many that the cooperatives need to function as cooperatives in order to provide confidence and value to its members.

In Tanzania the coffee industry also utilizes an auction system however the farmers are free to sell their produce either through the cooperatives or to private buyers. In this way, private buyers (other than cooperatives) are allowed to purchase the crops and therefore create competition which helps keep prices fair and reflective of the market. According to Tanzania Warehouse Licensing Board (TWLB), the current situation in the cashew industry creates a monopoly by cooperatives, thus making the market less competitive. The system could, however, accommodate other players (e.g. private buyers) if they were not banned from participating.

The chart below shows the timeline of governmental policy with respect to MT produced. It provides a good illustration of the impact that government policy has had on the Tanzanian cashew industry.

The text box below reflects the Tanzanian WRS as documented in the cashew Handbook 204 as published by Cashewinfo.com. http://www.cashewinfo.com/cashewhandbook2014.pdf This text box clearly illustrates the flow of products and documents.

The Cashew Handbook is published annually by Cashewinfo.com and is a valuable source for understanding the global cashew industry.

Cashew nut Marketing Board of Tanzania (CBT)

Figure 22 Procedures for WRS in Tanzania (Cashewinfo.com, 2014)

Figure 23 Historic events with Harvest overlay (African Cashew Initiative, 2011)

In 2014/15 the Tanzania Cashew nut Board (TCB) collected 195,000 tons by farmers in their primary associations through the warehouse receipt system. (All Africa, 2015) During the 2014/15 season to date, Tanzania has made $225.5 million from exporting 149,742 tons of raw cashew nuts. (All Africa, 2015) This reflects a 28% increase from last season.

The Cashew nut Marketing Board of Tanzania (CBT) performs the role of exporter of all (with possible exceptions as discussed above for specialty cashews). The export sales are done through an “auction” system however it is a blind auction without transparency of bidders, sales prices or the process.

The auction is a proven way to maximize the sales price of a product. In fact, in economic theory the auction is often considered to be the best system for selling a product for more than it is worth, as the winning bidder has paid more than the competition is willing to pay and therefore has paid more than the market for the product or service. There are four major (one-sided) auction types: (1) the ascending-bid (open, oral) often referred to as the English auction; (2) the descending-bid (Dutch) auction; (3) the first-price, sealed-bid auction; and (4) the

A study by the World Bank Dar es Salaam office has criticized the cashew nuts warehouse system, saying it does not help farmers get good prices and creates more liabilities to the government. http://www.21food.com/news/detail25232.html

second-price, sealed-bid (Vickrey) auction. Each of these auction types are designed to provide maximization of the sale of the goods or services.

Unfortunately the Tanzanian “auction” system does not have many of the features which makes an auction economically optimal for the seller. The features which prevent this from occurring include the following:

a. Transparency b. Monopsonistic or colluding buyers

In a report published by the ANSA stated:

The CBT auction is not a transparent system as the bid process is not public but rather through closed bid. “The lack of transparency in the auction system leaves it open to accusations of corruption and price fixing which is not good for the CBT or other stakeholders. An auction designed to enhance value to farmers and through which almost all in shell cashew are obliged to flow should be public with the winning bids published.” (ANSA, November 2013)

This lack of transparency prevents the auction system from functioning like an economically sound and functional auction. Our field interviews head numerous stories about buyer collusion and price rigging. While these stories may or may not be true, it is impossible to determine if they are or not with a blind auction. With an open auction, any of the formats mentioned above, would eliminate rumors as everything would be transparent. Therefore collusion would be difficult and under the watchful eye of buyers, sellers, the government and the development community.

We have not seen any argument which justifies retaining the current auction system rather than moving toward an open and accountable auction system. Those benefitting from the current system will undoubtedly fight any change in the system. However, keeping things as they are ultimately eliminates incentives for the farmers and by its very nature works to push prices to a minimum for the producers. This will ultimately hurt the buyers when producers continue to struggle to make a profit and leave the industry or, in an effort to preserve their industry, the government institutes a new system, or encourages alternatives like the goal of 100% processing by 2020.

The current WRS and Auction system does not reward quality which serves as a disincentive to produce quality. For example, there are just two grades: 48 lbs. standard units and under 48 lbs. units. . In the free marketplace, there is a premium for high yield nuts. For example, a 53 lbs. yield could be worth as much as $125 USD per MT, yet with the auction system, the producer receives the same return to the growers as a 48 lbs. yield nut. (ANSAF, 2013)

Efficiency of the current system In the void of competition, there is little economic incentive to push inefficiency out of the system. At all levels the concentration of marketing, warehousing, transportation and sales of RCN is strong and therefore competition is weak and incentive to improve efficiencies is minimized. This is clearly illustrated in the following areas:

a. Fees charged by the AMCOS for their services to the farmers b. Lack of accountability from the AMCOS to the producers c. Void of market options for the farmers d. The “auction” system not maximizing the sales price e. Transportation of product from the warehouses to the port

Many of these issues were echoed following the 2015 Dar es Salaam conference on cashew, ANSAF proposes the following action: 1. Increase domestic processing 2. Create avenues for competition in selling of cashews other than through the WRS 3. Increased advocacy; fight on behalf of farmers and improvement of the business environment We have covered points a – d above in other parts of this document. However we take this opportunity to provide details on the costs associated with transport of product from the warehouse to the port.

(ANSAF, 2013) Studies have documented that the cost of handling product through the WRS and Auction system is TZS286 (USD$181) per ton based upon 2012 value. This cost is passed on to the Cooperatives and subsequently to the farmers as a reduction in the value they receive from the auction. (ANSAF, 2013) A transparent and competitive system would add these costs to the prices that the buyers pay, thus increasing the value received by the producers. Additionally, the impact of the lack of competition for the growers’ product and the lack of necessity to create efficiency has decreased the farmers return on the sale of cashews to the WRS and Auction system. Lack of transparency in the Auction system and complexity for the outsider to understand and participate in keeps the control of the market in the hands of the few who understand and “trust” the system to treat them fairly. Buyers from countries other than India have been quoted in numerous reports to be confused with the Auction system and therefore reluctant to participate. In 2012 there were some issues relating to a USA buyer who was bumped out of the market when they attempted to purchase product that was “remaining” after the core buyers had met their needs.

Table 11 Freight and associated costs from Farm Gate to FOB

Table 12 Farm Gate as percentage of India Imported price (African Cashew Initiative, 2011)

Changes that will provide greater returns inside of Tanzania

Processing The Development Plan (2007/08-2010/2011) of the Cashew nut Board of Tanzania for increasing production from an average of 90,000 MT to 180,000 MT and processing from 20,000 MT to 100,000 MT to be achieved by mid-2010 did not materialize (ACI, 2011) and these numbers have still not been achieved today.

With the current disincentives provided to the industry by the WRS and Auction system, coupled with poor yields, inability of local supply to provide 12 month processing, inconsistent labor and an insignificant domestic market, many believe that raw cashew processing is not able to develop a competitive advantage and profitable industry.

“Domestic processing of raw cashew nuts is a Government priority (see recent article in Daily News http://allafrica.com/stories/201406060483.html), however, it is probably an unrealistic one because domestic processing is not profitable without Government support. Such support usually takes the form of an export tax on raw cashew nuts which ultimately comes at the expense of farmer’s prices.” (SERA Policy Project, 2014)Since receiving World Bank investment into processing facilities in the 1970s and 1980s, Tanzania has seen considerable turnover in the ownership and operations of facilities. Our field work has provided us with the following chart of past and present processing facilities:

From 12 processors to 3 currently active.

Processor , location Capacity/Status Tawar, Dar es Salaam Go down , Mbagala Not working Liwanda 1&2 Not working ETG, Masasi Operating Tinduru Machines not set up Amar , Tandahimba 1400 tons/pa TANECU 1000 tons/pa Tembasasi 500 tons/pa Mbagara 2000 tons/pa Chefu Legut Closed down Jumbo cashews 2000 tons/pa Olam 8000 tons /pa. Closed down

Table 13 Processors chart – pa – Per Annum

During 2013, Cashew Nut Board of Tanzania and Cashew nut Industry Development Trust Fund set aside Tsh10 billion (nearly USD 6 million) to boost local processing capacity. (Cashew Info, 2104) Plans are on the drawing board to build three cashew nut processing factories in Mtwara - the home of cashew nuts, Tunduru -both in the south and Mkuranga in Coast Region.

There is considerable momentum to increase processing inside of Tanzania to capture the difference in value between the sales price of RCN and processed kernel cashews. Long time industry expert James Fitzpatrick has presented the calculations reflecting the lost potential

revenue as follows:

This model has several assumptions and questions which we have not been fully addressed in any of the earlier reports that we have reviewed. These assumptions include:

a. It assumes that Tanzania would be able to capture the market without impacting the price. India is not going to give up their market for processed cashews without lowering their price to meet or beat the “new competition”. India has a 31% (ITC, 2014) global share of cashew exports. They are not going to give this up easily but will work to source from other origins for new supplies to replace this volume.

b. The cost of marketing which is now done by India would be borne by the new Tanzanian processors.

c. Relationships that the Indian processors have with end buyers would require time, money and efforts to break the relationship and replace it with a relationship with Tanzanian processors.

d. Despite reviewing dozens of reports and documents we have not seen a break-even study on Tanzanian cashews (this is most likely proprietary information and not easily available publically, however some data can be found via www.cashewinfo.org.) The question remains “can Tanzania compete with India, Vietnam and Brazil on their processing? Issues relating to this include the fact that India, Vietnam and Brazil import cashews from other origins to supplement their own production. This supplemented stocks allows them to lower their average cost of production. To ensure that this inventory is available, India has worked closely with Tanzania and Vietnam works closely with Cote d’Ivoire In order to supply their processors with raw materials year around.. (Cashew Info, 2104)

e. It does not address what will happen to India as their buyer when this initiative starts to take place. Will they switch origins in order to protect their supply source and if they do how will Tanzania survive the interim between losing India and capturing India’s customers?

f. Every major attempt to process cashews in Tanzania have failed from the World Bank funded programs of the 1970s and 1980s to recent production by Olam, which has moved their processing to Mozambique. (Olam is a leading global participant in the cashew industry, with an estimated market share of more than 20% in the RCN trade, and 15% in blanched cashew kernels and ingredients. (Olam Corporate website, 2015)) How can a new organization succeed with value added processing when an established market leader like Olam is leaving their investment in the market and taking their processing to Mozambique or elsewhere?

g. With 100% processing there would not be a need for the CBT, however, the industry will not start at 100% processing but rather ramp up with capacity, demand and success of existing efforts. What would be the interim efforts of the CBT in the meantime? Would the new processors have to buy from the CBT and if so how would the bid system work? Would they pay the same as the Indian and other buyers or would there somehow be a subsidy?

h. Where would the capital come from and what assurance would the investors have of success in the venture and not a change of policy when market conditions change as they will with time?

The SWOT analysis prepared by the ACI is illustrated in the chart below reflects their view of proces

sing opportunities in Tanzania.

Table 14 SWOT on processing opportunities (African Cashew Initiative, 2011)

Specific processing opportunity discussed during field interviews During the field interviews, our team met with Griffin J. Murray, Director, East Africa BlackIvy Group (gmurray@blackivygroup.com +255 684 224 618). His background in Cashews consists of 2 years (ending 2014) with Technoserve and as a contributor to the development of the African Cashew Alliance (ACA). Whilst at Technoserve in West Africa, he worked with the Export Trading Group (ETG) in their strategy and capital area. Murray worked in the Cashew sector in Tanzania for 3 years, while with ETG. He is keen on establishing an Africa Cashew platform to compete with India and Vietnam.

At this interview, Mr. Murray expressed his company’s interest in investing in processing cashews in Tanzania. BlackIvy Group is looking to invest in Cashews in Tanzania by acquiring 4 processing plants owned by ETG (factories build by World Bank backed loans). These facilities are part of the World Bank’s investment into 12 cashew processing facilities in the 1970s and 1980s that have failed. (ACI, 2011)

Since the above statement in 2011, ETG is operating three of these plants and BlackIvy is looking to purchase four plants from ETG. They have been recovered and are in good working order. The machinery was scrapped, but the facilities themselves are ideal for processing.

