09 Chapter 1

Messsage
I am glad to learn that www.CommodityIndia.com

is bringing out a publication entitled “Indian Cashew
Handbook”. The publication carries well researched
articles on the various facets of the industry.
Even though a large number of publications are avail-

able on the subject, the need for a comprehensive study
of the Indian cashew industry has been acutely felt for
a long time now. Hope this publication will fulfill this requirement.
The cashew industry in India has both economic and social significance
as it earns valuable foreign exchange for the country to the tune of Rs.
2000 crores per year and provides employment to about 4 lakhs workers,
mostly women from the weaker section of the society.
I hope that this publication will serve as a ready reckoner for every one
connected with the industry and facilitate free and uninterrupted flow of
information across the various segments of the industry and contribute to
the more vigorous growth of the industry in India
K. Krishna Pillai
Chairman
The Cashew Export Promotion Council of India
Page 1
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www.CommodityIndia.com
Preface
In a significant development, the cashew processors and
exporters are forced to adopt themselves to the chang-
ing Global scenario where they are required to MAR-
KET their product. The Indian Cashew Industry is
steadily coming to terms with this inevitable reality
which is in fact a paradigm shift from the age-old ‘sell-
ing’ to ‘marketing’. The awakening or the positive
awareness is perceived as an absolute necessity. It is a
pragmatic augury that the Central and State Govern-
ments have fallen in line and started viewing budget-
ary allocations on marketing as an investment rather
than an expenditure. The results speak for themselves in the form of rich
dividends to the national exchequer.
The credit for giving this activity the right direction, thrust and profession-
alism goes to www.CommodityIndia.com. Within a short span of time they
have been able to get into the intricacies of the trade and are on the road to
success. They are all set to curve a niche for themselves in all commodities
especially in the international market. The Cashew Export Promotion Coun-
cil of India is an exporter friendly organisation entrusted with the exclusive
prerogative and mission of promoting Indian Cashew Exports. Over the
last five decades, the CEPCI has done commendable work in making the
Indian tri-colour fly proudly aloft in the comity of cashew exporting/con-
suming countries of the world. It is in the fitness of things that we welcome
supplementary efforts from all quarters even on a commercial level.
I understand that this book which is the latest in the series of publications
www.CommodityIndia.com has ventured on is a research study aimed at
throwing sufficient light on all dimensions of the trade. From the title of
contents, the SWOT analysis, the market analysis, market integration and
demand elasticity for cashews may kindle the thought process of the indus-
try to be vigilant and responsive to creative result-oriented change.
This publication being the first of its kind will certainly need fine-tuning
and constructive critical review from the industry circles. With the feed-
back that the publishers receive upon its publication, I am sure the future
editions can serve as a ready reckoner to all sections of the trade all over the
world. I wish them unalloyed success...
WALTER D’SOUZA
Vice-Chairman, CEPCI
Page 2
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Table of Contents
Chapter Title Page #
I) Introduction to Indian Cashew Industry History of Indian cashew industry 05
Importance of cashew to Indian economy
Strength, Weakness, Opportunity and-
Threats of Indian cashew industry
II) Past, Present and Future of Status of cashew in India 17

Cashew Area and Production in India Trends in cashew area,
- production and productivity
III) Cashew Plantation in India- Site selection 25

Establishment, Management and Critical inputs
Economic Viability Management practices
Critical operations
Economics of cultivation
IV) Study of Cashew Processing Industry Drum roasting process in Andhra Pradesh 43
in Different States Oil bath roasting as preliminary process in Kerala
Cashew processing industry in Karnataka
Cashew fenny industry in Goa
V) Performance of Indian Direction of cashew kernel exports 75

Cashew Kernel Exports Trends in cashew kernel exports
Measures to strengthen Indian cashew exports
VI) Instability in Raw Cashew Nut Imports Domestic raw cashew sector 81
Trends in raw cashew nut imports
VII) Indian Cashew Nut Shell Liquid

(CNSL) Exports Uses of CNSL 89
Important factors for CNSL buyers
Direction and trends of CNSL exports
VIII) Direction and Changing Pattern of Transitional probability matrix 99

Cashew Trade -A Markov Analysis Projection of cashew exports to-
major importing countries
IX) Price Behaviour of Indian Cashew Kernel A peek at Indian cashew kernel price 107
Market integration
X) Export Competitiveness of Indian Cashew
XI) Demand Elasticity for Cashew Demand from developed economies 115
Demand from USA
XII) Appendix 127
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Preface
Dear Sirs/Madame, Profile of the Author
It gives us an immense pleasure in bringing out the In- Mrs. Ashalatha is a Gold
dian Cashew Handbook 2002. India has always enjoyed a Medallist in MSc., Agricul-
special place in the global cashew market. India offers tre- tural Marketing and Coop-
mendous scope for this sector- be it in cultivation or in
eration from University of
processing of cashew. The objective of this handbook is
Agricultural Sciences,
present the various aspects of Indian cashew industry in
Bangalore. Mrs. Ashalatha
a succinct form which serves as a reference for the world
has been researching on In-
cashew community at large.
dian cashew industry since her post-gradu-
I take this opportunity to place my appreciation to the entire ation days. She has won accolades for her
team involved in creating this unique product. The work on “Trends in Cashew Trade” and
handbook is authored by Ms. Ashalatha, commodity analyst “Application of Markov Chain Analysis on
with more than five years of extensive research experience cashew”. As a representative of Foretell, she
on Indian cashew industry. Her meticulous approach right has attended the World Cashew Congress
from data gathering to deploying various research held in Kochi during February 2001. Cur-
methodologies has resulted in insightful findings, which I rently, she is the in-charge of our weekly
am sure you would find it invaluable. The contribution of publication on cashew- “Cashew Week”.
Mr. Vinayak Meharwade, Manager - Products & Services,
in marketing this handbook amongst the cashew Profile of our organisation
community has been remarkable. I also place on record
my appreciation to other members of the team - Narayan
Foretell Capital Trust Private Limited, is
Kulkarni, Ganesh Kumar and Santhana Krishnan. I
an agri-business research firm based in
extend my appreciation to Mr. L N Bhaskar for his
Bangalore, India. Research on agri-com-
wonderful contribution towards designing the handbook.
modities is Foretell’s core competency . We
My sincere thanks are also to all the members of the Indian
add significant value to our esteemed cli-
cashew community especially to the office bearers and
members the Cashew Export Promotion Council of India. ents through our publications and advisory
services. We have specific publication on
I fully realize that all this would not have been possible various sectors such as cashew, coffee, ed-
with out your support. Your encouragement right from the ible oil, oilseed and oilmeal and spices, be-
inception has been the only source of inspiration for us. I sides a generic agri-business monthly
hope that you would enjoy the utility of this handbook as magazine. We advise our clients on trade
much as we did while creating it. I must admit here that (edible oil, extractions, coffee, and spices)
this is our first Handbook on cashew and hence is bound to and on business (market opportunities, in-
have some shortcomings. I seek your cooperation towards dustry analysis, and project appraisal and
building up this handbook in all possible ways. management). For further details, please
Sincerely Yours, contact us at foretell@vsnl.com
G Srivatsava
President,
Foretell Capital Trust Private Limited
Page 4
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Chapter - 01
Introduction to Indian Cashew Industry

History of Indian Cashew Industry
T
he history of cashew (Anacardium occidentale L.) is only five centuries old
and is very sketchy. Brazil is the home of cashew. It was introduced by
Portuguese seafarers into the
West coast of India in the Sixteenth Cen-
tury from Brazil circa 1560-65 AD. From
Goa, this great nut trickled down to the
Konkan coast and finally arrived in Kerala.
This is evidenced by the fact that raw cashew
is called “Parangi Andi” in Malayalam, which
literally translates to “Portuguese Nut”.
The crop now has spread to the East coast

particularly from North of Chennai to the
southern part of West Bengal.
Table 1.1- Cashew growing states and processing areas in India

Growing states Processing areas The origin of
Kerala Kollam cashew in India
Maharashtra Vengurla dates back to
Andhra Pradesh Palasa (1560 AD-1565
Orissa Bhubaneswar AD) the Portu-
Karnataka Mangalore
guese times when
Tamil Nadu Kuzhithurai, Panruti
the sea farers got
Goa Goa
West Bengal --
it into the west
Madhya Pradesh -- coast of India
Manipur --
Tripura Agartala
Page 5
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Chapter - 01
Fig.1.2 Export earnings from cashew kernel & allied products (1990-91to2001-02)
In the early period of its introduction, cashew was only a crop for afforestation and soil
conservation. The technology to extract the kernel from its shell, which contains
anacardic acid, was developed in Kerala during 1920’s. This led to commercialisation
of the crop for kernel production and its introduction to international trade. It has
nearly 500 years of tradition in cultivation and 75 years in processing and export. Cashew Cashew is impor-
is generally described as poor man’s crop and rich man’s food. tant to India in
terms of foreign
Importance of Cashew to Indian Economy exchange revenue
The importance of cashew to the Indian economy arises from the fact that it earns a & employment of
sizeable amount of foreign exchange. The total export earnings from cashew kernel the rural poor
and allied products during the year 2001-02 has been estimated at Rs. 17.9 billions.
Among the agricultural products exported from India during 2000-01, cashew ranked
third as a foreign exchange earner, contributing 0.93% to the total export earnings of
the country.
There are around 1,098 cashew factories in India and over 500,000 people work in
plantation and factories. More than 90% of the workers in the processing factories
are women from the lower strata of the society, mainly belonging to socially and eco-
nomically backward communities. Thus, apart from its economic significance, the
cashew industry has the potential to play a leading role in the social and financial upliftment
of the rural poor.
Cashew is a unique combination of fat, proteins, carbohydrates, minerals and vita-

mins. Cashew contains 47% of fat, but 82% of this fat is unsaturated fatty acids. The
unsaturated fat content of cashew not only eliminates the possibility of an increase of
the cholesterol level in the blood, but also actually balances or reduces the cholesterol
level. Cashew also contains 21% proteins and 22% carbohydrate and a right combina-
tion of aminoacids, minerals and vitamins and therefore, nutritionally, it stands on par Page 6
Chapter - 01
with milk, eggs and meat. Cashew has almost as low as 1% of soluble sugar (a person
eating cashew does not have to worry about excess calories). Cashew nut does not
lead to obesity and helps to control diabetes. In short, it is a good appetiser, an excel-
lent nerve tonic, a steady stimulant and a body builder.
Strength, Weakness, Opportunity and Threats of Indian Cashew In-

dustry
Strength
India is the largest producer of raw cashew, the largest manufacturer of cashew
kernel, the largest exporter of cashew kernel and the second largest consumer of
cashew kernel in the world. In view of this India has a comparative advantage over
other countries.
Growing demand for Indian kernels in international and domestic market and avail-
ability of cheap labour (mainly women) with the required skills in processing favour The major
Indian cashew industry. Cashew exports contribute heavily to the food security (in strengths of
terms of value) of the country. The value of one kilo of cashew kernel exported can Indian cashew
help to fetch 25 kilos of wheat or rice. industry are its
expertise in
Kernels from India fetch more prices in International market because of its better manufacturing
quality, less percentage of broken kernels, rich taste and good appearance. and availability
of cheap-skilled
Weakness labour while it’s
Even though cashew has 400 years history, it still remains a neglected crop. It is major weakness
a plantation crop in all countries except India. Cashew though for all practical pur- is poor availabil-
poses is viewed as a plantation crop is not administratively given a plantation status. It ity of raw nuts
is grown in wasteland/poor soil, which is unsuitable for the cultivation of any other
remunerative plantation crops. The yield per tree tends to be very low.
Primarily, the export of cashew kernel depends upon imports of raw cashew nuts
and domestic raw cashew nut production. India is the major importer of raw cashew
in the world for the manufacture of cashew kernel. Due to inadequate indigenous
production, the industry is forced to import over 250,000 tons of raw cashew nut
annually, mainly from African countries for export processing. India earns around Rs.
20 billion per annum through export of cashew kernels and to realise this, the country
is spending over Rs. 9 billion for importing raw cashew nut. Because of this the Indian
processors have to incur about 30% more in cost, compared to the local cashew
processing industry in other countries, making them noncompetitive. Cashew kernel
exports, by and large is not stable mostly due to the poor availability of raw nut for Page 7
Chapter - 01
imports and unpredictable domestic production.
The lack of availability of sufficient raw nuts has led to under utilisation of processing
units. This has led to reduction in number of labour days for many workers, who
depend on cashew processing. Also less capital investment and huge profits have acted
as incentives for creation of additional capacity. However, under utilisation of capacity
and severe under employment of labour in the existing factories are increasing. Thus,
if cashew plantations are not developed with a long term perspective, the future of
these communities would be very bleak. There is a need for increasing production of
raw cashew nut to make the country self-sufficient.
Majority of the trees are over aged and therefore their productivity has come
down. A considerable area under cashew plantation is under high degree of senility
due to the inferior genetic stocking and improper management of plantations. There
is a need for replantation of aged cashew trees.
There should be equality in tax rates of all states for raw cashew. Presently it is Our weaknesses
in the range between 0% and 8% causing distortion in the pricing structure. should be con-
verted into
Some of state governments must act to improve the APMC (Agriculture Pro- strengths and
duce Marketing Committee) or remove raw cashews from regulations, as it is an there lies the
impediment. The industry has been facing the same problem i.e., of double taxation, challenge for
as the government considers raw cashew and cashew kernel to be two separate com- Indian cashew
modities because of which sales tax and purchase tax are payable both on the output industry
and the input.
The present system of issuance of the DEPB (Duty Entitlement Pass Book) by
the Joint Director of Foreign Trade, regarding port registration has made it obligatory
for the importers to import through the same port. While the option of TRA (Transfer
Advises Release) is available to the exporter, often the procedure involved in this makes
it difficult for the exporter to freely sell this in the market.
Two separate columns should be provided in the DEPB for port of registration for
imports and port of registration for exports, so that the exporter has the option to
export and import his commodity through any of the ports. Otherwise, exporters
choosing to ship their cargo through smaller ports will find their DEPB not in demand
as most of the imports take place through major ports only.
In view of the difficult circumstances the export trade was subjected during the Page 8
Chapter - 01
current year and taking into consideration the seasonal nature of the industry, it is
imperative to give necessary instructions to the nationalised banks to refund the ex-
cess interest debited by them.
There is a need to extend the period of export finance for cashew industry upto
360 days at the concessional rate of interest. At present the state-run banks have
granted extension for finance upto 270 days with penal interest of 3.5% to 4.5%,
which is about 50% above the normal rate of interest for export credit.
The premium payable to Export Credit Guarantee Corporation (ECGC) is

counter productive to export growth. The banks while advancing export credit (packing
credit) ensures that adequate comprehensive insurance policies are taken to cover all
the risks under the sky for the pre-shipment period. The banks also cover the post-
shipment risk by collecting the ECGC premium on export realisation. The additional
burden of ECGC premium on the entire working capital of the industry for the pre-
shipment period @ 0.07% per month is in addition to the burden of normal coverage
in the form of a comprehensive policy is superfluous and needs to be scrapped.
With a view to encourage exports, certain state governments have passed orders
for refund of the purchase tax on raw material procured by the exporters in the
respective states used for the purpose of export. However the Cashew Export Pro-
motion Council maintained that the mediation of the Commerce Ministry is required
to make sure that all such legitimate claims are reimbursed immediately without any
delay. Net working of the Commerce Ministry with the Ministry of Science and Tech-
nology is required to expedite proposals coming under the Department of Scientific
and Industrial Research (DSIR) schemes. It also recommends for a single-window ar-
rangement to redress all the grievances.
The database on cashew is weak and in order to strengthen it there should be

an assessment cell. In the absence of a Commodity Board or Export Development
Authority, the Cashew Export Promotion Council is the only national organisation to
look after the export development activities. There should be a scheme for statistical
survey for area and production of cashew in the country since the current procedure
adopted is erroneous.
Exports in value added form

Over 99% of Indian cashew goes in bulk packaging and as plain cashew kernel. These
are imported by big wholesalers in the consuming countries, repacked in retail packs
either as such, or after roasting and salting and sold to retailers. These retail packs are Page 9
Chapter - 01
marketed under well-established brand names of the local packers. It is quite unfortu-
nate to note that even with over seven decades of experience in international trade in
cashew kernel, export of cashew kernels in value-added forms/consumer packs con-
stitutes less than 1% and its value is less than Rs. 10 million. No serious efforts have
been made by exporters to market these consumer packs in foreign markets, mainly
due to resource constraints. As there are no well established Indian brands, generic
promotion will have to be undertaken in association with other cashew exporting
countries, highlighting the health and nutritional advantages of cashew.
The cashew industry has hardly had any institutional support in India. Classified
as a luxury nut, it has been mostly left to trade and industry to fend for itself. Govern-
ment or multilateral institutions like Food and Agriculture Organisation, a United Na-
tions body, have hardly paid any attention to this crop in India. Institutional support will
definitely help in many areas, which are basic and scientific in nature whether related
The real competi-
to crop, production, statistics, world markets and usage.
tion for Indian
cashew is from
It is only in Goa, the cashew apple is presently put to profitable use in the extrac-
"Vietnam". The
tion of an alcoholic beverage known by the trade name of “Fenny”. Cashew apple can
country is really
also be used for the preparation of jam, preserves, candies and variety of fruit juices.
on the surge to
The ways and means to popularise use of cashew apple should be taken up in a mod-
make a mark in
est manner. More than 4.1 million tons of cashew apple are being wasted every year in
cashew
India, which otherwise would have helped our nation to levy more than Rs. 100 mil-
lion as excise revenue alone.
Threat
Emerging new competitors like Vietnam
An erstwhile supplier of raw cashew nuts Vietnam has developed an industrial base for
cashew processing and exports. Vietnam emerged as a threat not only in buying raw
cashew nut but also in selling kernels to our traditional buyers. Already, Vietnam has
emerged as a serious threat to India in promising markets like Hong Kong. Taiwan,
Japan, China, Malaysia, Singapore, Australia and the USA. India, which used to get
about 40,000 tons of raw cashew nut every year from Vietnam until a few years ago,
is not able to import cashew nut now. The Government of Vietnam has imposed
restrictions on the export of raw cashew nut by levying export duty and prescribing
ceilings on the volume of exports.
The main competition for cashew in the international market is other

tree nuts like almonds, pistachio, walnuts, macadamia etc.
All these products get a good measure of domestic support in their producing coun- Page 10
Chapter - 01
tries. As a result, some of these tree nuts are available at cheaper prices as compared
to cashew even in the domestic market.
Opportunity
India has vast potential to develop cashew as a plantation crop on commercial
basis, which can give as good/ even better revenue as tea, rubber, coffee and carda-
mom. Unless it is declared as a plantation crop India will take atleast 20 years to meet
the requirement of one million ton. If the cashew industry in India is to sustain in the
international market, the present production has to be doubled. Orissa, Maharashtra,
Goa and Karnataka hold promises for the future development.
The cashew processors should promote cashew cultivation on their own

interest. It would be a very good proposal if they themselves undertake planting by
buying wastelands, provided government gives exemption from land ceiling. Govern-
ment should realise that no entrepreneur or corporate sector can invest money on The opportunities
wasteland given on long lease. are there only if
there is adequate
India has a bright future in developing cashew plantations in the wasteland government
extending from Mumbai to Kanyakumari and from there to Kolkata. It is estimated support and that
that wasteland area is about 61,000 sq. km lying in the four southern states of India. A seems to be hap-
large part of this land is suitable for cashew cultivation. Our dependence on imports of pening in the near
raw cashew can be stopped and foreign exchange out flow can be avoided if these future
wastelands are made use of. The southern states of India have realised this position
and have initiated steps to develop cashew plantations.
The benefits that could be derived from promoting cashew cultivation are import
substitution, additional foreign exchange earnings, employment generation, develop-
ment of wastelands, improvement of ecology and prevention of soil erosion.
The Marketing Development Assistance would help the exporting companies

having an annual export turnover of Rs. 40 million or less in the preceding financial
year to participate in international trade fairs/exhibitions and also in Council’s spon-
sored buyer/seller meets abroad. The assistance scheme will also support for sales
cum study tours/trade delegations. The assistance on travel allowance (airfare) while
travelling in economy excursion class would be eligible under Marketing Develop-
ment Assistance.
Under the market access provisions of the WTO cashew kernels are imported
into the country from Vietnam and Indonesia. The government now levies only 40% Page 11
Chapter - 01
duty on import of cashew kernels where as there is a provision to levy up to 80%

under the WTO regime to protect the domestic cashew kernel industry.
Goa is the only place in India where cashew apple is used for fenny distillation.
Cashew apple processing is important because it is a programme of agricultural waste-
land utilisation. It will add a huge amount to the revenue of the country and provides
employment to a good number of people. It also brings cash income to the growers
during the much-needed time of cashew season to meet expenses of cashew collec-
tion, other expenses and it is a very nutritional raw material.
In addition to the supplementary income to the producers, the government excheq-

uer will also be benefited by a well-developed cashew apple processing industry. The
Goan Government is earning more than Rs. 6 million annually as excise revenue on
fenny trade. Goa known for
its beaches and
beauty, is only
place in the
country, which
uses cashew
apple for fenny
production. The
Goan government
is earning over
Rs. 6 million
annually by
excise revenue on
fenny alone
The fluctuation in annual production of cashew apple, off season functioning of the
processing units and capital investment are not at all a problem, if cashew apple process-
ing is functioning along with cashew nut processing industry or other similar type of
processing units/distilleries.
Value addition in cashew is another area, which needs much attention by Re-
searcher. Value addition can be done by exporting spicy, yogurt, sugar, chocolate, honey
Page 12
Chapter - 01
coated cashew and salted and roasted cashew etc. in addition to exporting different
forms of cashew like ground, granulated, paste and powered forms.
Increasing demand: It must be borne in mind that desirability of cashew in food

will make it a grocery item and not a snack one. The usage of nuts in ice cream, cakes,
biscuits, curry, chats are growing at a faster rates. A more important area would be to
address wrong perception about cashew. The high fat content deters many consum-
ers, but it is said to be good fat. A great many people confuse cholesterol with fat and
presume cashew has a lot of cholesterol when it has none. In addition, the estimated
world demand is around 225,000 tons of kernels, the present nut producing countries
are able to meet only around 150,000 tons.
The Department of Wastelands Development, Government of India has included

cashew as a crop for wasteland development in the country. So, there is a ray of
hope that India will be self-sufficient in raw cashew production if wastelands are used Over dependence
for this purpose. It also provides financial assistance up to Rs. 2.5 million to farmers always puts the
who take up cashew cultivation under approved wasteland development programmes. dependent in
Many private entrepreneurs and farmers are keen to develop cashew plantations but trouble. It is quite
they are not able to do so because of land ceiling laws. obvious that
India has to look
Strengthening the non-traditional markets and exploring new ones at other markets
The USA is the major importer with around 52 per cent share followed by Nether- besides the tradi-
lands with 19 per cent. It is a known fact that the Indian cashew industry is heavily tional markets the
dependent on international markets. Over dependence on one or two nations will USA A and
adversely affect on India’s capacity to bargain for better prices even with a quality Netherlands
product, considering the size of the major market. There is a need for diversification
of the market by strengthening the market in low intake counties like Japan, Australia,
Saudi Arabia, Kuwait etc. and developing new ones like South Korea, Sweden, China,
Belgium, Norway, Turkey etc. At the same time, India should sustain its relationship
with the buyers in the traditional and established markets.
A key move in existing market should be to improve information, study the value
chain, remove irritants and obstructions, focus on non-price issues like costs, quality,
logistics, possible innovations and education of the consumer. The scope for searching
for new customers is high where individual incomes are high and present per capita
consumption is low.
Branding
Brand promotion has to be undertaken by individual exporter with financial assistance Page 13
from the CEPC. Consumers in the developed world are used to identify quality with
individual brands and hence they go in for individual brands based on their own per-
ception of quality. There is a huge domestic and international market potential for
these products which should be reaped, for which proper marketing strategies should
be planed and implemented.
Organic Cashew Export