ETG also has operations in Mozambique, where acquisition has a lower risk exposure, which exports product to the US, European and Middle East markets. BlackIvy is in the US targeting huge retail chains like Walmart and Costco. The combined 4 processing plants in Tanzania will have the processing capacity of 35,000Tonnes/p.a.

BlackIvy is looking to purchase four plants from ETG. Three are operating and performing well, one will open this year. According to Mr. Murray:

“ETG has reached the limits of their expertise. They are experts at procurement and supply chain management, they don’t have the internal expertise to market beyond India and the Middle East. That is where value is created. Olam has dairies in Russia, cocoa and palm oil in West Africa. They moved beyond cashew (they maintain facilities in West Africa where things are a bit more straightforward). It’s not for the faint of heart. The facilities are part of the World Bank program from the early 1980s. They have been recovered and are in good working order. The machinery was scrapped, but the facilities themselves are ideal for processing.”

Olam has 20 cashew processing and packing facilities in 7 countries of origin, 1800 direct employees and 23,000 seasonal employees all solely involved in the cashew industry. (Olam Corporate website, 2015) (For details on Olam below)

Mr. Murray expressed his concern that Tanzania has potential, however, the potential is limited by the lack of political support. Unlike West African countries like Guinea Bissau, Ghana and Ivory Coast, Tanzania political environment doesn’t support large-scale locally based processors in contrast to Ivory Coast, for example, where there are 20 processors established.

ETG processes cashews solely for export; Tanzania’s domestic market is fairly insignificant, less than 1%. ETG exports to America, United Kingdom and Dubai. Dubai and Singapore are the emergent business

The following list was prepared in 2011 and does not reflect current conditions necessarily, however, it is included here to give the reader a better understanding of the attempts at processing that have occurred in Tanzania.

(ACI, 2011)

Mr. Murra

y recognizes

that Tanza

nian profit margi

ns are slim.

When asked

why other processors failed

Mr. Murra

y replie

d “I think that

processing

has failed

for a numb

er of reasons, including labor challenges, lack of good technology, poor working capital management, difficult political environment, etc.“ When asked what gives him confidence that

BlackIvy will succeed where others have failed he replied:

“Some of that info is proprietary, but I think that semi-mechanization with expert management and a well-trained labor force can yield efficiency never seen in Africa – I

Table 15 Cashew processing capacity and technology

know it can. Our marketing strategy is key and I think we can execute on it. The political environment is a major issue. Processing is still profitable eight months a year. It’s not ideal, but it doesn’t matter. I’d make the investment if I had the same profitability in one month. At scale we can supplement cash flows with the processing of by-products.”

In order to get more foreign investors on board for processing, he believes that the Government needs to consider providing incentives such as reduced VAT; Streamlining the purchasing system (If supply of RCN can't be guaranteed, processors have to enlist unlawful strategies like purchasing directly from farmers which Black Ivy isn’t ready to do). Finally a tax break on inputs directly tied to processing would support investment into processing facilities.

If BlackIvy is able to secure funds and proceed with the investment into the facilities, they would look to the donor community for assistance in farmer training and dissemination of information. Information is key. BlackIvy acknowledges that some form of capacity building will need to be presented at the farmer level and, if it comes to that, may outsource these skills hopefully utilizing grant support and financing from donors.

Mr. Murray indicated that if quality and quantity is ascertained, he would be ready to purchase the RCN at a 15-20% premium. He did not provide numbers to support this concept of premium or how they can pay a premium for RCN, and face lower plant efficiencies. Major processors like India, Vietnam and Brazil operate their plants with local and import raw materials to ensure plant efficiency by extending their season with imported RCN. We do not know if BlackIvy plans to do this or if imports of RCN are even allowed. (Checking on this at the time of writing)

Subsequent to field interview, Mr. Murray indicated that when addressing the issue of the Auction and the requirement that all cashews must move through that system “Solve this and we remove a huge impediment to a viable processing industry.”

Mr. Murray also indicated that “Tunduru and Newala cashews are generally thought to be the world’s best. They’re the largest, tastiest and most brittle” however he was not area of any brands or retailers paying a premium for these qualities. This is not to say that it is not possible that they would pay a premium, but at this stage the identity is lost in the Auction system and the ability to market them as premium is lost through the system. According to a study by the ACi, Tanzanian cashews rank #3 in Africa per the following chart.

It is estimated that a 10,000 MT processing facilities can be established for $6 million USD. (Cashew Info, 2104)

Table 16 Competitiveness of African cashew industries

One of the big challenges facing BlackIvy or any local processor, beyond the system inside of Tanzania, is market linkages and how they address these challenge. The SWOT chart below was prepared by the ACi.

Table 17 SWOT Market linkages (African Cashew Initiative, 2011)

Another issue facing BlackIvy is the sourcing of funds to secure the facilities. The USA is not a large investor in Tanzania. This will need to be addressed when securing funding for the investment.

Figure 24 Leading Investors in Tanzania (US Dept. of Commerce, 2014)

Olam Profile of a Processor Olam has 20 cashew2 processing and packing facilities in 7 countries of origin they have 1800 direct employees and 23,000 seasonal employees involved in the cashew industry. (Olam

Corporate website, 2015)

Change in the CBT bid system

An immediate positi

ve impac

t would

be achie

ved by

chang

Figure 25 OLAM global activity in cashews (Olam Corporate website, 2015)

ing the CBT system to an open and transparent auction system. If the CBT were to function as a mature commodity exchange, like the Chicago Board of Trade or the New York Coffee Exchange, or even developing commodity exchanges like the Ethiopian Commodity Exchange (ECX), this would go a long ways to improving the system for the benefit of the farmers.

Transparency of transactions will help the competitive nature of the exchange and force the buyers to compete. Even “if” the exchange is in fact maximizing the sales price, the belief expressed during our field studies does not give sellers any confidence that this is occurring. Therefore, a transparent system would at a minimum increase seller confidence in the system.

The only possible losers on a change to a more open bid system are those benefitting from the secrecy of the system which would include buyers and cooperatives (AMCOS) that are not open and honest with their members. If the AMCOS are open and honest with their members they have nothing to fear from an open system.

Eliminate the export tax There is considerable debate about the impact of the export tax, however the vast majority of the non-biased reviews concludes that the export tax has a greater impact on what the farmers get paid than increasing the price paid by the Indian buyers.

The global supply/demand factors impact what the Indian buyers are willing to pay. If the price of Tanzanian cashews are higher than the other options, they will purchase from alternative sources. Given the competitive advantage that Tanzania has based upon their harvest time and limited inventories at the time of their harvest, the Indian buyers have few options but to pay the price of Tanzanian cashews or close their plant and wait for new inventories to become available elsewhere.

Significant economic data has been collected to reflect the concept that the 15% tax did not in fact increase the price that the Indian buyers were paying, but rather, decreased the amount of money that goes back to the Tanzanian producers (details above).

If the global market for a product is “x” and a country places a tax on the value of “x” being exported the buyers will adjust their ex-works or FOB price to maintain “x” as the buying price, otherwise they would opt for other options.

The export tax is utilized to generate funds to support the industry with 65% of these funds going to the Cashew Development Trust Fund (CDFT). But in fact, it is a trade barrier which is discouraging production.

Developing a niche to capture export market for value added cashews

One way to capture greater value in a product is to de-commoditize it by creating a difference between your product and the “standard” product. 20/20DC has done this with a number of products, with our development of the red quinoa being the most globally successful example. (http://2020dc.com/casestudies.html) In the case of the red quinoa (traditional quinoa is white/blond) it was easy to differentiate (de-commoditize) the product. This is not so easy on cashews where a unique product has yet to be identified.

There is hope that a differentiation can be achieved through specialization and certification.

Fairtrade niche explored The example of Fairtrade coffee has been used as a role model which could be emulated for the cashew industry. However, several factors make this a difficult jump from the success of Fairtrade/niche coffee to Fairtrade/niche cashews. Some of these factors are as follows:

• Fairtrade coffee is a very small percentage of all coffee sold (see chart below.) In 2011 it represented only 6% of Starbucks coffee purchases. (Starbucks UK, 2015)

• Starbucks is the largest importer/user of Fairtrade Coffee • Differentiation of one lot of coffee is required to determine its value whereas

differentiation of one cashew from another is near impossible. Coffee, like wine, is cupped to determine quality with one planation or location creating a totally different product from the other. It would be unlikely for cashew buyers to taste lots of nuts before determining their value.

• Getting consumers to buy one style of coffee over another is justifiable as quality and flavor differ considerably. Not so with cashews.

Specialty cashews; not enough volumes and traceability; monitoring, licensing/certificates is intensive and costly. – From ETG

(Coffee, 2011) Philip H. Howard | Coffee https://www.msu.edu/~howardp/coffee.html

• Starbucks represents 10% of the global Fairtrade coffee business. • Starbucks supplements the Fairtrade certification with their own Coffee and Farmer

Equity (C.A.F.E.) practices standards program. These are standards driven by Starbucks to help ensure that they have specialty coffee available through sustainable practices. It ensures that the growers of specialty coffee (that can be differentiated from “C” coffee) is sustainable and the growers profit from the added effort to achieve a better quality coffee. We have not found any such corporate initiatives in the cashew industry. While companies do support the African Cashew Alliance (ACA) and the African Cashew Initiative (ACi) they do not work with independent standards.

• In 2012 global sales of Fairtrade coffee exceeded €535 million Euros while global Fairtrade for nuts of all types was just over €3 million Euros.

• During our research we contacted one of the architects of the Starbucks specialty coffee programs in Africa, Mr. Chris von Zastrow, Director of Coffee Sustainability at Starbucks Coffee Trading Company. Chris’s initial comments on the potential to build a cashew niche similar to what they have accomplished in coffee are:

o “…there are fundamental differences between coffee and cashews, not the least of which is that coffee is a “socializing” commodity around which businesses are built up. You would be hard pressed to create a similar hoopla “hub” around cashews.”

Table 18 Fairtrade Coffee percentage of company volume

o “…in spite of the marketing benefits, not a friend of FT, and not always in favor of organic – FT often doesn’t directly benefit the farmer due to poor traceability of funds / only a percentage of produce gets sold as such, while the rest goes at normal market price. Organic often leaves the farmer in a difficult position when diseases or poor soil conditions occur, and don’t have alternative means available of combatting.”

• Our research has only found one significant brand of Fairtrade cashews http://www.lemberona.at/. We have commenced a dialogue with them and they have advised us that they “would be interested to work with you on Fairtrade cashews but only if they are certified organic (EU-organic).” For further details on the dialogue with Lemberona see appendix x.

• According to the Fairtrade Africa, the African affiliate of the Fairtrade Labeling Organization (FLO) there are no Fairtrade certified cashew producers in Tanzania at this time.

• Their website, which serves as a database for buyers looking for Fairtrade product reflects only seven Fairtrade cashew producers in Africa at this time, all in West Africa. We have reached out to each of these with questions but as of this writing have not received any reply from them. If there were more global demand, the market would justify new entrants to file paperwork for this certification.

• During our field studies Masasi High Quality Farmers’ Products Ltd. (MHQFP) showed our team an expired Fairtrade certification. The question then arises “why did they let it expire?” Was it a function of demand or was it a function of the CBT not allowing them to sell their specialty cashews outside of the CBT system? This question remains. The MHQFP website http://masasi-farmers.webs.com/fairtrade.htm has a spot for Fairtrade information, however, this website with a 2009 copyright has no data or drill down ability for further information.

• The main standard of certified Fairtrade is the return which the farmer receives is fair and that the labor standards meet the FLO standards (see appendix F and G).

In addition to our field interviews in Tanzania we reached out to the FLO offices in Kenya and got some feedback from John Mabagala (j.mabagala-external@fairtrade.net) and received the following response to our questions.

• In Tanzania We have Masasi cashew cooperative under Fairtrade system. You can use the same model they are using to bring other cooperatives into Fairtrade family.

• In Tanzania, We as Fairtrade support this cooperative with training needed for them to be certified and remain certified.

• If a cooperative has a direct market outside the country which pays them more than what they will get through the auction system, they are allowed to request for direct export permit at the Cashew Board, then after that they can export without going through the auction system.

• Many cooperatives fail to get direct export market because they lack connection with buyers in Europe/ America/ Asia hence they have to go through the auction system.