The international market for organic food is booming. The whole organic market is
worth around US$ 15 billion. At present, India as a biggest processor/exporter of
cashew kernels doesn’t participate in the organic market for cashew. In India a good
amount of raw cashew is produced organically, but it is not differentiated from non-
organic raw cashew. Indian exports of organic cashew products are still in an infant
stage.
Thus the future of Indian cashew industry lies in how best it can capitalise on its
strengths and opportunities, overcome the weaknesses and neutralise the threats in Branding and
the coming couple of years. This itself will determine the fate of this industry, whether organic cashew
it is able to maintain its premier position in the global market in this decade and after. exports are the
two emerging
A sincere effort has been made, in this handbook, to explain the overall situation of cashew opportunities that
industry in India. India should
look forward
The First chapter, in this handbook, explains how this tasty nut came to India and
spreads to the southern states. It also explains the importance of cashew to Indian
economy and strength, weakness, threats and opportunities of Indian cashew indus-
try. With this background in view, the Second chapter presents trends in cashew area,
production and productivity. Chapter Three explains about the establishment, man-
agement and viability of a cashew plantation in India. Where as the Fourth chapter is
about a study of different types of cashew processing industry in major processing
states. The Fifth chapter throws light on direction and trends of cashew kernel ex-
ports. Sixth chapter is about the cashew nut imports and Seventh chapter explains the
uses and trends in CNSL exports. The Eighth chapter explains about direction and
changing patterns of Indian cashew kernel exports. The Ninth chapter provides a bird’s
eye view on the past cashew kernel prices in India and how it is interrelated with the
international prices. The Tenth chapter explains the competitiveness of Indian cashew
in international market. And finally in the last chapter (in Eleventh) it was explained
whether the demand for Indian cashew kernel is sensitive to buying countries GNP
(Gross National Product), Indian kernel prices etc..
Page 14
Reference
Ascenso, J.C. (1986) Potential of the cashew crop. Agriculture International. 38:324-
327; related material 38: 368-71.
Augustine, A. (1996) Problems and prospects of cashew apple processing. In na-

tional seminar on development of cashew industry in India. pp144-146. December
14-15, 1996, Bhubaneswar. Directorate of Cashew nut Development, Cochin, India.
Kannan, K.P., 1983, Cashew Development in India: Potentiality and constraints; Agri-
culture Publishing Academy, New Delhi.
Nair, K.G. (1996) Cashew in international trade- Problems and prospects. In national
seminar on development of cashew industry.
Prabhu, G.(1996) Cashew in international trade- Problems and prospects. In national

seminar on development of cashew industry in India. pp 138-143. 14-15, December
Bhubaneswar. Directorate of Cashew nut Development, Cochin, India
Sivanathan M., Pugalendhi L., Jeeva., S& Somasundram., D., 1990, An Eco-
nomic analysis of Cashew cultivation in South Arcot District, Tamil Nadu: The Cashew,
5(3) 17-20.
Walter D’souza, (2002), a paper presented in a Seminar on ‘State Government’s

Role in Export Promotion’ at the FIEO meeting held at Bangalore on 5.8.2002.
How to HACCP- Mike Dillon & Chris Griffith.
An Introduction to HSCCP- Sara Mortimore & Carol Wallace.
Food Quality and Safety System Training manual- FAO.
Requirements of the laws and regulations enforced by US FDA.
Cashew the millennium nut, Souvenir, World Cashew Congress, 2001, India.
Page 15
Page 16
Chapter - 02
Past, Present and Future of Cashew

Area and Production in India
T
he total world production of raw cashew nuts in 2000-01 was 0.925 mil
lion tons. Out of which India alone produced 0.325 million tons, which
accounted for 35 per cent of the total world production.
Table 2.1. World cashew production in 2000-01
Country Production %contribution
India 325,000 35.14
Brazil 180,000 19.46
Vietnam 100,000 10.81
Tanzania 100,000 10.81
Mozambique 40,000 4.32
Indonesia 30,000 3.24
Others 150,000 16.22
Total 925,000 100.00
Source: CEPC, Cochin
Decline in world nut production was witnessed since 1975 mainly due to political
India accounts
instability, socio economic problems and the fungal disease in the major African
for 33% of total
producing countries. In recent years both India and Brazil have made significant efforts
world production
to expand production through increasing planting and replacement of unproductive
mainly grown in
plantations. The other countries, which are making significant progress in cashew
East and West
production in the recent years, are Vietnam, Thailand, Myanmar and Indonesia.
coast of India
and private sector
Cashew is widely cultivated throughout the tropics for its nuts. From its origin in
are the key con-
tributors of
Fig. 2.1 Estimated world raw cashew production during 2001- 02 Indian cashew
production
Page 17
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North -Eastern Brazil, cashew spread to South and Central America and naturalised in
coastal areas of many tropical countries. The total world production of cashew is
estimated at 1,047,000 tons in 2001-02, out of which India is expected to produce
350,000 tons, 33% of the total world production.
Present Status of Cashew in India

Cashew is grown in the East and West coast of the country. The states include Goa,
Maharashtra, Kerala, Karnataka in the West coast and Tamil Nadu, Andhra Pradesh,
Orissa and West Bengal in the East coast. Other states, which produce cashew, are
Manipur, Tripura, Meghalaya, Andaman and Nichobar Islands, Madhya Pradesh etc.
Cashew Plantation Status:

Cashew plantation in different states has been taking place in the Private Sector, For-
est Department and of late by certain state level corporations. Of the total area, 74%
is in private sector, contributing 80% to the national production. Nearly 9% area and
6% production is the forest sector and 17% area and 14% production in plantation
owned by different state level corporations. Productivity is high in private sector com-
pared to other sectors.
According to the official estimates the area under cashew in India in the year 1955-56
was 110,381 hectares. The fig 2.2 shows there has been continuous increase in area
till 2001-02. The area under cashew In 2001-02 in India was 757,000 hectares. Simi-
larly the production has increased from 79,472 tons during 1955-56 to 350,000 tons
during 2001-02.
Fig 2.2 Area and production of raw cashew in India
Page 18
Chapter - 02
Table 2.2 Statewise growth in cashew area in India (area in Ha)

State 59-60 69-70 79-80 89-90 99-00 Increase / decrease
from 89-90 to 99-00
Andhra Pradesh 7,485 25,640 44,300 71,070 103,000 31,930
Kerala 52,439 98,960 147,891 155,390 122,000 -33,390
Orissa 721 3,309 38,830 59,980 84,000 24,020
Maharashtra 3,279 7,334 22,692 22,750 121,000 98,250
Karnataka 6,058 19,500 53,171 73,780 91,000 17,220
Tamil Nadu 35,021 80,101 94,770 95,370 85,000 -10,370
Goa 32,517 33,938 41,600 44,240 54,000 9,760
West Bengal 2,140 2,389 6,698 6,800 9,000 2,200
Others - - 1,202 1,490 17,000 15,510
Total 139,660 271,171 451,154 530,870 686,000 155,130
Increase over previous period -- 131,511 179,983 79,716 155,130 --
Source: CEPC, Cochin.
The area expansion was not uniform in the entire cashew growing area in India. States
like Maharashtra, Andhra Pradesh, Orissa, Karnataka have observed a high increase in
area. In Orissa from 1959-60 to 1999-2000 there has been more than 115 times
increase in area. In Goa, West Bengal and other states, which includes Tripura,
Pondicherry, Madhya Pradesh, Manipur, Meghalaya, Andaman and Nichobar the in-
crease in area was comparatively low. This is because quite a sizable area was already
under cashew and unavailability of land in some states like Pondicherry. In Kerala and
Tamil Nadu the area under cashew has decreased during 1989-90 to 1999-2000 mainly
because of the illegal felling of trees in some of the potential sectors by organised
gangs for their supply to both paper and rayon industries. But in India there was a
surge of 155,130 hectares of land between 1989-90 and 1999-2000 period. The area
under cashew in India increased by around 5 times between 1959 -60 and 1999-2000.
Table 2.3 Statewise growth in cashew production in India (output in tons)

State 59-60 69-70 79-80 89-90 99-00 Increase/decrease
from 89-90 to 99-00
Andhra Pradesh 2,275 12,971 12,300 36,580 100,000 63,420
Kerala 81,678 111,033 83,843 139,500 125,000 -14,500
Orissa 1,746 3,519 3,199 28,600 40,000 11,400
Maharashtra - 1,214 7,663 27,130 100,000 72,870
Karnataka 6,088 16,500 15,226 24,650 60,000 35,350
Tamil Nadu 13,859 27,582 10410 12,430 45,000 32,570
Goa 3,400 6,118 13,210 30,000 16,790
West Bengal 1,505 2,807 3,170 8,000 4,830
Others 218,748 320 12,000 11,680
Total 107,151 176,219 141,832 285,590 520,000 234,410
Increase over previous period 69,068 -34,387 143,758 234,410
Source: CEPC, Cochin Page 19
Chapter - 02
States like Maharashtra, Andhra Pradesh, Karnataka and Tamil Nadu have observed an
increase in production. In Goa, Orissa and others which includes Tripura, Pondicherry,
Madhya Pradesh, Manipur, Meghalaya, Andaman and Nicobar the increase in production
has been comparatively lower. In Kerala cashew production has decreased between
1989-90 to 1999-2000 period. During 90’s the over all Indian production has increased
by 234,410 tons. The production in India has increased to around 5 times between
1959-60 and 1999-2000. The increase in production during this period is more in
Maharashtra when compared to other states.
Trends in Cashew Area

It is extremely difficult to estimate the area under cashew accurately. This is so because
cashew cultivation falls into several categories, such as, small holder plantations,
community plantations, social forestry, corporate sector plantations, government
owned forests, soil conservation forests and also due to unsatisfactory methods of
data collection and estimation in some states. The Directorate of Cashewnut The expansion in
Development is however, estimating the area under this crop from time to time by cashew produc-
collecting crop statistics from the respective state governments. tion is relatively
less commensu-
Growth is a measure of past performance of an economic variable. They are com- rate with the
monly used as summaries of trends in time series data. They are not always used to expansion of
predict but to describe the trend in a variable over time. Policy decisions are often cashew area
made based on such growth rates, which depends on the nature and structure of the
data.
Methodology
Annual compound growth rates were analysed using the exponential growth function
of the form,
Y (t) = a bteu
Where, Y (t) = Dependent variable for which growth rate is to be estimated.
a = Intercept. b = Regression coefficient. t = Time variable. e = Exponent term
(2.718). u = Disturbance term.
The logarithmic form of the equation

Y (t) = a bteu is, ln Y = ln a + t ln b + e
The compound growth rate (g) in percentage is computed from the relationship,
(g) = [(Anti log of ln b) - 1] * 100 or (g) = (b – 1) * 100
The significance of the regression coefficients was tested using the student’s ‘t’ test. Page 20
Chapter - 02
Results and Discussion
Table 2.4 Compound Annual Growth Rate (CAGR) of

cashew area, production and productivity in India
Description Intercept Slope R2 Compound