• Another challenge which faces cooperatives is initial capital to collect/ buy cashew from their members when season starts. This makes their members to sell cashew to private buyers instead of cooperatives or cooperative to enter into a WHR system.

• If cooperatives can be pre-financed it will make them powerful enough to purchase cashew from their members and if the cooperative is certified it will be very easy to trade

it as Fairtrade cashew. Without a system of pre-financing certified cooperatives, members will sell their cashew to private buyers.

• Fairtrade standards are not so tough for farmers to abide, but it is critical to have connection with market sides which will buy Fairtrade Cashew before engaging farmers so that they are sure of where to sell after being certified.

This information is counter to some of our earlier findings, however, it provides some hope for the development of Fairtrade certification as a niche for cooperatives to work with export. If, in fact, the cooperatives can export outside of the Auction system, after receiving a direct export permit, then the challenge is to find buyers willing to support this program. Through our initial market research we did identify Lemberona GmbH of Austria and Fairtrade Warehouse of the UK and Traidcraft as companies ready and willing buyer of Fairtrade cashews, however, both indicate that they need to be Fairtrade and Organic certified. This will create some difficulties, however, is not impossible to develop and from our initial dialogue with Lemberona they are familiar with development programs and would consider being an active partner in the effort. It is also important to note that the last two organizations mentioned here are trade development efforts rather than market driven private sector efforts, therefore, their markets are limited to those who support their programs and through their retailers.

In our limited search we found only Liberat!on nuts as a Fairtrade and not certified organic nut available on the market, primarily in the UK.

The global volume of Fairtrade nuts of all types is only €3 million. Therefore, the market volume for Fairtrade cashews is very small and those not also certified organic even smaller. Even if Tanzania were successful in getting their cooperatives Fairtrade certified for cashews, and they were able to double the sales of all Fairtrade nuts, this would only generate €3 million in sales and the chance that a single nut would be able to double the sales of all Fairtrade nuts is very rare and a significant challenge. We are looking deeper to see if we can get a further breakdown on the €3 million but do not expect to find this detail prior to publishing this report. We have not seen statistics on what percentage of the Fairtrade nuts are also certified organic.

Additionally, concerns over the impact of Fairtrade and the benefit of the premiums paid for Fairtrade are having an impact on the sales of Fairtrade. In fact an article in The Guardian, ( 23 February, 2015) stated “Fairtrade sales fall for first time in foundation's 20-year existence Ethical trading scheme’s drop of nearly 4% reflects consumers’ reluctance to pay extra as cheaper alternatives are presented by chains such as Aldi and Lidl. (The Guardian, 2015)

The above points illustrate that for developing a niche for a product, certifying as Fairtrade has some inherent problems, not the least of which is the small global market that currently exists for this niche. This coupled with the difficulties in the transparency required to meet the standards and the fact that few buyers will pay a premium for product that is certified Fairtrade and not Fairtrade and organic. To meet the standards t would therefore require organic

certification as well as Fairtrade and would therefore require the time and standards of organic certification be met as well.

There is hope however with companies like Lemberona willing to work with the Tanzanian farmers, processors and exporters to achieve a product that they can sell. Lemberona is familiar with development projects with their lead international buyer having experience with development projects funded by GIZ and the UNDP therefore they understand the development community and have worked with PPP programs in the past and have expressed an interest in securing sources from Tanzania.

In November 2013 Fair Trade campaign urges EU to set up cashew regulation (see press release in Appendix H page 174) We have tried to update the status of this effort however can find nothing further online and therefore assume that the effort was unsuccessful and failed or has lost momentum.

The current prices for Fairtrade certified cashews is found in Appendix F page 171.

In addition to Lemberona we were able to find one on-line retailer selling Organic Fairtrade cashews – Greenline Paper. Details on this product are find in Appendix A page 150.

The text box below from the ACi report on the Tanzania cashew industry outlines some of the processors that our Field Team interviewed and others that were not available to interview during our time in Tanzania. This box provides further details on the specialty processors active in Tanzania.

Table 19 Good Practice examples of processors

Organic Niche Explored Another common niche to de-commoditize products like cashews is to work with organic certification. The cost and time required to achieve organic certification is longer than that of Fairtrade, requiring a three (3) year transition from conventional to organic, the wait period and cost associated with organic is considerably higher than that of Fairtrade, and therefore, requires a long term commitment. During the 3 years transition the farmer would not get the benefits of the higher price paid for organic product and would not get the benefits of using chemicals for fertilizer, pesticides and other non-organic crop enhancement efforts.

However, given the fact that Tanzania ranks #26 out of 30 cashew producing countries as the lowest yield per hectare perhaps these crop enhancement chemicals are not currently being used anyway so the transition would not be that drastic. Perhaps, as stated earlier, the low returns received by the farmer are keeping them from utilizing extensive inputs to enhance their yields.

To complicate the challenge for farmers wishing to covert to organic is the CBT and the laws preventing cashews from being sold outside of the WRS and CBT system.

If producers in Tanzania are going to commit to producing organic they will want assurances that they will be able to sell their product outside of these systems. During our field interviews our team heard that specialty cashews are being sold outside of the WRS and CBT system, however, we have not independently confirmed this fact.

Olam is a major supplier to Whole Foods Market (see appendix I) and until recently had a processing presence in Tanzania. The questions to be asked are:

• Why is Olam leaving Tanzania as a processor? • What would bring them back to processing in Tanzania? • Would they benefit from having organic cashews supplied by Tanzanian producers? • How would they work with the CBT and WRS for organic products?

Brand owners like Lemberona, retailers like Whole Foods Market, and processors like Olam have demand for organic product. The challenge is can Tanzania meet their needs through the current system? It is not essential that Tanzania process the organic nuts as they can export them as RCN, if the buyer has organic certification for their chain of control and their processing facilities.

Despite the added costs and difficulties of getting organic certification, it is a viable niche which can be developed to the advantage of the Tanzanian producers and/or processors and/or exporters.

In the USA, organic nut production currently amounts to less than 1 percent of conventional nut production. Between 2008 and 2011, organic nut sales were valued at $47 million. In 2011, California’s organic nut sales totaled $40 million, up 44 percent from 2008 and representing 85 percent of total U.S. organic nut sales. (ERS 2013) This limited production and small market illustrates both the difficulty of producing nuts organically and the relative size of the market demand for organic nuts. If the demand were higher, producers in the USA would convert to organic as the growth in the market is significant yet the total volumes are small. Many of the

nuts found in Whole Foods markets, the leading seller of organic products in the USA, are conventionally produced. Therefore either the demand isn’t there or the premium to produce organic isn’t justified by the demand, either way the production of organic is small.

Diversification of buyers The concentration of the industry with India controlling 88% of the total cashews exported from Tanzania is something that can be aggressively addressed to find new markets, thus creating less dependence on India and creating competition for India.

For new buyers to enter the market several things need to be addressed. Much of the written research and our own field studies indicated that other buyers do not enter the market for the following reasons:

• Lack of understanding – this can be addressed through a marketing program which participates in trade events and visits the buyers face-to-face in their offices to explain the Tanzanian system. This was attempted by Mr. Mfaume Mkanachapa Juma , Director General of the CBT during the Vietnam Cashew Conference

“Tanzania produces high quality raw cashew nuts to the tune of 158,000 tonnes a year. We support farmers through the warehouse receipt system, wherein traceability is ensured, quality of Nuts is clearly spelled out for every lot and price fixing is done through a transparent auction process. The auction information is also made available through website to all market participants.

At present 90% of the raw nuts are exported. Of which 90% is purchased by India. Tanzania invites raw nuts users in Vietnam to come to Tanzania, get themselves registered and buy directly from the warehouses. This would eliminate middlemen, bring in quality produce and improve the overall business environment.”

• Transparency – nobody wants to enter market that they don’t understand and has a

reputation of not being transparent in its transactions. Therefore the transparency issues need to be addressed before the marketing effort discussed above is undertaken.

The advantage that Tanzania has is that all processors face the same limitations on available product during the time that Tanzania is processing, therefore, demand exists. The challenge is how to get the buyers into the market and resolving the above two issues will make a big difference in getting new buyers into the system.

The scope of work of this assignment was not to identify new customers or create market linkages however, with the research that we conducted we have identified three buyers who will consider purchasing Tanzanian product. Two of these companies are mentioned earlier Lemberona (details below in appendix A) and Whole Foods Market. The third company is Narin Bys Dis Ticaret AS of Turkey. This company is the largest exporter of nuts to the Middle East and works with their own Free Trade Zone packaging plant in Mersin which services customers

Table 20 Free Trade Zone buyer

in Jordan, Libya, Algeria, Tunisia, Morocco, Spain, Lebanon, Israel, Syria and Iraq. (See full details in Appendix B)

With available databases of actual importers with bills of lading and shipment details available on-line through a number of services, including Piers, and Panjiva for the USA, the ITC and Kompass for global data and www.seair.co.in for India and a number of other counties, and similar data sources for individually targeted markets, it is most efficient to work one-on-one with potential targeted customers without having to spend the expense of participating in a tradeshow. Identifying the buyers is not a problem, selling them on the system and providing them with confidence that they will be treated fairly and that the market will function appropriately with supply, demand and rule of law is the challenge.

Available resources Despite the lack of transparency of the CBT auction, there is no drought on data for the cashew industry. Web based data is readily available on markets, prices, processing and all other aspects of the cashew industry. This report has utilized several of these resources to complete our study. Details on these sources is found in the Resources section of the Annotated Bibliography below.

A couple of these key and free resources are:

About www.cashewinfo.com

www.cashewinfo.com is a unique effort to bring together all stakeholders of the cashew industry producers of raw cashew, processors, kernel buyers, value-adders, by-product users, technology suppliers, logistics companies, quality systems firms, supplier of capital, government agencies, NGOs, intermediaries and the retail consumers. (Cashew Info, 2104)Newsletter- Cashew Week

Our weekly newsletter ‘Cashew Week’ is well circulated among the corporate and trading circles and in has been in circulation since 2003. The weekly newsletter contains a good combination of trade related information, RCN/Kernel market information from across the globe and articles/experts view.

Additionally there is the African Cashew Alliance (ACA) and the African Cashew Initiative (ACi) both of which have commissioned studies and continue to support the industry with data. Some of this data is free via the internet while other portions of the data are available only to members with membership fees based upon the size of the company applying for membership.

http://worldcashew.com/

http://www.cashewinfo.com/cashewhandbook2014.pdf - provides an excellent profile for establishing cashew processing units including equipment and capacity issues.

Stakeholders Stakeholders in Tanzania cashew nut industry that USAID may work with in promoting productivity and incomes for smallholders:

These stakeholders can be categorized into three groups:

Government, quasi-government or parastatal organizations, NGOs and farmer-based organizations.

Thus,

Government:

1. Ministry of Agriculture, Food Security and Cooperatives 2. Ministry of Industry, Trade, and Marketing 3. Naliendele Agricultural Research Institute (NARI) –the only research institute handling

cashew in Tanzania

Quasi-government or parastatal organizations

4. Cashewnut Board of Tanzania 5. Tanzania Warehouse Licensing Board 6. Primary Societies and Small-scale Processors Groups 7. Cooperatives (Tandahimba Newala Cooperative Union (TANECU), Masasi and Mtwara

Cooperative Union (MAMCU)), Coast Region Cooperative Union (CORECU) Non-State Actors

1. Agricultural Non-State Actors Forum (ANSAF)

Banks

2. CRDB 3. NMB Banks 4. Tanzania Investment Bank (TIB)

Other associations

5. Tanzania Private Sector Foundation TPSF 6. Tanzania Exporters Association (TEA)[ Phone :+255 732 924564/754-

869838] 7. Tanzania Chamber of Commerce, Industry and Agriculture

Budding Farmer-Based Organizations Working on Non-conventional cashew

8. Masasi High Quality Cashew

Annotated Bibliography In our review of available data we have prepared the following Annotated Bibliography of available data.