(ln a) (ln b) Annual
Growth
Rate (%)
AREA
Whole Period 11.96 0.04 0.93 3.77
(1956-57 to 2001-02 )
1956-57 to 1970-71 prior 11.63 0.07 0.94 7.34
to the project (AICS&CDP)
1971-72 to 2001-02 12.71 0.03 0.95 2.63
after the project
60’s 12.08 0.05 0.95 5.02
70’s 12.59 0.04 0.94 3.89
80’s 13.06 0.01 0.91 1.44
90’s 13.12 0.04 0.92 3.82
PRODUCTION
Whole Period 11.42 0.03 0.91 3.41
(1956-57 to 2001-02 )
1956-57 to 1970-71 prior 11.33 0.05 0.98 5.47
1971-72 to 2001-02 11.78 0.04 0.87 4.13
after the project
60’s 11.56 0.05 0.98 5.26
70’s 12.18 -0.04 0.80 -3.53
80’s 12.07 0.05 1.00 5.00
90’s 12.53 0.05 0.78 5.62
PRODUCTIVITY
Whole Period 6.38 0.00 0.04 -0.36*
(1956-57 to 2001-02 )
1956-57 to 1970-71 prior 6.60 -0.02 0.53 -1.74
1971-72 to 2001-02 5.95 0.02 0.41 1.75
after the project
60’s 6.39 0.00 0.04 0.22*
70’s 6.50 -0.07 0.96 -7.15
80’s 5.92 0.03 0.97 3.51
90’s 6.28 0.03 0.28 2.70
* Non significant
Page 21
Chapter - 02
1. Growth in cashew area

Fig 2.3 Actual and Estimated area under cashew in India

Non availability
The area under cashew has increased from 110,381 hectares in 1955-56 to 757,000 of area in some
hectares in 2001-02 recording a compound growth rate of 3.77% per annum. The states, illegal
estimated growth rate of area under cashew prior to the implementation of All India felling of trees
Co-ordinated Spices and Cashew Development Project (AICS&CDP) was 7.34% per for supply to
annum and after its implementation it was 2.63% per annum. The estimated growth both paper and
rates for cashew area in 60’s, 70’s, 80’s and 90’s were 5.02, 3.89, 1.44 and 3.82% per rayon industries,
annum, respectively. In 70’s and 80’s the growth rates decreased and in 90’s it has conversion of
increased. cashew area to
rubber planta-
The growth of cashew area decreased after the implementation of AICS&CDP due to
tion, senile and
the fact that sizable area was already under cashew cultivation and non availability of
unproductive
land for expansion in some states. Illegal felling of trees in some of the potential areas
cashew trees,
by organised groups for their supply to both paper and rayon industries and the con-
incidence of pest
version of cashew area to rubber plantation in Kerala, the main cashew growing state,
and diseases are
were the main reasons attributed to this declining trend in area after the implementa-
some the reasons
tion of AICS&CDP. In 90’s again the annual growth in cashew area has increased. This
for fluctuation in
is because of the steps taken by the governments in formulating economically viable
domestic raw
schemes and proper extension programmes resulting in a steady increase in cashew
cashew supply
area. Non availability of raw nuts for imports from other countries also boosted the
area under cashew cultivation in 90’s.
The raw cashew nut production has increased from 79,472 tons in 1955-56 to 350,000
tons in 2001-02 recording a compound growth rate of 3.41% per annum. The esti-
mated growth rate of cashew production prior to AICS&CDP was 5.47% per annum
and after its implementation it was 4.13% per annum. There was decrease in cashew
production after the implementation of AICS&CDP. The estimated growth rates of
cashew production in 60’s, 70’s, 80’s and 90’s were 5.26, -3.53, 5.00 and 5.62% per
annum respectively. In 70’s the estimated growth rates of cashew production was Page 22
Chapter - 02
2. Growth in cashew production

Fig 2.4 Actual & estimated cashew production in India

negative. All the coefficients were statistically significant at one-percent level of signifi-
cance.
The Indian
The growth rates in cashew area and cashew production are not commensurate with Government has
the expansion of area. The relatively low increase in production compared to the taken various
expansion of area was due to passing of juvenile stage by the young plantation in most steps to increase
cases and at the same time, the presence of sizable senile and unproductive cashew area under
trees in some locations and incidence of pest and diseases. Besides this, the crop is cashew planta-
grown on marginal lands. tion by giving
subsidies etc.. So,
3. Growth in cashew productivity the achievement
The productivity of cashew in 1999 was 628.29 kg/ha. The estimated growth rate of of the projected
productivity prior to AICS&CDP was -1.74% per annum and after its implementation increase in pro-
it was 1.75% per annum. There is an increase in cashew productivity after the imple- duction will not
mentation of AICS&CDP. In 70’s and 80’s the growth rates were -7.15 and 3.51% per be a problem
annum respectively. In 70’s and prior to AICS&CDP the estimated growth rates of
cashew productivity is negative. Overall growth rates for the whole study period and
for 60’s has been nonsignificant.
There was an increase in productivity after the implementation of AICS&CDP. During

70’s there was a drastic reduction in raw cashew yield.
Projections
The growth rates obtained using exponential functions were used for future projec-
tions on the assumption that same trend will continue. The growth trends were ex-
trapolated till 2010-11. The cashew area would be 1.059 million hectares by 2005-06
and 1.286 million hectares by 2010-11. In case of cashew production it would be
0.488 million tons and 0.577 million tons for the same period. India will achieve more Page 23
Chapter - 02
than this target, as the government has taken various steps to increase the area and
productivity under cashew crop.
The benefits derived from the promotion of cashew cultivation are import substitu-
tion, afforestation, wasteland development, ecological improvement, prevention of
soil erosion and employment generation in rural areas. The Indian Government has
set a target to produce one million tons of raw cashew nuts by 2010 AD.
Reference
Nagaraja K.V., 1998, Quality of Cashew kernel in relation to export, The Cashew, J-
S.1998: 143-147.
Balasubramanian P.P., 1998, Cashew Development in India- Present status and fu-
ture strategies, The Cashew, J-S, 1998: 7-31.
Bhaskara Rao, 1998, National perspectives for cashew development in India, The
Cashew, J-S, 1998:41-47.
Dattatreyalu M., 1977, Export Development of Cashew, Foreign trade review, Vol.
XII, No2, 1977: 229-240.
Giridhar Prabhu, 1998, Is Indias global leadership sustainable?. The cashew, J-S1998:
169-174.
Krishnaswamy L., 1981, Production and supply of cashew. Cashew causerie, III (4):
10-12.
Krishnaswamy L., and Krishnan K.P. 1981, Area and production status of cashew-
a critical analysis. Cashew causerie, III (3): 14-33.
Kulkarni, 1999, “Cash (new) for farmers, Deccan herald, Oct 4, 1999.
Nayar K G., 1995, Cashew- a versatile nut with unlimited growth potential, the cashew,
1995, 22: 2, 3-6.
Prafulla K. Das 1985 Status of production and trade of cashew in India, Agricultural
situation in India, 34 (10): 765-770.
Sandhu H K , 1982, An econometric analysis of Indian export share of cashew ker-

nels in the world trade, Indian Journal of Agricultural Economics, September (1982)
37(3): 300-305.
Sridharan B., 1982, Cashew in India’s export trade, Indian Journal of Agricultural
Economics, September 1982, 37(3): 317-322. Page 24
Chapter - 03
Cashew Plantation In India

- Establishment, Management and Economic Viability
C
ashew is one of the most important commercial crops of India that has not
received the required attention so far. It continues to be a neglected crop
for years, primarily due to lack of awareness regarding its economic, eco-
logical and biological potential. It is an energy rich crop, which is grown in energy less
soil. The domestic production of raw cashewnut meets only about one third of the
requirement of the processing industry. To enhance the production and productivity
of cashew, it is necessary to encourage establishment and management of commer-
cial plantations.
Plantation management in cashew is an area that has not received required attention
so far. Here an attempt is made to visualise the critical inputs, operations, technolo-
gies and management strategies that are essential for the successful establishment and Cashew, contin-
maintenance of commercial cashew plantations. ues to be a ne-
glected crop
Critical Decisions in Plantation Establishment and Management despite its eco-
nomic, ecological
A. Site selection and biological
i) Climatic factors potential
Selection of suitable sites considering its agronomic, climatic and ecological require-
ments is very important.
1. Altitude
Performance of cashew is generally good upto an altitude of 450 metres and satisfac-
tory upto an altitude of 700 metres from mean sea level.
2. Temperature
Cashew is able to bear seasonal and daily changes in temperature to a greater extent.
Areas susceptible to receiving extremely low (less than 180 C) and high (more than
400 C) temperatures for prolonged periods are less suitable.
3. Humidity
In areas with less than 60% relative humidity, the performance of cashew will be low.
4. Rainfall
An average annual rainfall of 1300-2000 mm is necessary for rainfed cashew culture.
Areas with less rainfall, irrigation is required. Cashew is very sensitive to water logging
but tolerant to soil moisture stress to a greater extent.
ii) Soil factors

1. Texture of soil
Cashew grows in almost all types of soils. However, it performs well in well-drained Page 25
Back Home Next
Chapter - 03
red sandy loams and light coastal sands. Heavy clay soils (poor drainage conditions) ,exces-
sive alkaline and saline soils are not suitable for cultivation.
2. Soil pH
Soil with pH more than 8 is suitable for cashew cultivation.
iii) Variety selection

Successful cashew cultivation depends upon the selection of the best varieties suited
for the agro climatic condition and adoption of right package of practices recommended
for the region. Varietal selection is the most critical decision in plantation manage-
ment. The crop improvement work done under the Indian Council of Agricultural
Research (ICAR) and at the various State Agricultural Universities led to the develop
Table 3.1 High yielding varieties of cashew released by different State

Agricultural Universities/ ICAR and its yield potential (kg/tree)
State Recommended Varieties Yield (kg/tree)
Planting cashew
Kerala Anakkayam-1 (BLA-139-1) 12.1
Madakkathara-1 (BLA 39-4) 13 starts from site
Madakkathara-2 (NDR 2-1) 17
identification, its
Kanaka (11-1598) 12.8
Dhana (II-1608) 10.7 climatic condi-
Priyanka (II-1591) 16.9
tion, altitude, soil
II-3-17 (Dharasree) 18.6
K-10-2 (Sulabha) 21.9 pH to variety
Tamil Nadu selection. Every
Vridhachalam-1 7.1
Vridhachalam-2 8.1 aspect has a role
Vridhachalam-3 14.2
to play for a
Andhra Pradesh
BPP-1 (II 2/11) 17 good cashew crop
BPP-2 (II 2/12) 19
BPP-3 16
BPP-4 (9/8 EPM) 13
BPP-5 (Hybrid- 2/16) 21.5
Karnataka
Ullal-1 (8/46) 19
Ullal-2 (3/67) 18
Ullal-3 15
Chinthamani-1 (B/46) 7.2
NRCC- Selection-1 10
NRCC- Selection-2 9
Orissa
BIIB-1 (WBDC- V) 16
West Bengal
Jhargram- 1 (BLA-39-4) 10
Maharashtra
V-1 (Ansur- 1) 23
V-2 (WBDC- VI) 24
V-3 (Ansore-1 x Vetore- 56) 14
V-4 (Midnapore Red x Vetore- 56) 14
V-5 (Ansur early x Mysore Kotekar) 21
V-6 (Vetore- 56 x Ansur- 1) 16 Page 26
Chapter - 03
ment of 30 high yielding varieties of cashew suitable for different regions.
B. Critical input in cashew plantation