Oteng, Stephen. 2011. Export Factsheet ECOWAS: Cashew Nuts. International Trade Centre.

http://www.itc-learning.org/mod/resource/view.php?id=1375

Sponsored by the Canadian International Development Agency, this publication by the International Trade Centre discusses the export potential of Cashew Nuts from the Economic Community of West African States (ECOWAS). Utilizing statistical analysis, this report provides tools and suggestions to develop a regional export strategy and encourage poverty alleviation by the means of sustainable economic development. The author states that 67% of global cashew production comes from Africa, most notably Nigeria and the United Republic of Tanzania. Export Factsheet ECOWAS: Cashew Nut suggests that African countries could use their comparative advantage to significantly increase their share of international economic growth. Recommendations include product diversification, initiatives by various government institutions such as the Ministry of Industry and Trade and Ministry of Food and Agriculture, as well as the organization of rural farmers into associations leveraging more bargaining power.

Akyoo, Adam; Mpenda, Zena. 2014. Policy Imperative For Control Of Market Exchange Failure In The Cashew Nut Industry. International Working Paper Series (n. 14/3). Natural Resources, Agricultural Development and Food Security International Research Network (NAF-IRN)

http://economia.unipv.it/naf/Working_paper/WorkingPaper/Tanzania/AKYOOtre.pdf

“This study examined the root causes of incessant market failure problem facing Tanzanian cashew nut industry. The overarching hypothesis was that the industry challenges are both structural and institutional. Competition status and economic coordination in the industry were thus duly scrutinized. Key informant and questionnaire interviews were carried out with key industry stakeholders and cashew farmers respectively. Data analysis entailed operationalizing the Institutional Analysis and Development framework, the DFID Competition Assessment Framework and estimating the Stochastic Frontier Production Model. Results showcased a systematic positive effect of the Warehouse Receipt System (WRS) on indicative and final producer prices over the years. Concentration ratio results professed the industry as being fairly concentrated and hence oligopolistic. Farmers’ input use efficiency was calculated at 51% on average suggesting that majority could be high cost producers. The WRS was vindicated as an effective system for the industry though its high transaction costs due to hiked administrative costs, weak institutional arrangements along the value chain, cooperative monopoly and inadequate enforcement of underlying regulations counteract its strength. Fair competition in the industry is stifled by clandestine buyer collusion and predatory pricing at the expense of local processing. Production cost would overstate indicative price if used as a basis for its setting given inefficient farmers. For better

results the industry needs to depoliticize, change warehouses’ ergonomics, eliminate unnecessary WRS administrative costs, break cooperative monopoly to accommodate private buyers’ participation, strengthen regulatory enforcement mechanisms, restore export parity pricing procedures and establish an advisory to sieve conflicting scholar recommendations. (Author abstract).”

Rukonge, Audax. 2013. Cashew: Addressing Poverty Through Processing In Tanzania. ANSAF

http://www.policyforum-tz.org/sites/default/files/CashewADoortoPovertyReduction_0.pdf

This document, contributed to by the Agricultural Non State Actors Forum (ANSAF), Agricultural Council of Tanzania (ACT) and BEST-AC, analyzes market trends and statistical data to advocate for the advantageous regulation of the cashew industry in Tanzania. With a projected increase in world demand of 9% per year, the author suggests to increase domestic processing prior to exporting to employ economic growth in the industry. With less than 15% of the total exported crop processed in country, the document reports that processing the entire crop domestically would have added US$750 million over the past 5 years. Contrasting the lost value by exporting unprocessed cashews, a monetary investment of $110 million could build enough processing facilities to properly process the entire Tanzanian crop as well as create 45,000 jobs. Cashew: Addressing Poverty Through Processing In Tanzania suggests that modern processing of cashews domestically can drastically improve the economic benefits received from the Tanzanian cashew industry and may contribute to the alleviating of poverty in certain sectors.

ACT; ANSAF and Cashewnut Board of Tanzania. 2013. Cashew Processing Development in Tanzania: A Shared Vision.

http://www.ansaf.or.tz/CASHEW%20ACT%20FACTSHEET.pdf

“This is a combined summary of two documents which were produced in 2013 and which have had an important part to play in the discussion as to the best way forward for the Tanzanian cashew nut industry. It documents how the Tanzanian Cashew nut Sector has evolved a shared vision for the development of a value added sector. This development impacts all stakeholders from growers through to international investors who are interested to develop modern, food safe processing. (Author abstract).”

Enclosed in the document are detailed recommendations from the ANSAF study stating actions required to stimulate sustainable processing and value addition. To meet the recommended actions by ANSAF, the Cashew Board of Tanzania has implemented The Cashew nut Processing Programme (CPP). The publication describes in detail the specific strategies that have been set by the Cashew Board of Tanzania to achieve the sought after benefits of effective cashew production and processing in Tanzania.

Sera Policy Project. 2014. Cashew Industry in Tanzania.

This document gives an overview of the many constraints that are placed on the Tanzanian cashew industry that inhibit the industry from reaching its pull potential. The

author discusses the constraints on domestic processing and points to the lower productivity per worker compared to high processing countries like India due to year round operation and a large domestic market that will purchase kernels broken during the processing at a higher price locally than if exported. The Cashew Board whose members are appointed by the Ministry of Agriculture and endorsed by the President instigates political constraints through its monopoly control of the industry. Marketing constraints as well as high taxes and fees are claimed to be detrimental to the cashew producers and the industry and are in full control of the Cashew Board. The author of the publication suggests two approaches to growing the cashew industry in Tanzania: (1) Large scale replanting to establish a commercially viable industry, (2) Improve policies and privatize marketing.

ITC. 2011. Cashew Market News Service (MNS). Cashew Market News Bulletin Issue no. 1. Market News Service.

http://www.intracen.org/uploadedFiles/intracenorg/Content/About_ITC/Where_are_we_working/Multi-country_programmes/Pact_II/Cashew%20Report.pdf

This article is a quarterly news statement prepared by the ITC in close collaboration with ECOWAS TEN issued in November 2011. The purpose is to keep cashew stakeholders up to date with developments within the industry including topics on quality, business policies and regulations, situation of the cashew industry in member ECOWAS countries and information on upcoming events. This publication provides market insights on the raw cashew outputs of ECOWAS countries in comparison to other top producers globally. The author suggests that the processing of cashews domestically is key to add value and create more economic prosperity for member countries. The publication delves into the adverse effects that fluctuations in currency in comparison to the USD have on international trade in the cashew industry.

ITC. Cashew Sector at a Glance

http://www.intracen.org/itc/market-insider/cashew-nuts/

Gives a brief overview of the global cashew industry and discusses that the current global production of raw cashew nuts exceeds 2.1 million tons and carries a value of nearly $2 million. With only 10% of African cashew nuts processed domestically, the author points to this as lost economic opportunities to processing countries such as India, Vietnam and Brazil. Claiming that the sector is currently undergoing a state of transition, there is anticipation of an increase in global interest of African cashews and will continue as the global demand continues to climb.

Makene, Prosper. 2014. Sido Invents Cashew Shelling Machine to Add Value to Produce. The Guardian.

http://www.ippmedia.com/frontend/?l=71536

This news article discusses the benefits of a recent development by the Small Industries Development Organizations (Sido) in Lindi Region. The creation of a cashew nut shelling machine is hoped to ensure farmers a better price by selling a processed product at a

higher price in comparison to a lower price for unprocessed cashew nuts. It highlights the affordability of the machine and the current efforts by organizations within the country to help train farmers on how to use and successfully process their raw crop.

Likwata, Musa Yusuph; Venkatakrishnan, V. Performance of Agricultural Marketing Cooperative Societies in Cashews Nut Production and Marketing in Masasi District, Mtwara Region, Tanzania. International Journal of Research in Management & Technology (IJRMT) vol. 4, no.5, October 2014. IRACST.

http://www.iracst.org/ijrmt/papers/vol4no52014/14vol4no5.pdf

“Agricultural Marketing Cooperative Societies (AMCOS) are expected to play an important role in the cashew nut production and marketing in Tanzania. The study conducted at three AMCOSs at Masasi district, Mtwara region has found out that though the AMCOSs are performing better in terms of the production related services, they do not have much scope in obtaining better prices for the cashew nuts. Higher cultivation costs, inability of AMCOSs to support all its members adequately, low quality inputs and higher transportation costs were some of the challenges faced by the members. Grading cashew nuts, facilitating farmers to get inputs and proper storage of cashew nuts by the AMCOSs were rated better. The study recommended among other things, employing a competent manager, more powers to AMCOSs on cashew nut price fixation and members’ involvement in mobilization of capital for the AMCOS. (Author abstract).”

Nyange, David. 2004. Survey of agricultural marketing logistics costs in rural Tanzania. Washington, DC: World Bank.

http://www-wds.worldbank.org/external/default/WDSContentServer/WDSP/IB/2009/03/17/000334955_20090317055634/Rendered/PDF/477740WP0TZ0Ru1Box0338860B01PUBLIC1.pdf

“This analysis documents and relates how rural logistics costs emanating from infrastructure particularly road quality impacts agricultural production and marketing in export crops producing rural areas. The study objectives are two folds: First to provide an accurate understanding of the organization of logistics from the farmer to the main assembly centre's before processing or export and the sequence of the supply chain and participants. Second, to estimate costs along the supply chain among various market participants in the logistical sequence. This inception report presents preliminary findings from a rural logistics cost survey of farmers, traders, transporters and district officials in cashew growing villages of Mkuranga district in Coast region. The methodology adopted in the study is to compare two villages (Kitomondo and Kizapala) with different road accessibility in terms of price levels, spatial price variability, traffic intensity, number of crop buying agents, length of supply chain and the degree of competition Moreover, input usage by farmers, input price and cashew production are compared. Ultimately farm budgets and transport logistics costs are estimated.

Results show differences in cashew production where the less accessible village of Kizapala recorded lower production which could be attributed partly to observed less farm sizes, less use of sulphur and consequently low cashew yields. In cashew marketing, Kizapala has more market intermediaries where the supply chain consists of farmers- stockist (shop owner)-buying agent-cashew processing and export companies. In Kitomondo district the supply chain is much shorter where farmers sell directly to cashew buying agents. Kizapala village also exhibit more spatial price variability than Kitomondo. In terms of transportation logistics, farmers in both villages receive 63 percent fob prices. (Author abstract, modified).”

Mitchell, Donald. 2004. Tanzania’s Cashew Sector: Constraints and Challenges in a Global Environment. Africa Region Working Paper Series No. 70. World Bank. http://www.worldbank.org/afr/wps/wp70.pdf

This publication is written by Donald Mitchell, the lead economist in the World Bank’s Development Prospect group at the time of publishing by the World Bank. The purpose of the report is to assess the performance and identify hindrances to the Tanzanian cashew industry. Fieldwork was carried out during 2001 and focused on the main cashew producing areas of Tanzania, Mtwara and Lindi. At the time of publication, Mitchell states that the cashew industry is not likely to expand or maintain current level of production unless a more constructive role is defined for the Cashew Board, there is an increase in quality of exports, financial assistance of input costs is provided to small hold farmers, and a reduction of export taxes. The study concludes that there are exploitation opportunities for expansion of the Tanzanian cashew industry. The author suggests that replanting crops with improved varieties to yield higher amount of crops and lower maintenance costs increasing the comparative advantage of Tanzanian cashews. The report claims that an increase in capacity of domestic processing prior to exporting could create as many as 20,000 jobs and increase the price that is currently being received by export raw nuts to India. Concludes that these opportunities for growth in the cashew industry are unlikely to happen without public sector support and more definition on the public-private partnership that is necessary to address the challenges inhibiting industry growth.

Ghosh, Palash. 2013. Tanzania’s Cashew Nut Farmers Riot Over Poor Prices. International Business Times.

http://www.ibtimes.com/tanzanias-cashew-nut-farmers-riot-over-poor-prices-1216733

This online article published by the International Business Times covers an event in April of 2013 in Tanzania where cashew nut farmers rioted in the Liwale district of the Lindi region due to delayed payments by authorities. Farmers were offered less than half the agreed price to last year. Due to 85,000 tons of cashews left unsold to global markets, the government announced that it would begin to utilize a system where farmers would receive monetary reward for unsold nuts to be delivered to cooperatives through an

export guarantee scheme. The perceived failure of the program by farmers who are unhappy with the prices they received could be a signal that the public sector needs to adjust practices to in order gain assurance from farmers and grow the cashew industry in Tanzania.