1. Planting material
Soft wood grafts are the best planting materials in cashew.
2. Nitrogen (N)
Among the fertiliser nutrients, nitrogen is the one to which cashew responds the
most. Potassium(K) comes second. Cashew is shy towards phosphorous (P) in terms
of response. It is essential to apply sufficient quantities of N and K to cashew depend-
ing on the age of crop and the fertility status of the soil. To balance the nutrition
phosphorous and other micronutrients may also be applied in recommended quanti-
ties.
Table 3.2 Fertiliser recommendation for cashew, for different states of India
State Fertiliser dose for adult tree (gm)

N P2O5 K2O
Kerala 750 325 750
The right ferti-
Maharashtra 1000 250 250 lizer dosage and
Tamil Nadu 500 250 250 the right nutrients
Andhra Pradesh 500 125 125 should be applied
Karnataka 500 250 250 at the right time
West Bengal 600 300 300
Orissa 500 250 250
Table 3.3 Fertiliser recommendation in relation to tree age
State % of fertiliser dose recommended for adult trees

1 year 2 year 3 year 4 year 5 year
Kerala 33 66 100 100 100
Maharashtra 25 50 75 100 100
Tamil Nadu 15 30 40 60 100
Andhra Pradesh 0 25 50 75 100
Karnataka 12 25 50 N-100 100
P&K-50
West Bengal 33 66 100 100 100
3. Water
Irrigation water is a critical input capable of increasing cashew yields considerably. It
has been realised that irrigation during summer months can double cashew yields.
Page 27
Chapter - 03
C. Critical management practices in cashew

1. Season and method of planting
In Kerala, the best planting season is June-July or September-October, coinciding with
the monsoons.
Planting is done in pits (60 cm cube), filled with top soil and organic manure (5-10 kg)
to 3/4 of the pit capacity. The grafts are planted after carefully removing the polythene
bag. Care should be taken to see that the graft union is at least 2.5 cm above the
ground level.
2. Pit size
Pit size influences considerably the growth of the grafts. The generally recommended
pit size is around 60 cm x 60 cm x 60 cm Enhanced growth and performance were
observed with plants grown in larger pits (90 cm x 90 cm x 90 cm or more).
3. Planting density
Planting density differs with the agro climatic conditions, soil nutrient status and level
of management adopted. Selection of an optimum population is an important decision
making in the success of commercial plantations. For this, an assessment of soil fertility Right manage-
evaluation and a decision regarding the type of agricultural condition to be followed ment practices
(rainfed/irrigated) is necessary. like season of
planting, plant-
Table 3.4 The normal spacing recommended for cashew in Kerala ing density etc
are equally
Spacing in meter No. of plants in No. of plants in
Square system* Triangular system*
important
Poor soil 7.5 x 7.5 177 204
Rich, deep & 10 x 10 100 116
sandy coastal soil
*per hectare
4. High density planting

High density planting enhances the productivity of cashew plantations to a consider-
able extent. Initially, more grafts are planted per unit area. In the later phases (after 7
-10 years depending upon the canopy expansion), the number of grafts planted should
be thinned out. This is useful in poor soils where the rate of canopy expansions slows
down.
Uniform management practices must be applied to all plants. The nut yield per tree
will be more or less the same with all plants in the initial years, whatever be the density
of planting. High density plantations will give more yield per hectare, due to higher
Page 28
Chapter - 03
plant population. Afterwards, when the plant population of high density plantation is
made equal to that of the conventional system of planting, productivity of both the
plantations will be more or less equal.
Table 3.5 The spacing and plant population in square and triangular system
of planting
Spacing Square Triangular
system (trees/ha) system (trees/ha)
4m x 4m 625 720
5m x 5m 400 460
8m x 4m 312 360
5. Weed control through chemicals

In order to keep the plantations weed free, one has to incur a lot of expenditure.
There are effective weed control methods that can be applied for cashew plantations.
Weeding has to be done in June-July and September-October, either chemically or
manually, depending upon the weed growth. Chemical weed control is effective, when
Cashew planting
compared with manual weed control, especially in places where labour costs are high.
density should be
high for better
Application of Paraquat @ 0.4 kg/ha twice at a bimonthly interval starting from July will
yield while weed
effectively control all types of weeds. Application of Glyphosphate @ 0.8 kg/ha, in
control should be
June-July can also control the weeds effectively.
effectively and
timely done
Application of Paraquat twice will costs Rs.1600 per hectare @ 0.4 kg per hectare per
weeding i.e. 2 litres of Paraquat per hectare, @ Rs. 250 per litre, 500 litres of water
per hectare, 5 men per hectare for spraying, wage @ Rs. 60 per day / labour. Where
as manual weed control twice will costs Rs.3000 per hectare @ 25 women per hec-
tare per weeding, labour wages @ Rs.60 per day.
6. Time and method of applying fertilisers

Generally, it is recommended that fertilisers must be applied twice a year, coinciding
with the Southwest monsoon and Northeast monsoon.
It is suggested that instead of applying fertilisers twice a year, the frequency can be
restricted to once a year coinciding with “flushing and early flowering phase” which
may enable to save the application cost to some extent.
Page 29
Chapter - 03
7. Method of irrigation
The most common method of irrigation that is followed is drip irrigation. Flow tech
irrigation, an improved method over drip irrigation, is being adopted. Application of
water @ 200 litres/tree, once in a fortnight, is recommended by National Research
Centre for Cashew, for increasing cashew yield.
8. Fertigation
Fertigation, the combined application of irrigation water and fertilisers, is one more
management practice that can conserve water and nutrients to a considerable extent.
While irrigating cashew plantations, one must see that irrigation is cut in the nut devel-
opment period for suppressing vegetative growth and to enhance maturity.
9. Inter-cropping
The wider inter space that is available between cashew trees enables cultivation of
other crops, as a source of additional income for the growers. Inter-cropping with Fertilizers should
annual crops makes the ground free from weeds and brings down the cost of weed- be applied twice
ing. However, it must be seen that competing perennials are avoided, while selecting a year, drip
inter-crops. Biennial horticultural crops like pineapple and papaya and annual food crops irrigation is
like cowpea and tapioca are suitable inter-crops in cashew. Inter-cropping is likely to recommended.
depress cashew growth in moisture stressed area under rainfed agriculture inter-crop- Inter cropping
ping. with crops like
pineapple is quite
10. Harvesting and drying popular in India
Harvesting must be done at the right time and nuts must be dried properly and stored
well. Unripe fruits must not be harvested. Ripened fruits will fall down and they can be
collected manually. Nuts can be extracted from the apple, dried in sun (moisture level
less than 8%) for about 2 days. While drying nuts frequent turning of nuts on the
drying floor is necessary to ensure uniform drying of the kernel to maintain quality.
D. Critical operations
1. Polytapes removal
It is necessary that polytapes present in the graft joint are removed. Otherwise, it may
result in girdling and breakage of plants at the graft joint.
2. Staking
Staking is an important operation, mainly in wind prone areas.
Page 30
Chapter - 03
3. Mulching
Plant growth can
improve consid-
erably due to
mulching at the
plant base with
organic waste.
4. Trenching
If trenches are
dug at the centre
of four plants,
mainly in plantations of sloppy plants, it helps in conserving soil and water to a great
extent and for enhancing the plant growth. The pits collect run off water and soil that
makes it possible to maintain soil health. Polytapes re-
moval, staking,
5. Pruning mulching,
Pruning facilitates appropriate sunlight penetration and helps in producing vigorous trenching, prun-
productive laterals for enhancing nut production. ing and tea
mosquito controls
6. Tea mosquito control are some of the
Tea mosquito is considered as the most notorious among the major cashew pests. It critical operations
was reported that spraying against tea mosquito results in yield increase ranging from
59% to 80% compared to the unsprayed control in different states. The young plan-
tations (1-3 years) are more susceptible to tea mosquito damage and therefore they
are to be sprayed regularly. A study conducted by Mini Abraham (1994) revealed that
spray applied nutrient absorption was highest through the lower side of the younger
leaves suggesting that the spray solutions may be directed accordingly to obtain high
efficiency.
E. Economies of cashew cultivation

1. Cost of setting up plantation (one hectare)
The cost of setting up one hectare of cashew (200 trees) in the first year has been
estimated at Rs 16,419. The costs incurred in the second, third, fourth, fifth, sixth,
seventh and eighth year for maintenance are estimated at Rs 9,318, Rs 11,187, Rs
12,118, Rs 13,549, Rs 14,980, Rs 16,411 and Rs 17,042 respectively. (Table 3.6)
Page 31
Chapter - 03
Table 3.6 Cost of establishment and maintenance of one hectare of

cashew plantation (200 trees)
Item 1 2 3 4 5 6 7 8 9 10
onwards
Land clearing 1,250 -- -- -- -- -- -- -- -- --
Cost of 200 grafts 4,400 444 -- -- -- -- -- -- -- --
@ Rs.22*
Digging 200 pits 2,000 -- -- -- -- -- -- -- -- --
@ Rs. 10/plant
Protection from wind + 1,000 -- -- -- -- -- -- -- -- --
Organic manuring ** 1,600 1,600 1,600 1,600 1,600 1,600 1,600 1,600 1,600 1,600
Chemical fertilizer *** 1,978 1,952 2,964 2,964 2,964 2,964 2,964 2,964 2,964 2,964
Weeding (2 times) 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000
Plant protection cost # 1,041 2,082 3,123 3,754 4,385 5,016 5,647 6,278 6,278 6,278
Pruning & training 150 240 300 -- -- -- -- -- -- --
Harvesting @ Rs. 2/kg -- -- 200 800 1,600 2,400 3,200 3,200 3,200 3,200
Total 16,419 9,318 11,187 12,118 13,549 14,980 16,411 17,042 17,042 17,042
Cost per tree 82.10 46.59 55.9 60.6 67.7 74.9 82.1 85.2 85.2 85.2
* Rs. 20 towards cost of graft and Rs. 2 towards transportation per graft,
** Organic manuring @ Rs. 2 per Kg per plant (cost @ Rs. 320 per ton and 25% of the cost for transportation and application),
*** As recommended by the package of practices recommendations of KAU (25% of the cost of fertilizer is included for transpira-
tion and application)
# For the control of the mosquito and stem borer as recommended by the package of practices recommendations of KAU ,
+ Protection of young grafts from wind by installing bamboo baskets @ Rs. 5 per plant.
The cost of manuring a cashew tree has been estimated at Rs 12.89 in the first year, Rs
17.78 in the second year and Rs 22.82 from the third year. Plant protection cost per
tree has been worked out at Rs 5.21 in the first year, Rs 10. 41 in the second year and
Rs 15.62 in the third year and Rs 18.77 in the fourth year, Rs 21.93 in the fifth year and
Rs 25.08 in the sixth year, Rs 28.24 in the seventh year and Rs 31.39 from the eighth
year onwards (Table 3.7)
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Chapter - 03
Table 3.7 Cost and income of cashew cultivation (Rs per tree basis) based
on current prices (200 trees per ha) year after planting
Item I II III IV V VI VII VIII IX X
onwards
Manure cost per tree 12.9 17.8 22.8 22.8 22.8 22.8 22.8 22.8 22.8 22.8
PP cost per tree 5.2 10.4 15.6 18.8 21.9 25.1 28.2 31.4 31.4 31.4
Harvesting cost per tree - - 1 4 8 12 16 16 16 16
Other cost per tree 64 18.4 16.5 15 15 15 15 15 15 15
Cost of cultivation per tree 82.1 46.6 55.9 60.6 67.7 74.9 82.1 85.2 85.2 85.2
Yield per tree (kg) - - 0.5 2 4 6 8 8 8 8
Cost of prod. per kg of nut - - 111.9 30.3 16.9 12.5 10.3 10.6 10.6 10.6
Net income per tree -82.1 -46.6 -40.9 -0.6 52.2 105.1 158 154.8 154.8 154.8
( Price/kg of nut = Rs. 30 )
2. Cashew inputs
In the first year, 200 cashew grafts, 200 bamboo baskets, 4,000 kg of organic manure,
107 kg of Urea, 134 kg of Mussori Phosphate, 99 kg of Muriate of Potash, 300 ml of
Endosulphan, 400 ml of Ekalux, 400 gm of Carbaryl and 5 kg of Sevidol are needed.
(Table 8)
Table 8. Input requirements for one hectare of cashew plantation (200

trees) based on current recommendations year after planting
Item I II III IV V VI VII VIII IX X onwards
Graft (No) 200 20 -- -- -- -- -- -- -- --
Wind protecting baskets 200 -- -- -- -- -- -- -- -- --
Organic manure (kg). 4,000 4,000 4,000 4,000 4,000 4,000 4,000 4,000 4,000 4,000
@ 20 kg/plant
Urea (kg). 107 215 326 326 326 326 326 326 326 326
Super Phosphate (kg) 134 268 406 406 406 406 406 406 406 406
Murate of Potash (kg) 99 198 300 300 300 300 300 300 300 300
Endosulphan (ml)* 300 600 900 1,200 1,500 1,800 2,100 2,400 2,400 2,400
Ekalux (ml)* 400 800 1,200 1,600 2,000 2,400 2,800 3,200 3,200 3,200
Carbaryl(g)* 400 800 1,200 1,600 2,000 2,400 2,800 3,200 3,200 3,200
Sevidol (kg) 5 10 15 15 15 15 15 15 15 15
* Spray volume per tree was taken as 1,2,3,4,5,6 and 7 litres during 1 to 7 years respectively and 8 litres
from the 8th year onwards.
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Chapter - 03
3. Cashew input costs