Reform of the Tanzanian Cashew Nut Business Environment (Tanzania Cashew Policy Study). Final Report. BEST-AC.

http://www.best-dialogue.org/wp-content/uploads/BEST-AC-2008-04-Tanzania-Cashew-Policy-Study-Technoserve.pdf

“The Tanzania Cashew Policy Study, supported by the Business Environment Strengthening for Tanzania – Advocacy Component (BEST-AC) and executed by TechnoServe (TNS) from January to April 2008, aims at providing industry stakeholders with an independent, market-driven analysis of the cashew value chain, and at identifying high-potential opportunities for policy reform that promote pro-poor development of this strategic sector. Furthermore, an advocacy strategy is proposed to communicate to policymakers the urgent need for reform, the specific areas of concern, and the potential solutions.

The cashew industry is strategic in Tanzania in terms of both poverty alleviation and economic growth. However, its development is hinder by an unsupportive operating environment. In order for this industry to realize its potential, comprehensive policy reform is required. Lack of it, on the other hand, could actually lead to the collapse of the industry in less than 10 years. This report proceeds to the identification of 5 priority areas for reform: (1) Promotion of an industry of service providers for farmers (2) Reform the crop board (3) Development of complementary markets, notably agricultural inputs (4) Regulated liberalization of the trade of raw nuts (5) Promotion of an internationally competitive cashew processing industry. Importantly, all these recommendations are low-cost and low-risk. The report also proposes an advocacy plan designed to push forward these reform proposals. (Author abstract, modified).”

Nkonya, N. & Barreiro-Hurle, J. 2013. Analysis of Incentives and Disincentives for Cashew Nuts in the United Republic of Tanzania. Technical notes series, MAFAP, FAO, Rome.

http://www.fao.org/3/a-at478e.pdf

“The note starts with a brief review of the commodity’s production and consumption as well as trade and policies affecting the commodity. It also provides a detailed description of how the key components of the price analysis have been obtained. Using this data, the MAFAP indicators are then calculated and interpreted in light of existing policies and market characteristics. The analysis is commodity and country specific and covers the period 2005-2010. The indicators have been calculated using available data from different sources for this period and are described in Chapter 3. The outcomes of this analysis can be used by those stakeholders involved in policy-making for the food

and agricultural sector. They can also serve as input for evidence-based policy dialogue at the country or regional level. (Author abstract, modified).” The report concludes with main messages obtained from conducting the report, recommendations on how to positively promote the Tanzanian cashew industry.

UNIDO. 2011. Tanzania’s Cashew Value Chain: A diagnostic. United Nations Industrial Development Organization (UNIDO). Vienna, Austria.

http://www.3adi.org/tl_files/3ADIDocuments/Country%20information/Tanzania/Cashew%20Value%20Chain%20Diagnostics.pdf

This in depth and detailed study examines the status of the cashew value chain in Tanzania by providing an overview of inputs and supplies, production and processing, technology and innovation, end markets and trade, standards and quality control, value chain governance, value chain finance, energy and cleaner production, environment policy and institutions. Concludes to suggest how to foster development to create more value for the Tanzanian cashew industry.

Kilama, Blandina. 2013. The Diverging South: Comparing the Cashew Sectors of Tanzania and Vietnam. Doctoral Thesis, Leiden University.

https://openaccess.leidenuniv.nl/bitstream/handle/1887/20600/fulltext.pdf?sequence=12

“Based on rural fieldwork in Tanzania and Vietnam, this book describes the difference in organization of cashew production, between highest producing areas by analyzing the lower level of the cashew value chain. Using a comparative analysis the book explores the dynamic process of how cashew farmers, of the two countries, are integrated in the existing production set up. The importance of choice through economic freedom is explored by analyzing the functioning of different actors to allow or hinder advancement in production and productivity. (Author abstract).”

CFC. 2012. Linking Farmers, Extension and Research at Community Level. Regional Cashew Improvement Network for Eastern and Southern Africa, Common Fund for Commodities. Amsterdam, The Netherlands.

http://www.common-fund.org/fileadmin/user_upload/Projects/FIGTF/FIGTF04/THE_RECINESA_SUCCESS_STORY.pdf

This publication is provided by the Common Fund for Commodities (CFC). The CFC provides financial assistance to developing countries for poverty alleviation through commodity focused developments. The Regional Cashew Improvements Network for Eastern and Southern Africa (RECINESA) is funded by CFC and is focused on improving the quality and quantity of cashew nut production in the region with the hope to create sustainable development to improve the livelihoods of the small hold cashew farmers. This report covers major constraints inhibiting the cashew industry in Ethiopia,

Kenya, Madagascar, Malawi Mozambique, Tanzania and Uganda and the actions taken by the project to ensure sustainability and prolonged economic growth.

Will, Margret. 2011. The Cashew subsector in Tanzania. African Cashew initiative (ACi).

http://africancashewinitiative.org//imglib/Cashew_Subsector_Tanzania.pdf

This study which was jointly financed by private companies, the Federal German Ministry for Economic Cooperation and Development and the Bill & Melinda Gates Foundation was implemented as part of the African cashew initiative (ACi). The purpose of this study was to accomplish a rapid assessment of the performance of the Tanzanian cashew value chain, analyze the marketing system and identify specific lessons learned and good practices achieved for enhancing the development of the cashew value chain in Tanzania. Examines lessons learned from historical past of the Tanzania cashew industry and communicates that good practices and strategies that can be adopted to encourage cashew value chain development. The report concludes with identification of good practices that could encourage economic growth and development of the cashew industry and increase the competitiveness of the Tanzania value chain in the global market.

Fitzpatrick, James. 2011. Competitiveness of the African Cashew Sector. African Cashew initiative (ACi).

http://africancashewinitiative.org//imglib/downloads/Competitiveness_of_the_African_Cashew_sector_FINAL.pdf

The purpose of this study is to analyze the competitiveness of African cashew nuts in the global market. The author who has over 27 years in the African cashew industry, analyzes two value chains present in the African cashew nut industry: in-shell cashews and cashew kernels. The report includes data and summarization of current trends in cashew production, an overview of global cashew consumption, outlook of demand from specific regional markets around the globe, factors that increase the competitiveness of the African cashew crop and a comparison of African cashews with the main cashew processing countries. The report concludes that aligned public and private efforts are needed to ensure sustainable production and increase competitiveness of African cashew nuts on the global market.

ECI Africa. 2003. Cashew Nuts Sub-Sector Study. USAID.

http://www.value-chains.org/dyn/bds/docs/411/DAI%20pesa%20Cashew%20Nuts%20Subsector%20Study%20Oct%202003.pdf

As a final report of the USAID funded Private Enterprise Support Activities (PESA) project Tanzania, this publication is an analysis report on the cashew nut sub sector in Tanzania. Included in the report is and in depth overview of the sub-sector and cashew production in Tanzania while identifying growth opportunities and actions to facilitate

development. Noted in the study are current bottlenecks and constraints inhibiting the industry namely production, government policy and marketing. Identified in the report are strategies in which PESA can best support the growth of the cashew nut industry and economically impact farmers. Growth opportunities are suggested to begin with the engagement between the public sector and small farmers.

Baregu, Mwombei; Hoogeveen, Johannes. 2009. State and Market in Cashew Marketing: What Works Better for Tanzanian Farmers?. Poverty Reduction and Economic Management, Africa Region, The World Bank. Washington DC.

http://www.wereldburgers.tv/wp-content/uploads/2010/10/Wereldbank-cashew.doc

This document looks into the cashew industry in Tanzania of previous years and when outcomes were most favorable (1960s and 1990s) and compares it to the current “warehouse receipt system” where farmers are experiencing unsatisfactory prices for their crops. This document takes a historical approach and reports small hold farmers slowly losing their ability to obtain favorable prices for their cashew production. The report states that the farm gate to export price is about 39% compared to a 64% average since 1991 and has concluded that industry outcomes were most favorable during times of greater farmer representation or with greater competition.

Corta, Lucia da; Kayunze, Kim; Maro, Festo; and Mashindano Oswald. 2011. Agricultural growth and poverty reduction in Tanzania 2000-2010; where has agriculture worked for the poor and what can we learn from this?. Working Paper no. 208. Chronic Poverty Research Center.

http://r4d.dfid.gov.uk/PDF/Outputs/ChronicPoverty_RC/WP208-Mashindano.pdf

“Agriculture is an economic activity important to achieving the poverty reduction strategy goals of Tanzania. Growth in agriculture has made contributions to GDP, foreign exchange earnings, and income poverty reduction. However, despite high growth, the growth pattern in agriculture (which employed about 70 percent of the population between 1998 and 2009) is not reflected in poverty reduction, particularly in rural areas. Using quantitative and qualitative data collected from rural farmers in Mwanza, Newala and Rukwa regions, this paper unpacks growth and poverty transmission routes, identifies growth barriers for agricultural incomes, and analyses where agricultural growth has occurred and if that growth has been transmitted into poverty reduction. Findings indicate that the pattern of economic growth in the past decade was largely influenced by the service and industry sectors; and less by agriculture where annual growth has been slow, following persistent low and declining productivity caused by low utilization of fertilizer and improved seeds, and the low rate of mechanization. Evidence gathered from our six research sites also noted barriers to production and markets. Trade and export of cashew nuts and non-traditional items like mango and cut flowers were important routes for income growth, but poor farmers had limited access compared to their richer counterparts. We conclude in this paper that further measures are needed to stimulate higher productivity and income growth associated with new

technology, secure markets, mixed farming (diversification of crops and livestock) and efficient institutions (warehouse and credit schemes). (Author abstract).”

MAFAP (2013). Review of food and agricultural policies in the United Republic of Tanzania. MAFAP Country Report Series, FAO, Rome, Italy.

http://www.fao.org/fileadmin/templates/mafap/documents/Tanzania/URT_Country_Report_Jul2013.pdf

This report produced by Monitoring African Food and Agricultural Policies (MAFAP), is a review of the food and agricultural policies in Tanzania from 2005-2011. It reviews key economic issues affecting the agricultural and analyzes key policy decisions that affect the agricultural sector in Tanzania. The publication focuses on the main agricultural commodities produced including cashew nuts due to their significant role in the Tanzanian agricultural sector. Price incentives and disincentives faced by farmers are examined and aims to shed light on the rural and agricultural sector in Tanzania to help encourage policies to support the small hold farmers and producers.

Survey 2: Agricultural Trade Policies Tanzania. Economic and Social Research Foundation, Dar Es Salaam, Tanzania.

http://www.fao.org/docrep/013/al668e/al668e03.pdf

As an important sector in the Tanzanian economy, effective agricultural policy is necessary for this sector to capitalize on opportunities and take full advantage of its full economic potential. Outlined in the report are the trade policies affecting the main commodities individually such as maize, coffee, cashews, sugar, sesame etc. The report includes tariffs, non-tariff barriers, production and marketing channel information and their specific affect on each commodity.

OECD (2013). Overview of progress and policy challenges in Tanzania, OECD Investment Policy Reviews: Tanzania 2013, OECD Publishing.

http://www.oecd.org/daf/inv/investment-policy/IPR-Tanzania-2013-Overview-Progress-Policy-Challenges.pdf

“This Investment Policy Review aims to provide timely inputs into Tanzania’s current policy reform process, including the revision of the National Investment Promotion Policy of 1996 and the associated Tanzania Investment Act of 1997. The Review focuses on four policy areas selected by the Office of the Prime minister of Tanzania, namely: investment policy; investment promotion and facilitation; infrastructure development; and agriculture.

First, this overview provides a short description of the policy context for investment in Tanzania. Second, it summarizes investment trends over the last two decades. Third, it

identifies the main policy challenges faced by Tanzania to attract investment across all economic sectors. Finally, it provides policy options to address these challenges and to optimize the benefits of domestic and foreign investment. (Author abstract).”

Gandye, George; Ilomo, Mesia. Trade Policy and Foreign Trade Performance in Tanzania.

http://daadpartnership.htw-berlin.de/fileadmin/Workshops/2011_Uganda/Abstracts_and_Papers/Gandye_and_Ilomo_Trade_Policy_and_Foreign_Trade_Performance_in_Tanzania.pdf

“The aim of this paper is to present an empirical assessment of Tanzania foreign trade policy and performance since 2003. This paper is purely descriptive. Analysis of trade performance is done at all levels, that is, bilateral, regional and multilateral. Generally, the intensification of regional integration, in particular, the implementation of East African Corporation Customs Union (EAC-CU) protocol, improved intra-regional trade and consequently increased Tanzania's relative share in the region. Furthermore, Tanzania trade structure is changing in favor of services in terms of product and Africa in terms of destination market; however, European Union (EU) remains a dominant destination market for Tanzania exports. Exports to EAC and SADC account for about ninety (90) percent of Tanzania exports to Africa. Primary commodities consistently account for around eighty percent of merchandise exports. There is limited level of industrialization which is also supported by dominance of low technology manufactures among merchandise exports.

The level of trade is generally low; this may be explained by limited productive capacity facing the country. Enhanced investments (both domestic and foreign) and appropriate utilization of natural resource are likely to enhance supply capacity and improve country’s trade performance. (Author abstract).”

Mutalemwa, Darlene K. 2013. India: An Ideal Partner in Tanzania agriculture?. Journal of Language, Technology & Entrepreneurship in Africa Vol.4 No.1

http://www.ajol.info/index.php/jolte/article/viewFile/88217/77863

“The agricultural sector is the driving force of the Tanzanian economy. Therefore the need to develop and modernize it is of paramount importance for food production, poverty reduction and growth in other sectors. This paper aims at increasing knowledge and understanding of the contribution of India including its private companies, in Tanzanian agricultural investments, development and transformation. The paper concludes with some final remarks broadly stating that while Tanzania has enormous potential for attracting private investment in agriculture, there are serious constraints to India’s effective engagement in Tanzanian agriculture including Tanzania providing a favorable business environment and attractive business opportunities. The Government of Tanzania should therefore improve its Doing Business ranking by providing the right

framework to enable business development by further reducing bureaucratic hurdles, improve access to finance, provide modern infrastructure, commit to good governance, etc. (Author abstract, modified).”

Bitegeko, Janet; Rukonge, Audax. 2013. Tanzania Cashew Directory 2013. ACT; ANSAF

http://www.ansaf.or.tz/images/Cashew%20Directory%202013.pdf

“The purpose of this directory- jointly produced by the Agricultural Non State Actors Forum (ANSAF) and Agricultural Council of Tanzania (ACT) in collaboration with and the Cashew Board of Tanzania is to profile cashew sector in Tanzania, with the aim of attracting more investments. It aims to provide an account of the capabilities of the cashew sector in Tanzania, which can transform into economic well being lives of millions of smallholder farmers. Available evidences show that more investments are needed to turn around the cashew sector- increase its profitability, create more jobs and become a major foreign currency earner. (Author abstract, modified).”

POLICY BREIF – Advocating for effective regulation of the cashew nut industry in Tanzania. ACT; ANSAF; BEST–AC

http://www.ansaf.or.tz/MEDIA%20PACK/Policy%20Booklet%20-%20CASHEW%20NUTS.pdf

This publication covers numerous factories that contribute to the inhibition of the cashew nut sector in Tanzania. The author(s) conclude with recommendations to make the cashew industry more viable and actions that can be taken to alleviate some of the current constraints and bottlenecks on the industry.

Nkonya, Nganga; Rukonage, Audax. Increasing Value Addition and the Competitiveness of Tanzania Cashew Nut Industry. Monitoring and Analyzing Food and Agricultural Policies (MAFAP).

http://www.fao.org/fileadmin/templates/mafap/documents/Papers_and_presentations/MAFAP_ANSAF_Presentation_Cashew_nut_sector.pdf

This analysis explores the cashew nut value chain governance and power dynamics and publicizes the economic value lost by exporting unprocessed product to the major export destinations outlined in the report. Changes made in 2005 to move to a Warehouse Receipt System (WRS) are outlined and presented with graphical information and includes the distribution of revenue from the export tax obtained from cashew nuts over the past several years. The author(s) report that the export tax implemented to increase value addition to the product has instead initiated price disincentives for the sector. Given are policy recommendations determined by the MAFAP through this report.

Shomari, Shamte H. 2002. Opportunities and Constraints to the Development of Cashew Exports in Eastern and Southern Africa. CFC; ITC.

http://www.unctad.info/upload/Infocomm/Docs/cashew/opportunities.pdf

This report outlines observations and recommendations on how to increase value and production of cashew nuts in eastern and southern Africa. Includes delegation from Tanzania, Mozambique, Kenya, Malawi, Madagascar and Uganda. Introduces the major constraints inhibiting the quality and quantity of raw nuts and emphasizes the benefits processing cashews within the country of origin to claim additional economic benefits.

TechnoServe, Inc. 2005. Olam and TechnoServe Form Partnership to Develop a Sustainable Cashew Industry in Africa. CSR Press Release. CSRwire.

http://www.csrwire.com/press_releases/23207-Olam-and-TechnoServe-Form-Partnership-to-Develop-a-Sustainable-Cashew-Industry-in-Africa#

Olam International Limited, the largest supplier of cashews globally has joined with TechnoServe a U.S. based development organization to “unlock” the value of the African cashew industry in East and West Africa. The goal is to create profitable businesses and a profitable cashew industry so that the focused cashew producing regions can become reliable suppliers to the global market. The publication states that the hope is to generate economic opportunity and be a mechanism for growth in the poor rural communities.

African Cashew Alliance (ACA). 2010. Cashew Investment Guide.

http://www.africancashewalliance.com/sites/default/files/documents/Cashew%20Investment%20Guide%202010.pdf

This extensive report provides information to aid investment in the cashew industry amongst numerous African countries. Gives an overview of current production, market and consumer trends, and investment data. Tanzanian cashew industry is analyzed and introduces the current infrastructure and regulations in place necessary to make informed investment decisions. Name of operating as well as non-operating processors within the country is presented.

ITC. 2006. Current Situation and Perspectives of Agro Food For Export: Tanzania. Packaging Studies. International Trade Centre (ITC).

http://www.aafex.com/publications/file-server/Publications/Packaging_sector_studies_in_Tanzania.pdf

This report explores the agricultural sector of the Tanzanian economy and the situation at the time of publication of the food for export to the global marketplace. Delves into the importance of exports of agro food products for Tanzania, problems and constrains that inhibit export development and export demand for food products including cashew nuts. Concludes with recommendations to encourage further development of domestic processing and packaging to obtain more economic value from agricultural products and to satisfy regional and international demand. A list of main packaging manufactures of agricultural products is included in the report.

Bashiru, F.; Boma D.; Harries, H.C.; Kasuga, L.J.; Katanila, N.; Kikoka, L.P.; Lamboll, R.; Maddison, A.C.; Majule, A.E.; Martin, P.J.; Masawe, P.A.; Millanzi, K.J.; Nathaniels, N.Q.; Shomari, S.H.; Sijaona, M.E.; Stathers, T.; Topper, C.P.; and Waal, De. 1997. Cashew Nut Production in Tanzania: Constraints and Progress Through Integrated Crop Management. Vol. 16 No. 1. Elsevier Science Ltd.

http://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=3&ved=0CCwQFjAC&url=http%3A%2F%2Fwww.researchgate.net%2Fprofile%2FTanya_Stathers%2Fpublication%2F222177041_Cashew_nut_production_in_Tanzania_Constraints_and_progress_through_integrated_crop_management%2Flinks%2F0f3175331c9b65865a000000.pdf&ei=u2jYVOmyD8TVoASi2YGgBw&usg=AFQjCNEFAdaTKLmyinHjagFRN_QK_ruWhg&sig2=VXZwmm41ayH7kT480Cl43g&bvm=bv.85464276,d.cGU

This article published by Elsevier Science Ltd. discusses constraints on cashew nut production that Tanzanian farmers experience. Constraints believed to have a detrimental effect on production and economic prosperity for the industry are socio-economic constraints by the means of ineffective producer price and marketing, cashew farm abandonment, lack of capital and credit by farmers and a shortage of labor. Biological constraints discussed are hindering diseases of crops, low yields, and overcrowding of trees. Concludes that as long as farm-gate prices remain attractive, powdery mildew will remain the most important restraint on cashew production in Tanzania.

Appendix

Appendix A - Importing Companies Company name

Number of product or service categories traded

Number of employees

Country

City Website

Persinut Röst & Handels GmbH

7 1-10 Austria Feldkirchen bei Graz

Lebur-Product-Plus Ltd.

45 21-50 Belarus Minsk http://www.lebur-product.by

Menken NV 32 51-100 Belgium Aartselaar

Niche Trading NV

193 1-10 Belgium Antwerpen http://www.nichetrading.com

Kronos AD 6 21-50 Bulgaria Sliven http://www.kronos-distribution.com

Balkam AD 15 Unknown Bulgaria Sofia http://www.balkam.net

Grivas OOD 6 51-100 Bulgaria Sliven http://www.grivas-nuts.com

Kamenski & sons OOD

8 21-50 Bulgaria Shoumen http://www.kamenski.net

ALIMENTS KRISPY KERNELS INC.

12 251-500 Canada Québec http://www.krispykernels.com

Xiecheng Foodstuff Trade Co. Ltd.

5 21-50 China Jinyun, Zhejiang

NATURA HUSTOPECE s.r.o.

89 1-10 Czech Republic

Hustopece u Brna

http://www.naturahustopece.cz

K-SERVIS PRAHA, a.s.

34 11-20 Czech Republic

Nucice http://www.k-servis.com

LTC Vysoké Mýto, akciová spolecnost

72 21-50 Czech Republic

Vysoké Mýto http://www.ltc.cz

BMC Brno, s.r.o.

114 11-20 Czech Republic

Brno http://www.bmcbrno.cz

ALIKA a.s. 8 51-100 Czech Republic

Klenovice na Hané

http://www.alika.cz

SVET ORÍŠKU spol. s r.o.

76 21-50 Czech Republic

Teplice http://www.svetorisku.as

POEX Velké Mezirící, a.s.

50 101-250 Czech Republic

Velké Mezirící http://www.poex.cz

El-Motwakl for Import, Export, Packing & Distributing

7 21-50 Egypt Hadayek El-Qobba,Cairo

Kreek's France Arachides

26 21-50 France LA ROCHE SUR YON

http://www.kreeks.fr

Soprex 13 21-50 France PLAILLY

Benoit SNC 8 51-100 France CHARVIEU CHAVAGNEUX

http://www.intersnack.fr

Bargues Agro-Industrie S.A.

39 21-50 France LAVERCANTIERE

http://www.bargues.com

Mondial Fruits Secs

54 1-10 France MARSEILLE 10

Commodities and Products Industries

15 11-20 France VERSAILLES http://www.capindustries.com

ültje GmbH 11 101-250 Germany Schwerte http://www.ueltje.de

Worlée NaturProdukte GmbH

93 101-250 Germany Hamburg http://www.worlee.de

Seidl Confiserie GmbH

20 51-100 Germany Laaber http://www.seidl-confiserie.de

The Lorenz Bahlsen Snack World GmbH & Co. KG

8 101-250 Germany Neu-Isenburg http://www.crunchips.de

Heinrich Brüning GmbH

23 11-20 Germany Hamburg http://www.heinrichbruening.de

Sino Jet International Limited

3 1-10 Hong Kong, China

Sheung Wan, Hong Kong

http://www.sinojet.com.hk

GILAN 5 51-100 Hungary Páty http://www.kalifa.hu

TRADING Kereskedelmi, Termelõ és Szolgáltató Kft.

Sai Ventures 8 1-10 India Bengaluru

T.R. Venkatachalam Chetty

2 51-100 India Panruti

The Kerala State Cashew Development Corp. Ltd

2 Unknown India Kollam http://www.cashewcorporation.com

Vijayalaxmi Cashew Company

2 Unknown India Kollam http://www.vlccashews.com

C K International

50 11-20 India Thane

Assorted Food Packers Pvt. Ltd.

2 11-20 India Kollam

Harvest International Corporation

8 21-50 India Pune http://www.harvestexim.com

Nila Exports 3 Unknown India Kollam

Navami Exports

3 Unknown India Kollam

Aleph Enterprises

2 Unknown India Kollam

Alphonsa Cashew Industries

2 Unknown India Kollam

Sri Lekshmi Foods

2 Unknown India Kollam

GTC Foods Pvt. Ltd.