In the first year, an amount of Rs 4,400 is necessary for buying grafts, Rs 1,000 for
buying basket, Rs 1,280 for buying organic manure, Rs 366 for buying Urea, Rs 268 for
buying Super Phosphate, Rs 149 for buying Muriate of Potash, Rs 69 for Endosulphan,
Rs 104 for buying Ekalux, Rs 98 for buying Carbaryl and Rs 250 to purchase Sevidol. In
the first year, Rs 7,984 is required for meeting the input expenses. The requirement
increases with time. (Table 3.9)
Table 3.9 Input cost (Rs) for one hectare of cashew plantation (200 trees)
Item I II III IV V VI VII VIII IX X onwards
Graft* 4,400 440 -- -- -- -- -- -- -- --
Wind protecting baskets (No.)+ 1,000 -- -- -- -- -- -- -- -- --
Organic manure (kg)** 1,280 1,280 1,280 1,280 1,280 1,280 1,280 1,280 1,280 1,280
Urea (kg) - @ Rs.3.4 per kg 366 732 1,109 1,109 1,109 1,109 1,109 1,109 1,109 1,109
Super Phosphate (kg) @ Rs.2 per kg 268 536 813 813 813 813 813 813 813 813
Muriate of Potash (kg) - @ Rs.1.5 per kg149 297 450 450 450 450 450 450 450 450
Endosulfan (ml)* - @ Rs.230 per litre 69 138 207 276 344 410 482 551 551 551
Ekalux (ml)* - @ Rs.260 per kg 104 208 311 415 520 627 728 832 832 832
Carbaryl(gm)* - @ Rs.245 per kg 98 196 294 392 490 588 686 784 784 784
Sevidol (kg) -Rs.50 per kg 250 500 750 750 750 750 750 750 750 750
Total input cost 7,984 4,327 5,214 5,485 5,756 6,027 6,298 6,569 6,569 6,569
* Rs.20 towards cost of graft and Rs.2 towards transportation per graft,
** Organic manuring @ Rs.20 per kg per plant (cost @ Rs.320 per ton),
+ Protection of young grafts from wind by installing bamboo baskets @ Rs. 5 per basket
4. Labour needs
In the first year, for one hectare of cashew, 21 mandays are required for land clearing,
17 mandays for pit making, 7 mandays for planning, 6 mandays for organic manuring, 3
mandays for fertiliser application, 9 mandays for pest control, 50 mandays for weed
control and 3 mandays for pruning. Totally, 114 mandays are required for finishing the
work in the first year. In the
second year, the require-
ment of mandays' de-
creases and increases after
the harvest begins. (Table
3.10)
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Chapter - 03
Table 3.10 Labour requirement (no. of man days) for one hectare of
cashew plantation (200 trees) based on current rates of work output at
CRS, Madakkathara year after planting
Item 1 2 3 4 5 6 7 8 9 10
Land clearing 20.83
Digging* 16.67
Pit filling, planting,
staking & mulching 6.67
Organic manuring 5.33 5.33 5.33 5.33 5.33 5.33 5.33 5.33 5.33 5.33
Chemical fertilizer 3.26 6.52 9.88 9.88 9.88 9.88 9.88 9.88 9.88 9.88
Weeding ( 2 times) 50 50 50 50 50 50 50 50 50 50
Plant protection cost 8.67 17.33 26 32 38 44 50 56 56 56
Pruning & training 2.5 4 5
Harvesting @ Rs 2/kg 3.33 13.33 26.67 40 53.33 53.33 53.33 53.33
Total 113.93 83.19 99.55 110.55 129.88 149.21 168.55 174.55 174.55 174.55
Labour cost is Rs.60/man/day
* Digging 12 pits/day/man @ Rs.10/pit
5. Labour distribution
Labour required is maximum in May-June, August-October and December period
during the first year. Peak requirement of labour in an adult plantation is in June, Sep-
tember-October and December-April.
6. Expected yield and net income

It is expected that the average nut yield will be at 100, 400, 800, 1200 and 1,600 kg of
nuts per hectare in the third, fourth, fifth, sixth and seventh year respectively. After
this, a minimum yield of 1,600 nuts per hectare is expected in all the years. It is ex-
pected that there will be a net income of Rs 52.3, Rs 105.1, Rs 158 and Rs 154.8 per
tree in the fifth, sixth, seventh and eighth year respectively and that there will be a net
income of Rs 154.8 per tree from the ninth year. (Table 3.7)
7. Production cost per kg of nut

The production cost per kg of nut is estimated at Rs 30.29 in the fourth year, Rs 16.94
in the fifth year, Rs 12.48 in the sixth year, Rs 10.26 in the seventh year and Rs 10.65
from the eighth year onwards. (Table 3.7)
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Chapter - 03
Economic Viability of Cashew Plantation
F. Economic analysis of a project for the establishment and maintenance of

100 hectares of cashew plantation
The economic viability of a project for the establishment and maintenance of 100
hectares of cashew plantation is prepared using the following the techniques suggested
by Pitale (1987). The Benefit- Cost Ratio (B/C ratio) and Internal Rate of Returns were
worked out based on the following assumptions.
1. The cashew plantation is raised and maintained scientifically as recommended by

the Kerala Agricultural University.
2. Cashew grafts are purchased at the rate of Rs.20 per graft and Rs.2 per graft is
provided for transportation, loading and unloading.
3. Provision is made for 10% gap filling during second year.
4. High Yielding Varieties recommended by the University is cultivated.
5. The wage of a labourer is assumed at Rs. 60 per day and Rs. 10 per pit for digging.
6. The crop is raised in rainfed condition.
7. The price of raw cashewnut is assumed at Rs.30 per kg.
8. Inflation rate both for cost of cultivation and price of raw cashewnut is assumed at
the rate of 6%.
9. The project is financed by borrowed funds at an interest rate of 15%.
10. The crop has a gestation period of two years and the crop starts giviing yields from
the third year onwards.
11. All the investments are incurred at the beginning of the year.
12. Discounting factors are assumed at 15%.
13. The economic life span of cashew is assumed at 20 years.
14. The yield level is assumed at around 50% of the yield realised in the research
station under rainfed conditions.
15. The residual value of cashew tree is calculated assuming a current price of Rs. 200
per tree with an annual inflation @ 6% per annum.
16. The project is implemented in own lands.
17. No economic value has been attributed to cashew fruit. There will be approxi-
mately 10,000 kg of cashew apple production per hectare, which can fetch Rs.
6,000 at the rate of Rs. 6 for 10kg apple at Goa state.
18. No intercropping is undertaken in cashew plantation.
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Chapter - 03
1. Non recurring expenses (NRC)

Non recurring expenses to the tune of Rs.4 million is provided to meet the cost in-
volved in land development, purchase of tools, implements, drying land, fencing, small
office etc.,
2. Recurring expenses (RC)

In addition to the cost of cultivation (Table 3.11) provision is made for meeting the pay
of staff Rs.0.28 million per year with an annual inflation @10% to meet the salary of
three farm managers @ Rs. 2,500 per month, six Field Assistants @ Rs.1,500 per
month and six Watchmen @ Rs.1,200 per month and to meet the TA and DA and
office expenses @ 30,000 per year, with an annual inflation @ 10%.
3. Cash flow
The details of the cash flow, showing the non-recurring and recurring cost involved in
the establishment and maintenance of 100 hectares of cashew is given in Table 3.11.
During the first year, an amount of Rs. 1.64 million is required for the establishment of
100 hectares of cashew, purely for cultivation purposes. For a period of 20 years, the
cost involved for the establishment and maintenance of 100 hectares of cashew is
estimated to be Rs. 59.76 million, considering an annual inflation in costs @ 6%. The NRC is Rs.4
million while RC
The total Non Recurring Costs (NRC) of the project is worked out to be Rs.4 million. varies from year
The Net Present Value (NPV) of NR investments at 15% discount rate is estimated to to year
be Rs. 0.848 million. The total receipt during the project period (20 years) is Rs. 164.8
million leaving a net profit of Rs. 86.74 million. The NPV of the net receipts is Rs. 5.81
million.
a) Benefit Cost Ratio

The benefit cost ratio of the project is arrived as a ratio of the NPV of net receipts
(Rs.5.81 million) to the NPV of non-recurring investments (Rs. 0.848 million) and it
was estimated to be 6.85. The benefit cost ratio indicates that the investor can expect
Rs. 6.85 per every Rupee invested, suggesting that the project is economically viable.
b) Benefit cost ratio capitalised

In order to test the tolerance of the project, the total investment (recurring and non-
recurring) upto the end of fourth year were capitalised at 15% interest and its NPV
worked out (Rs. 5.81million). The B/C ratio capitalised was then worked out as the
ratio of NPV of net receipts (13.82) to the NPV of capitalised investments upto the
end of fourth year, (8.01) and it was estimated to be 1.72.
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Chapter - 03
c) Internal Rate of Returns (IRR)

The IRR of the project was estimated to be 21.25%. This means that the earning
power of the investments of the project is @ 21.25% annually. The price level as-
sumed for the cashewnut is quite realistic (Rs.30/kg) and less than the current market
prices. The price trend of cashew in the past decade show a steady increase and the
same can be expected in future also. On an average there was about 15% annual
increase in price during the past 5 years. In the present project, an annual increase of
only 6% was considered for calculating the economies. The cost escalation was also
assumed at 6%. The yield level assumed is also reasonable (Table 3.11). As such, the
estimates are realistic and modest and profits are attainable. The data of B/C ratio
(both non-capitalised and capitalised) and IRR gives clear indications that the project is
economically viable.
Table 3.11 Cash flow statement for 100 hectares of cashew plantation (200
trees) Rs. In million, for 20 years
Year 0 1 2 3 4 5 6 7
Cost of 16,419 9,318 11,187 12,118 13,549 14,980 16,411
cultivation /ha
(Rs) - at current price
Cost of cultvn. 1.64 0.99 1.26 1.44 1.71 2.00 2.33
For 100 ha 6% inflation
(Rs in Mln)
Non Recurring 4 - - - - - -
investment (Rs. In Mln)
Pay of staff (with 0.28 0.30 0.33 0.37 0.40 0.44 0.49
10% annual inflation)
Office expenses (with 0.10 0.11 0.12 0.13 0.15 0.16 0.18
Total expenses 4 2.02 1.40 1.71 1.94 2.26 2.60 2.99
Total receipts 0.34 1.43 3.03 4.82 6.81
Net receipts -4 -2.02 -1.40 -1.37 -0.51 0.77 2.22 3.82
Present value at -4 -1.75 -1.06 -0.90 -0.29 0.38 0.96 1.43
15% discount rate
Page 38
Chapter - 03
Continued...
Year 8 9 10 11 12 13 14
Cost of 17,042 17,042 17,042 17,042 17,042 17,042 17,042
cultivation/ha (Rs) -
at current price
Cost of cultvn. 2.56 2.72 2.88 3.05 3.23 3.43 3.64
(Rs in Mln)
Non Recurring - - - - - - -
Pay of staff (with 0.54 0.57 0.65 0.71 0.79 0.86 0.95
Total expenses 3.29 3.50 3.76 4.02 4.30 4.61 4.94
Total receipts 7.22 7.65 8.11 8.60 9.11 9.66 10.24
Net receipts 3.93 4.15 4.35 4.58 4.81 5.05 5.30
Present value at 1.28 1.18 1.07 0.98 0.90 0.82 0.75
The B/C ratio is
15% discount rate
1.72:1 and the
Continued... IRR is 21.25%,
Year 15 16 17 18 19 20 Total which indicate the
Cost of 17,042 17,042 17,042 17,042 17,042 17,042 31,5528 financial feasi-
cultivation/ha (Rs) - bility of the
at current price
project
Cost of cultvn. 3.85 4.08 4.33 4.59 4.86 5.16 59.76
(Rs in Mln)
Non Recurring - - - - - - 4
Pay of staff (with 1.05 1.15 1.26 1.39 1.53 1.68 15.73
Total expenses 5.28 5.65 6.05 6.49 6.95 7.45 81.21
Total receipts 10.85 11.50 12.20 12.93 13.70 26.63* 164.83
Net receipts 5.57 5.85 6.15 6.44 6.75 19.18 --
Present value at 0.68 0.63 0.57 0.52 0.47 1.17 --
15% discount rate
* This includes income from nut Rs.14.5 million and price of wood at the end Rs.12.1 million
NPV 5.81
IRR 21.25%
BC ratio 1.72:1
Page 39
Chapter - 03
d) Sensitivity analysis
Any agricultural enterprise would be liable to uncertainties, mainly due to the involve-
ment of unpredictable weather conditions. As such there is possibility of yield reduc-
tions mainly due to aberrant weather conditions. Moreover, price fluctuations of prod-
ucts may also cause concern. To assess this sensitivity of the project in terms of its
economic viability, a sensitivity analysis was done assuming income reduction by 10%
(due to reduction in raw cashew price or decrease in the yield). The change in the B/
C ratio when income is reduced by 10% worked out and presented in Table 3.12.
Table 3.12 B/C ratio at 10% income reductions (200 trees per ha) yield kg/
tree
Year Yield Level 10% less

assumed ( Normal)
NPV (million) 5.81 3.05
BC Ratio 1.72 1.38 If there is 10%
IRR 21.25 18.48 decrease in the
income also the
The B/C ratio decreased from 1.72 to 1.38 when 10% yield income reduction was
cashew planta-
assumed from the normal. The sensitivity analysis gives clear indication that this prod-
tion is profitable
uct can tolerate natural calamities and possible yield reductions or decrease in raw
cashew prices from the normal. Thus the economic potential of the project in terms
of risk tolerance is well indicated.
e) Summary of expenses and receipts

The abstract of the cash flow statement is given below
Total cost of establishment and maintenance of
100 hectares of cashew for 20 years 200 trees/hectare Rs.59.76 million
Total receipts from 100 hectares for 20 years
@ 6% annual inflation in price Rs.164.83 million
Total net receipts from 100 hectares for
20 years (Rs.30/kg of nut and Rs.200/tree, at 6% annual inflation) Rs.88.92 million
Net present value of the net receipts at 15% discount Rs. 13.82 million
Total non recurring investment Rs. 4 million
The NPV of total capitalised investment upto the end of
the 4th year (Beginning of yield) Rs.8.01million
B/C ratio (Capitalised) 1.72
Internal rate of return (IRR) 21.25%
Page 40
Chapter - 03
Scientific establishment and management of cashew plantation involve certain vital

decisions and skilful integration of efficient management strategies. Here an attempt
has been made to identify the critical decisions, involved in selection of plantation
sites, critical inputs, operations and management practices involved in the scientific
establishment and management of cashew plantations. The cost of establishment and
maintenance of cashew over years and the economies of scientific cashew cultivation
are also worked out and analysed. The input requirement, the input cost, the labour
requirement and distribution for one hectare of cashew plantation are estimated and
presented. The expected yield and net income from cashew plantations are also
worked out. The economic analysis of a project for the establishment and mainte-
nance of 100 hectares of cashew plantation is also presented. The B/C ratio (1.72)
and Internal Rate of Returns (21.25%) from cashew plantations suggest that it is an
economically very viable venture. The sensitivity analysis gives clear indications that
projects on cashew plantation can tolerate natural calamities and possible yield reduc-
tion to the extent of 10% from the normal. The economic potential and risk toler-
ance of cashew plantations is well indicated.
Cashew cultiva-
Cashew cultivation is more profitable than rubber, coffee, tea and cardamom espe- tion is more
cially as it can be cultivated even in wastelands. Under best management (if given same profitable than
attention as in the case of tea, coffee and rubber) 4 tons of cashew can be obtained rubber, coffee, tea
per hectare. There are plantations in Australia yielding 4 tons of raw cashew/hectare. and cardamom if
the same attention
References is given
Abdul Salam M, Pushpalatha P.B, Suma A and Abraham C.T, (1993), Efficacy of
chemical weed control in cashew plantations. Journal of Plantation Crops, 21(1) pp:
54-56.
Abdul Salam M, (1997), Cashew plantation- Management and Establishment. The

Cashew 11(3) pp: 13-32.
Abdul Salam M, (2001), Cashew Research and Development Indian Scenario, World
Cashew Congress 2001 Souvenir pp: 33-41.
Beena B, Abdul Salam M and Wahid P.A, (1995), Root activity of cashew
(Anacardium Occidentale L.) varieties in relation to phonological phases. Journal of
plantation Crops 23 (1) pp: 35-39.
Beena B, Abdul Salam M, and Wahid P.A, (1995), Nutrient offtake in cashew, The
Cashew 9(3) pp: 9-16.
Bhaskara Rao, E.V.V, Swami K.R.M., Yadukumar N and Sreenath Deekshit Page 41
Chapter - 03
(1994), Cashew Production Technology. National Research Centre for Cashew, Puttur,
Karnataka pp: 22-25.
Kerala Agricultural University, (1993), Package of practice recommendations

“Crops 1993” Directorate of Extension, Mannuhy, Thrissur, Kerala pp: 68-75.
Mandal R.C., Yadukumar N and Mohan E, (1992), Cashew based farming systems.
PLACROSYM -VII, Cochin 28-30 Dec. pp: 26.
Mini Abraham, (1994), Folliar absorption of nitrogen and phosphorous by cashew,

M.Sc thesis, submitted to Kerala Agricultural University.
Pitale R.L., (1987), Project appraisal technique (second edition), Oxford IBII Publish-
ing Company Ltd., New Delhi- 110 001.
Prasad Rao, G.S.L.H.V. and Gopakumar C. S., (1994), Climate and Cashew. The
Cashew, October-December, 1994, pp: 3-9.
Page 42
Chapter - 04
Study of Cashew Processing Industry

in Different States
T
he growing demand for kernels in the international market availability of
cheap labour (mainly women) and the required skills in processing are
favourable factors contributing to the rapid growth of cashew processing
industry in India.
Cashew industries have a simple organisational structure and mostly are under private
management i.e., proprietorship (63%) or partnership (19%). Since it requires a large
amount of initial investment and working capital, most companies depend on com-
mercial banks and state financial agencies for working capital.
The Indian
About 62% of the companies are categorised under “Manufacturer-cum-Exporter”. cashew industry
This is primarily due to the encouraging export policy and low per capita consumption is mostly domi-
in India. nated by private
players. There
During off-season, in order to run the factory throughout the year, 50% of the total was a wide gap
factories import raw nuts. The availability of raw nuts in India is from March to June in the demand &
only. Inadequate supply of raw nuts and fluctuating price makes the processors heavily supply of raw
dependent on the raw nut imports from Brazil, West and East Africa, Ivory Coast and nuts
Vietnam.
Tiny processing units (up to 100 tons/year) and medium capacity processing units
(100-500 tons/year) account to 39% and 42% respectively. This is mainly due to raw
nut shortage and financial constraints. Utilisation capacity of most of the units is below
50%.
About 90-95% of women are working in these industries at different stages of process-
ing. The total strength in each units varies in range of 50-400. Men are mostly involved
in drying, stacking, roasting, kernel drying and packaging. About 80% of the total
women workers are involved in shelling and peeling activities. Since, both the proc-
esses are highly labourious, the wages are fixed by the government at different stages
of operation and strictly followed subject to each state.
Harvested nuts are dried under the sun immediately after procurement. Turning of
nut at regular intervals is done to ensure uniform drying. The dried nuts are filled in
gunny bags of 80-kg capacity and stocked in godown. Few industries in Mangalore
Page 43
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Chapter - 04
indicated the application of pesticide after three months of storage to avoid insect
infestation.
Drum roasting (66%) as preliminary roasting is followed in Kerala, Tamil Nadu, Andhra
Pradesh, Orissa and West Bengal. The latest method of steam boiling (27%) is prac-
tised in Karnataka, Goa and Maharashtra. Few industries (7%) are still following out-
dated method of oil bath roasting. This may be due to infrastructure developed for oil
bath roasting and additional finance required to develop facilities for other methods.
In drum roasting, the feed rate of raw nuts and rotational speed of drum are the two
important factors that decide the quality of processed kernels. The duration of boiling
and steam pressure have main bearing on the kernel quality in steam boiling. The key proc-
esses involved in
There are three ways of shelling. Mallet hitting, through semi automatic hand cum the cashew
pedal operated cutter and semi automatic single operation unit. Mallet/stone is re- processing are:
quired for shelling drum-roasted nuts. On an average, two to two and a half persons drying, stacking,
are necessary for completing shelling of 80 kg raw nuts per day. They have to do this roasting, shell-
for eight hours. However, steam boiled nuts are decorticated by using hand cum pedal ing, peeling,
operated cutting unit. Two persons are required for shelling an 80 kg raw nut per day. kernel drying,
In both the cases, the nut recovery process is in the range of 90-95%. Despite the fact packing,. Shell-
that workers apply ash on nuts in drum roasted nuts, their hands are exposed to the ing and peeling
adverse effects of CNSL. In some factories, labourers in the shelling section are given are labour inten-
hand gloves for avoiding the CNSL effect on hands to a certain extent. The quantity of sive processes.
kernel recovered in drum roasting is slightly lower, when compared with steam boil- Drum roasting is
ing, as a spoiled nut burns completely, while it is being roasted. the most popular
roasting method
Steam boiled nuts are cooled for 10-14 hours for making shell brittle. The operation adopted in India
enhances the whole recovery process. Cooling of drum roasted kernels is done for 1-
2 hours, so that the CNSL can be drained out and the temperature of the nut can be
brought down.
There are three different forms of kernel dryers that are used in general. They are:
Conventional 8 foot borma dryer, built with brick and mud. The kernels are spread
on wire mesh tray and subjected to hot air by putting in a chamber above the
furnace.
Tunnel dryer, in which hot air produced outside, is passed into the drying chamber
by using tunnels. Heat utilisation efficiency is more.
Electrical borma dryers, in which both hot air temperature and flow rate are con-
Page 44
Chapter - 04
trolled automatically by thermostatic mechanism. Just four hours are required for
drying 400 kg of kernels. It has 120 trays in 4 trolleys with holding capacity of 4 kg.
Kernels are subjected to 700C. Uniform drying and minimum supervision are the
main advantages of this system.
Peeling is a labour intensive process. Fingernails are normally used for removing testa.
The average production capacity of eight hours labour per day is 6-10 kg. The first
grading of 7-10 grades is done in this section. Wages are fixed on the basis of whole
kernels and this acts as a control for careful work.
The standard specification for Indian cashew kernel is prescribed under the Export
(Quality Control and Inspection) Act, 1963. The processors involved in export of
kernels only follow the specification very strictly. A high degree of cleanliness is main-
tained in the grading section. The kernels are sorted out into wholes, splits, broken
etc and the wholes are graded into different sizes on the basis of the number of wholes
per pound, according to the specification. All the operations are done manually.
Three different
Humidification of kernels is one of the processes followed in summer for avoiding forms of kernel
excessive breakage, during handling and transport. The permissible moisture content drying is used in
after packaging is just 5%. general of which
borma dryers is
Graded kernels are packed in 25 lb (11.34 kg) capacity tins on weight basis. The tins most popular.
are subsequently evacuated and filled with carbon dioxide gas with the assistance of Mould vacuum
packing unit, called ‘Vita pack’, for suppressing the possible insect attack. This also packaging is a
helps in bringing down the likelihood of rancidity. Kernels filled in containers and inert better technology
gas are soldered afterwards. Packed tins are then labelled as per grades across the lid, that should be
by using special temper proof adhesive. Two tins that contain 25 lb of cashew kernels adopted in India
are packed in a corrugated cardboard carton that is bound by nylon strapping for the
purpose of exports. Standard markings are printed on the carton. They include brief
description, name of packer, gross and net weight etc. Flexible packaging with NO2
gas infusion was introduced in India after kernel importing countries imposed restric-
tion on tin containers, due to the problem of disposal. Around 8% of processors have
moved over to the new packaging system. Recently, Mould Vacuum Packaging for
cashew kernels has been introduced. This method has many advantages such as less
cost of packaging, use of recyclable material, easy handling, free from pesticides and
preservatives, minimum movement of kernels with maximum protection.
Oil expeller (15 HP) is used for extracting CNSL. The expeller oil is transferred to the
boiling unit, where it is subjected to 1000C for 4 hours for evaporating moisture and Page 45
Chapter - 04
cooled for 10-12 hours in settling tanks. About 20 kg of crude oil can be extracted
from 100 kg shell and sold at the rate of Rs 12 per kg of oil.
Processing cost of steam boiling is higher than that of drum roasting. It has an added
advantage of CNSL extraction as an extra benefit.
Problems Identified and Probable Measures