53 11-20 India Delhi http://www.gtcfoods.com

Neel Agrotech Pvt ltd

32 11-20 India Ahmedabad http://www.kompass.in/neel-agrotech-pvt-ltd

Blue Sky Exim 67 11-20 India New Delhi http://www.kompass.in/blue-sky-exim/

Amritha International

23 21-50 India Tirupur http://www.amrithainternational.com

Emperor Enterprises

8 1-10 India Hyderabad

Deen International

15 1-10 India Vellore

Fouress Foods 21 1-10 India Chennai http://www.kompass.in/fouress-foods

R.S.V.Impex 5 1-10 India Chennai

Agro Trade International

2 1-10 India Kollam

Reva Trades 170 11-20 India Chennai http://www.kompass.in/reva-trades

Jai Commercial Centre

30 1-10 India Chennai http://www.wix.com/jaishiva5/jcc

Rajkumar Impex Pvt Ltd

3 251-500 India Chennai

Peniel Cashew Co

3 1-10 India Kollam

Ashkar Cashew Industries

2 Unknown India Kollam

Vittal Cashew Industries

2 Unknown India Kasaragod http://www.vittalcashew.com

Jabsons Foods 12 1-10 India Bharuch http://www.jabsons.com

Right Channels 8 Unknown India Chennai

Accord Trade 9 21-50 India Tuticorin

A.A.Nuts 2 Unknown India Kollam

N.S.Phadnis 2 Unknown India Neyveli

Anzar Cashew Co

2 Unknown India Kollam

Kuber Foods Products India Private Limited

40 Unknown India New Delhi http://www.kuberfoods.com

Raj Exim 29 21-50 India Madurai http://www.safetymatches.in

Hi-Profile International Traders

35 11-20 India Chennai http://www.hiprofiletrade.com

Sea Across Exports

10 1-10 India Coimbatore

Boom Buying Pvt. Ltd.

1,998 51-100 India New Delhi http://www.kompass.in/boom-buying-pvt-ltd

"Kishore "N" Lakshmi Priya & Co

38 Unknown India Coimbatore http://www.naturalhoneyandfoods.com

Western India Cashew Company Pvt Ltd

2 Unknown India Kollam http://www.indiancashews.com

Emmanuel Cashew Industries

2 1-10 India Kollam

Deepkamal Exports Pvt Ltd

24 1-10 India Mumbai http://www.deepkamalexports.com

Radiant Global Import And Export

32 1-10 India Chennai http://www.radiantglobal.in

Global Exim Corporation

12 51-100 India Chennai http://www.globalexim.biz

Global AR Trading

5 Unknown India Thane

St Mary'S Cashew Factory

3 11-20 India Kollam

Sopariwala Exports Pvt Ltd

67 501-1000 India Mumbai http://www.sopariwala.com

M-Impex 15 11-20 India New Delhi http://www.mimpex.net

Bhaskara Exports

2 1-10 India Kollam

Admire Agri Gold

41 11-20 India Salem

Paras Udyog 21 1-10 India Indore

Aliya Cashew Exporters

2 Unknown India Kollam

Fernandes Brothers

2 101-250 India Mangalore

Divya Universe 6 11-20 India Chennai

Poornachandra Cashew Company

2 21-50 India Kollam

Pratipa Cashews

2 101-250 India Cuddalore

Tasty Nut Industries

2 11-20 India Kollam

Sahyadri Cashew Processors

5 101-250 India Kumta http://www.kompass.in/sahyadri-cashew-processors

UE Trade Corporation (India) Pvt Ltd

43 1-10 India New Delhi http://www.uetcindia.com

Stallions Trading Co

9 1-10 India Madurai

Shah Traders 2 11-20 India Kollam

Chung King Associates

2 21-50 India Chennai http://www.chungkingindia.com

Fruits of RT 2 Unknown India Cuddalore http://www.geocities.com/fruitsofrt

Prabhat Udyog 447 101-250 India Hyderabad http://www.prabhatudyog.net

Aashray Incorporation

52 11-20 India Rajkot http://www.kompass.in/aashray-incorporation

Sai Export Enterprises

3 11-20 India Kollam

Enrich Impex 103 1001-5000

India Chennai http://www.enrichimpex.com

Olam Agro India

11 51-100 India Gurgaon http://www.olamnet.com

Angel Cashews 2 Unknown India Kollam

Honest Textile 26 11-20 India Surat

Gayathri Exports

2 251-500 India Karkala http://www.gayathriexports.com

Avant-Gaarde (Pvt) Limited

69 11-20 India Hyderabad http://www.avant-gaarde.com

Alvel Sales 40 1-10 India Chennai http://www.kompass.in/alvel-sales

A. S. Cashew Exporters

2 1-10 India Kollam

G. Limit Trades And Concepts

4 1-10 India Kollam

Miltop Exports 55 21-50 India Jamnagar http://www.kompass.in/miltop

Karuda Exports 8 11-20 India Rajapalayam

Veeran Exim 14 1-10 India Chennai

Binu Exporters 13 1-10 India Malappuram

Thampuran Cashews

4 Unknown India Kollam

Chethana Cashew Corporation

2 1-10 India Kollam

Shree Panchganga Agro Impex Pvt Ltd

67 251-500 India Pune http://www.panchganga.com

Kalbavi Cashews

2 251-500 India Mangalore

Narayan Ganesh Prabhu Zantye & Company

2 101-250 India Bicholim http://www.zantye.in

Indian Resins & Polymers

2 Unknown India Kollam

Binod Cashew Corporation

2 Unknown India Kollam

Chothy Enterprises

2 1-10 India Kollam

Damodar Cashew Co

2 Unknown India Kasaragod

Excellent Cashew Company

2 Unknown India Kollam

N R RESOURCES

9 1-10 India New Delhi http://www.kompass.in/n-r-resources

Sandhya Cashew Factory

2 Unknown India Pathanamthitta

Anjali Oils and Foods

94 251-500 India Madurai http://www.kompass.in/anjali-oils-foods

Samex Agency 34 Unknown India Mumbai http://www.samexagency.com

IEIE 18 1-10 India Chennai

AIM Overseas 5 1-10 India Rajkot http://www.aimoverseas.co.in

TKM Agro Limited

2 Unknown India Coimbatore

Rishabh Group Of Companies

2 51-100 India Hyderabad http://www.rishabhgroup.com

J D Corporation

11 11-20 India Mumbai http://www.indianspicesngroceries.com

Orbitta Exports 10 21-50 India Rajkot http://www.orbittaexports.com

Keventer Agro Limited

31 501-1000 India New Delhi http://www.kompass.in/keventer-agro-limited

Latha Exports 2 1-10 India Madurai

Glitto Exports 20 Unknown India Madurai

N. S. Phadnis 16 1-10 India Neyveli

Najeem Cashew Industries

2 Unknown India Kollam

Choice Cashew Industries

2 1-10 India Kollam

Aggarwal Impex

195 1-10 India Navi Mumbai http://www.kompass.in/aggarwal-impex

Siva Trading Company

57 Unknown India Tirupur

Vijetha Agrotech

36 1-10 India Secunderabad

Achal Industries

2 Unknown India Mangalore http://www.achalcashew.com

Swathy Enterprises

4 11-20 India Kollam http://www.swathyenterprises.com

Sanghani Multilink Marketing Pvt Ltd

10 21-50 India Thane http://www.sanghanimultilink.com

K.G.N. International Exports & Imports

24 1-10 India Chennai

Quilon Export Enterprises

2 21-50 India Kollam

Apex Ventures Pvt. Ltd.

2 1-10 India Kollam

Mysore Mercantile Co. Ltd.

18 Unknown India Bengaluru http://www.mmclindia.com

Navami Exports

1 11-20 India Kollam

AK - Skyangels Import-Export

7 1-10 India Dindigul http://www.ak-skyangels.com

Pasand Exports Pvt. Ltd

43 21-50 India Ahmedabad http://www.allspiceexports.com

Arabian Cashew Exporters

2 1-10 India Kollam

K Star Imports and Exports

10 Unknown India Chennai

India Food Exports

2 Unknown India Kollam http://www.Indiafoodexporters.com

Sangvi Agro Pulses

10 Unknown India Chennai

Magestiic Exports & Imports India

8 Unknown India Vellore

Abbas Cashew Company

2 Unknown India Kollam

Bethel Cashew Company

3 1-10 India Kollam

Chandra Cashew Factory

2 Unknown India Kollam

Sai International Trading Company

14 11-20 India Kollam http://www.sitcoindia.com

Royal Food Exporters

2 Unknown India Kollam http://www.royalfoodexporters.com

Mac Agri Exports

59 1-10 India Mumbai http://www.kompass.in/mac-agri-exports

Mahesh Chand Varun Kumar

4 11-20 India Delhi

Shree Bhagawati Flour & Foods Pvt Ltd

106 101-250 India Ahmedabad http://www.kompass.in/shree-bhagawati-flour-&-foods/

Crispy Snacks 2 1-10 India Kollam

Esjaypee Impex Private Limited

33 21-50 India Chennai http://www.esjaypee.com

Sree Sastha International

23 Unknown India Chennai http://www.cardamomindia.com

Dharamvir Exports Pvt Ltd

107 21-50 India New Delhi http://www.kompass.in/dharamvir-exports/

Sai Lekshmi Foods

2 21-50 India Kollam

Olam Exports (India) Limited

4 21-50 India Kollam

The Cashew Export Promotion Council of India

4 11-20 India Kochi http://www.cashewindia.org

S.N.Cashew International Pvt Ltd

3 Unknown India Kollam

Western India Cashew Company Pvt Ltd

2 101-250 India Kollam http://www.wenders.com

Chemmarathil Cashew Company

2 1-10 India Kollam

Arputham Exports

14 Unknown India Chennai

Bola Surendra Kamath & Sons

2 Unknown India Karkala

Basic Biz 7 Unknown India Chennai http://www.basicbiz.in

V.S.Exports 12 21-50 India Coimbatore

The Vellimalai Rubber Co. Ltd

6 21-50 India Kottayam http://www.ooppoottil.com/vellimalai

Emgeeyar Cashews

2 Unknown India Panruti

Carmel Cashews

2 Unknown India Kollam

Aziya International

2 Unknown India Kollam

Shri Balaji Overseas

56 21-50 India New Delhi http://www.kompass.in/shri-balaji-overseas

Unni Enterprises

2 Unknown India Kollam

Raaj Internationals

35 Unknown India Chennai

Rajpal & Company

13 11-20 India Mumbai http://www.rajpalco11.com

Venture Access 34 1-10 India Coimbatore http://www.kompass.in/venture-access

I Deal Worldwide

128 Unknown India Chennai http://www.idealworldwide.com

Kaleva Sweets & Namkeen

19 21-50 India New Delhi http://www.kalevaindia.com

Herbarium 7 11-20 India Kollam

Indigo Multitrade Pvt. Ltd.

324 21-50 India Mumbai http://www.indigo.in

Srinivasa Cashews

2 101-250 India Cuddalore

Nisha Traders 3 Unknown India Thanjavur

Associated Cashew Industries

2 Unknown India Kollam

Abhiesh Exports

17 11-20 India Kollam http://www.abhieshexports.com

Jucofabs 5 Unknown India Kolkata

VINCENZO CAPUTO, Srl

129 11-20 Italy SOMMA VESUVIANA (NA)

http://www.vincenzocaputosrl.it

MAINARDI NICOLA, Srl

7 11-20 Italy LENDINARA (RO)

http://www.mainardisrl.com

TORREFAZIONE LA FORLIVESE, Snc (dei F.lli Mambelli -)

11 11-20 Italy FORLI' (FC) http://www.forlivese.it

DANIEL MOLINELLO BROKERAGE & ADVISOR FINEST ITALIAN GOURME T SPECIALITIES,

768 Unknown Italy GENOVA (GE)

Srl

N.P. & Company, Inc.

232 21-50 Japan Osaka http://www.nposk.com

Blasko Ltd 36 11-20 Latvia Riga, Rigas district

http://www.blasko.lv

Sté Ets Michel Najjar Sal

27 251-500 Lebanon Roumieh (Metn)

http://www.cafenajjar.com

Foods Industrial Corporation Sarl

23 21-50 Lebanon Choueifate (Aley)

http://www.fodico.net

Diabco Sarl 20 Unknown Lebanon Kfarsaroun (Koura)

http://www.alamiranuts.com

Abiad General Trade

50 Unknown Lebanon Beirut http://www.abiad-general-trade.com

Al Rifai Roastery Sal

47 251-500 Lebanon Beirut http://www.alrifai.com

Nutland BV 70 1-10 Netherlands

Gravenhage,'s-

http://www.nutland.nl

Griffins Foods Limited

21 501-1000 New Zealand

Auckland http://www.griffins.co.nz

Atlanta Poland SA

59 101-250 Poland Gdansk http://www.atlantapoland.com.pl

eBakalie 60 1-10 Poland Rzeszów http://www.ebakalie.pl

Intersnack Poland Sp. z o.o.

24 501-1000 Poland Slomniki http://www.felixpolska.pl

ROS-SWEET Sp. z o.o.

84 21-50 Poland Lancut http://www.ros-sweet.pl

Maestro-Nut SRL SC

20 51-100 Republic of Moldova

Chisinau http://www.maestro-nut.com

ORLANDO IMPORT - EXPORT 2001 S.R.L.

100 51-100 Romania Clinceni

Rieber & Son Russia Production

12 101-250 Russian Federation

Elektrostal http://www.rieberson.ru

Seng Hua Hng Foodstuffs Pte

15 51-100 Singapore Singapore http://www.camelnuts.com

Ltd

Swiss Singapore Overseas Enterprises Pte Ltd

65 11-20 Singapore Singapore http://www.swiss-singapore.com

Ravita, s.r.o. 36 Unknown Slovakia Prešov http://www.ravita.sk

ALFA SORTI s.r.o.

31 21-50 Slovakia Zvolen http://www.alfasorti.sk

Neltropica Fruit (Pty) Ltd

10 1-10 South Africa

Pretoria West http://www.neltropica.co.za

Isabel De Hungria López Cruz

103 1-10 Spain Andújar http://www.liquidgold.es

José Pelluz Bernal

10 21-50 Spain Santa Cruz http://www.josepelluz.com

La Baturrica, S.L.

11 11-20 Spain Zaragoza http://www.tostadero-baturrica.com

Productos Damel, S.L.

25 101-250 Spain Paterna http://www.damel.com

Green Way Asia Enterprises

2 11-20 Sri Lanka Gampaha http://www.greenwayasia.lk

Fruits & Nuts Exports (Pvt) Ltd

12 21-50 Sri Lanka Kelaniya

Stassen Group of Companies

147 Unknown Sri Lanka Colombo 14 http://www.stassengroup.com

GTB Steel Corporation (Pvt) Ltd

12 101-250 Sri Lanka Colombo 5

J Zahirsha Brothers (Pvt) Ltd

57 21-50 Sri Lanka Colombo 4 http://www.zahbro.com

Union Commodities (Pvt) Ltd

223 251-500 Sri Lanka Kelaniya http://www.unicomtea.com

Foreconns Canneries

20 51-100 Sri Lanka Beruwala http://www.foreconnscanneries.com

Informatics Agrotech (Pvt)

17 Unknown Sri Lanka Colombo 8 http://www.informatics.lk

Ltd

J B Enterprises (Pvt) Ltd

89 21-50 Sri Lanka Nugegoda http://www.jbenterprisessrilanka.com

Heritage Cashew & Food Co., Ltd.

4 21-50 Thailand Bangkok

Heritage Murgerbon Corp., Ltd.

4 21-50 Thailand Nakhon Pathom

www.heritagethailand.com

Lamer Gida ve Ihtiyaç Maddeleri Dis Ticaret Ltd. Sti.

46 1-10 Turkey Izmir http://www.lamertrading.com

Dirafko Dis Ticaret ve Gida Sanayi Ltd. Sti.

3 51-100 Turkey Izmir http://www.drafko.com

Gülsen Gida Sanayi ve Ticaret A.S.

35 21-50 Turkey Çorum http://www.gulsengida.com.tr

Seda Seker ve Gida Ürünleri Kimyasal Ürünler Imalat Paketleme Sanayi Ticaret Ltd. Sti.

17 51-100 Turkey Osmaniye http://www.meyna.com.tr

ARIOL Ltd 28 51-100 Ukraine Sevastopol, Republic of Crimea

http://www.santavita.com.ua

PRYRODNI PRODUKTY Ltd

43 21-50 Ukraine Kyiv http://www.jasmin.ua

FAETON-HRUP Ltd

11 11-20 Ukraine Kyiv http://www.faetongroup.com

BIG NUTS Ltd 39 11-20 Ukraine Pervomaisk, Mykolaiv Reg.

http://www.bignuts.com.ua

AHROPROMSBYT Ltd

16 1-10 Ukraine Kyiv

SPECIAL Ltd 10 1-10 Ukraine Rivne

Poonam International Limited

6 21-50 United Arab Emirates

Dubai

Best Food Co LLC

16 21-50 United Arab Emirates

Dubai http://www.bestfood.com

Awafi Foodstuff Industry Co LLC

15 101-250 United Arab Emirates

Sharjah http://www.crunchosawafi.com

Ismail Zada Trading Co LLC

5 11-20 United Arab Emirates

Dubai

Al Douri Foodstuff Trading Co

20 51-100 United Arab Emirates

Dubai http://www.aldouri.com

Al Fustaq Foodstuff Factory LLC

15 21-50 United Arab Emirates

Dubai http://www.nutty-nuts.com

Foodpro Trading LLC

29 Unknown United Arab Emirates

Dubai http://www.foodprogroup.com

Fairway General Trading LLC

7 21-50 United Arab Emirates

Dubai http://www.fatimagroup.com

Kenkko Corporation Ltd

30 11-20 United Kingdom

London http://www.kenkko.com

John B. Sanfilippo & Son, Inc.

14 1001-5000

United States of America

Elgin http://www.jbssinc.com

From <http://www.trademap.org/CompaniesList.aspx>

Appendix B Grading of cashew nuts

Appendix C Association of Food Industries (AFI) Specs for cashew kernels

Appendix D Fairtrade prices 2015

Appendix E Fairtrade Cashew standards 4.2.1 On request from the producer, the Fairtrade payer must make up to 60% of the value of the contract available as pre-finance to the producer at any time after signing the contract. The pre-finance must be made available at least six weeks prior to shipment. Contract production operators should refer to the contract production standard on pre-finance. 4.3.4 Payment Terms: For purchases made at farm gate or ex works levels, payment must be made upon receipt of the product. For Raw Cashew Nuts from Africa: the payment is possible up to 30 days from the transfer of the product. For purchases made at FOB level, payment shall be net cash against a full set of documents on first presentation. The documents to be presented will be those stipulated in the contract and customary in the nuts trade. Fairtrade Standard for Nuts for Small Producer Organizations January 2013 6 4.1 Sustaining Trade 4.1.1 Sourcing plans must cover each harvest. Sourcing plans must be renewed a minimum of three months before they expire. 4.2 Pre-finance 4.2.1 On request from the producer, the Fairtrade payer must make up to 60% of the value of the contract available as pre-finance to the producer at any time after signing the contract. The pre-finance must be made available at least six weeks prior to shipment. Contract production operators should refer to the contract production standard on pre-finance. 4.3 Pricing Fairtrade Minimum Prices and Fairtrade Premium levels for Fairtrade products are published separately to the product standards. 4.3.1 For Brazil nuts: The Fairtrade Minimum Prices for Brazil nuts set at the “Ex Works without selection and packing – at the processing plant” level cover the following costs: one-off set-up costs amortized, field work, harvest, transport to the processing plant, shelling, and organizational costs. 4.3.2 For almonds, apricot seeds and walnuts from Pakistan: For these products, only the Fairtrade Standard for Contract Production Projects is applicable. The price at Ex Works level includes the Certification Costs (GBP 0.01 per kg of conventional produce and GBP 0.03 per kg of organic produce) which are paid to the Promoting Body. The Certification Costs are deducted from the price paid to the individual producers, i.e. from the Fairtrade Minimum Price or the market price, whichever is higher. 4.3.3 For secondary products: There are no Fairtrade Minimum Prices defined for secondary products and their derivatives. Sellers of the product and its next buyers must negotiate prices for secondary products and their derivatives. A default Fairtrade premium of 15% of the negotiated price must be paid in addition. Fairtrade International reserves the right to set a Fairtrade Minimum Prices for secondary products and its derivatives in the future. 4.3.4 Payment Terms: For purchases made at farm gate or ex works levels, payment must be made upon receipt of the product. For Raw Cashew Nuts from Africa: the payment is possible up to 30 days from the transfer of the product. For purchases made at FOB level, payment shall be net cash against a full set of documents on first presentation. The documents to be presented will be those stipulated in the contract and customary in the nuts trade.

4.3.5 Late payment: For contracts involving Fairtrade payers and producers, payment must be made according to the international customary conditions and no later than 15 days after the receipt of the documents transferring ownership. For contracts involving Fairtrade payers, producers and conveyors, conveyors must pay producers no later than 15 days after receipt of the payment from the Fairtrade payer. 4.3.6 For Cashew Nuts from Africa: The buyer of Raw Cashew Nuts (RCN) must pay FMP and FP for the total amount of RCN weight which the buyer later sells on as Fairtrade, but this must not be less than 80% of the total amount purchased as Fairtrade from the producer. In case the processor/exporter buys RCN, then at least the FMP and the FP for RCN at the EXW level must be paid. Importers buying cashew kernel must pay at least the worldwide FMP at the FOB Fairtrade Standard for Nuts for Small Producer Organizations January 2013 7 level. In both cases, if the relevant market prices are higher than the FMP, then the market price must be paid. The FMP for RCN are linked to the nut count and the kernel outturn ratio (KOR). See 4.3.7 for guidance and price calculation.

Appendix F – Fairtrade campaign

Fair Trade campaign urges EU to set up cashew regulation

A+ | A- Fair Trade campaign urges EU to set up cashew regulation Fair Trade activists are urging the EU to set up regulations which will prevent low pay and poor working conditions for workers in Africa and India. Campaigners are objecting to a economic model in which a supermarket earns just over £1 from a bag of cashews sold for £2.50 while the factory worker in these developing countries makes 3p per day. Comments made by EU Commissioner for internal markets, Michael Barnier, shows that a case may be taken up against the industry. "Farmers and workers across the world are suffering every day because of unfair trading practices by supermarkets," said Liz May, head of policy at the fair trade organization Traidcraft in an interview with the Guardian newspaper. "It's time the EU took action and set up a regulator with the power to stop abuses by retailers that result in extremely low pay and appalling working conditions, " she said. It is suggested that with its premium price, the cashew nut industry could be a great opportunity for Africa and India economically. Globally, it is a $4 billion (£2.5 billion) industry that provides jobs for millions. Source: esmmagazine.com Publication date: 11/26/2013 Inserted from <http://www.freshplaza.com/article/115582/Fair-Trade-campaign-urges-EU-to-set-up-cashew-regulation

Appendix G – Olam company profile and brands Olam – Corporate website reflecting Whole Foods Brand – which is probably organic – note other brands including Costco Kirkland and most major USA brands. With a 20% market share a large portion of their product is bound to go to these market leaders.

Appendix H – USA imports and price (Assoc., 2014)

Appendix I - The cashew processing flow chart.

(African Cashew Initiative, 2011)

Prices of cashew nuts Feb 2015

Appendix J – Glossary of terms Glossary of some Cashew Terms used Conventional Food produced without organic or fair-trade certification Development Community The development support community which includes

government agencies, non-government agencies and foreign government agencies.

Fairtrade The Fair-trade system is about trading as directly as possible with producer organizations and ensuring that all participants comply with Fair-trade standards. These standards guarantee fair and sustainable terms of trade for producers in developing countries” Fair-trade Trade Foundation

FCL Full container load In-shell Nuts as harvested prior processing Kernels Shelled cashew nuts LCL “Less than container load” NGO Non-Government Organization Organic Production system which excludes the use of chemicals and

promotes environmentally sustainable methods. Outturn Cashews – weight of kernels produced from a unit of in-

shell nuts (grams per kg , lbs. per 80kg bag) RCN Raw Cashew Nuts (the cashew in its shell) Roaster Processor and packer of cashew kernels for retail or

wholesale trade Shelling or processing Removal of outer shell , peeling and grading of in-shell

nuts Yield Used to describe the grades of kernels produced by

Shelling in-shell cashew.

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