Procuring quality raw nut
Procurement of raw nuts is mostly based on personal experience. Floating or cutting
results form the criteria for fixing the price. Raw nut moisture content has to be taken
into consideration along with prescribed quality standards, while fixing up the price.
Increasing raw cashew nut shelf life

The warehouse for raw nuts must be treated with special/utmost care for maintaining
the nuts at a safer level of moisture by exercising control over the environment there. The major
Control can be achieved by good ventilation and using new fumigated bags. For ad- problems facing
equate aeration, free space must be there between two stacks in a row. The quality of the cashew
nuts and their environmental condition during storage is also a factor on which the industry are
storage life of raw cashew depends. Moisture condensation in godowns in certain processing of
pockets and consequent microbial growth result in delirious fluctuating temperatures quality raw nut,
at the godowns. Relative humidity of the atmosphere plays a vital role in safe storage poor shelf life of
of raw nuts. The nuts absorb or adsorb moisture for maintaining equilibrium with raw nut and low
relative atmospheric humidity. recovery rate of
cashew kernels
Increasing recovery of white kernels
In the case of steam boiling, steam pressure and duration must be optimised for vari-
ous origin nuts with rotational speed (rpm) of drum and feed rate. In borma dryer, the
temperature and duration of drying must be optimised and thermostatic control must
be included in the design of borma dryer for uniform drying.
Minimisation of labourer’s drudgery

An improved cashew-shelling unit must be developed for minimising the drudgery of
the labourers who operate the shelling unit and avoiding the CNSL effect on the hands
of the operator.
Kernel scorching in borma dryer

Uniform circulation of hot air must be maintained at constant temperature all through
the process in the tunnel dryer by providing thermostatic control.
Page 46
Chapter - 04
Maximising whole kernel recovery in peeling process

One can try mechanical means of peeling the testa automatically, i.e., puncturing the
testa layer and peeling through forced air.
Overcoming cumbersome vita packing system

For this, the flexible packaging system with NO2 gas infusion or moulded vacuum
packaging may be followed. This will bring down the packaging cost to a great extent.
The number of raw nuts available for processing has dropped short of the re-
quirements for full use of the capacity. The insufficient raw nuts have brought
about reduction in the days of employment for the large number of workers who
depend on cashew processing. Less capital investment and huge profits have acted
as incentives for creation of additional capacity. However, under-utilisation of ca-
pacity and severe under-employment of labourers in the existing factories is in-
creasing.
Only a few processors have gone in for oil bath roasting that has the advantage of
obtaining Cashew Nut Shell Liquid (CNSL). This is probably because the capital
investment that is required for adopting technology is 10 times more than the
drum roasting. Unpurified CNSL will not attract sufficiently a big market. Due to
this, creation of additional capacity in the industry and emergence of new industry
must not be encouraged.
Authorities issuing licence for setting up cashew processing industries must be

very strict with regard to cleanliness.
Efficiency in production of unscorched kernels and maximum recovery of CNSL

are the main requirements for development of mechanised cashew processing
plants.
Page 47
Chapter - 04
Table 4.1 Indian Cashew processing industry during 1999

States Processing Units (no)
Organised Unorganized Total Capacity Processing Labour
(‘000 tons) Consumption force
(‘000 tons) (no)
Kerala 375 23 398 600 193 223,000
Karnataka 164 8 172 30 25 15,500
Goa 25 32 57 15 8 1,200
Maharashtra - 49 49 20 6 750
Tamil Nadu 217 24 241 271 150 73,300
Andhra Pradesh 38 65 103 32 28 4,350
Orissa - 33 33 15 15 700
West Bengal - 45 45 7 5 150
Total 819 279 1,098 1,000 430 320,300
Through imports -- -- -- -- 220 --
Table 4.2 Comparison of processing cost by different methods (Rs/kg)

Processing stages Oil bath roasting (Calicut) Drum roasting (Palasa) Steam boiling (Manglore)
Drying raw nuts 0.13 0.07 0.15
Preliminary roasting
1.labour wages 0.12 0.11 0.18
2. fuel charges 0.25 0.04
Shelling roasted nuts 1.39 1.13 1.28
Kernel drying(Tunnel drier)
1.labour wages 0.20 0.02 0.19
2. fuel charges 0.10 0.05
Peeling 1.30 0.99 1.26
Grading 0.24 0.12 0.57
Packaging 1.54 1.31 1.53
1.labour wages
2. container + soldering
3. Infusion of CO2
Total 5.27 3.85 5.16
Advantage Extraction of CNSL - Extraction of CNSL
but discoloured oil of superior quality and
reuse of shell cake
A Study of Cashew Industry in Major Processing States

1. Drum Roasting as Preliminary Process at Palasa in Andhra Pradesh
Andhra Pradesh ranks second with the raw nut production of 0.065 million tons dur-
ing 2000-2001. There are 103 processing units, accounting for 9.38% of total cashew
industries in India. Majority of the processing units are in Palasa region. About 66% of
cashew industries in Palasa region have a capacity utilisation of 0.64-1.44 tons per day. Page 48
Chapter - 04
The average kernel recovery is calculated as 26% and overall cost of processing in this
region is worked out at Rs. 3,845 per ton of raw nut. The cost benefit ratio is found to
be 1:1.36.
The first cashew-processing unit was started at Mori of Rajahmundry. Afterwards,

cashew units came up in Palasa and Vetapalem. There was a rapid growth in Palasa
region due to easy availability of raw nuts from adjoining districts and the neighbouring
state.
Cashew industries: About, 68 processing units are functioning at Palasa, locally called
‘Bhatti’. There are 73 management units that share the processing facilities, which are
mainly drum roasting and kernel drying with existing units. Nearly all the units in the
region come in the category of tiny units, based on total capital investment and power
requirement. It has been estimated that all these units have an estimated capacity of
Andhra
32,000 tons per annum, with a potential to generate employment for 4,350 persons.
Pradesh ranks
However, only 22% of total units function all through the year due to insufficient
second in raw nut
financial support and less demand of cashew kernels in the domestic market from this
production. The
region. Palasa Cashew Exporters Private Limited has started exporting cashew ker-
first cashew-
nels from this region from 1983. At present, every year, cashew kernels worth around
processing unit
Rs 3.0-3.5 million are being exported. The region was declared as polluted area due
was started at
to emission of smoke during drum roasting. Due to this, establishment of cashew
Mori in
industries in this region has been discouraged. The government announced a subsidy
Rajahmundry
of 20% for infrastructure development to begin the processing industry in the out-
district
skirts of Palasa.
Raw nut procurement: Raw nuts are generally bought through commission agents
from Mangalore, Rajahmundry and Orissa between March and May. East Godavari
district provides 33% of the total requirement of raw nuts. Floating and cutting tests
are conducted for checking the quality of nuts in winter and summer respectively.
Storage and drying of raw nuts: Raw nuts are stored in gunny bags of 80-kg capac-
ity in the warehouse. At the farm level, ‘Gadher’ structure is used for storing nuts. It is
a bamboo bin that is coated in cow dung, cylindrical in shape and has a height of five
foot with a diameter of 3 foot. This structure can be used for increasing the storage
life of nuts for 8-10 months. Processors feel that the nuts in hilly region can be stored
for upto two years, without spoilage in warehouse, whereas nuts in the coastal areas
can be stored for just 4-5 months. In nut drying, about 8-10% (dry basis) moisture
content is lost in the process.
Page 49
Chapter - 04
Drum roasting: Drum roasting is predominantly followed in Andhra Pradesh. This

consists of feed hopper, rotary drum, gears and water tanks with sprinklers and a
surface. A feeding tank/hopper can contain 800-kg raw nuts. As the moisture content
and size of the nut has an impact on the qualitative efficiency of kernels in drum roast-
ing, roasted nuts are tested for their quality to optimise feed rate and drum revolu-
tions.
Shelling: Skilled women are involved in the shelling process. Roasted nuts are tapped
gently in the shelling section, two-three times manually, with the use of wooden mal-
lets and this impact will help the nut to crack and the kernel is separated. The shelling
percentage normally ranges between 26 and 30%. The average shelling capacity is
between 10-12 kg/labour/day and 92% of wholes are recovered. Roasted nuts are
mixed with ash, so that skin damage against CNSL can be avoided. The out turn of
wholes is taken into consideration for wage calculation.
Kernel drying: Kernels are dried in the conventional system called borma, which is
Drum roasting is
built with brick and mud. The hot chamber capacity has been estimated at 450 kg
popular in
kernels. Four bags of burnt shells are used as fuel. Drying is done for 10-12 hours and
Andhra
skilled male workers are engaged for the purpose. Tray positions are changed at regu-
Pradesh and the
lar intervals for facilitation of uniform drying. It has been estimated that 8-9% drying
kernel drying is
takes place in this process.
still done in the
conventional
Peeling: Peeling of dried kernels is done manually by using fingernails. The operational
system called
capacity ranges from 7-8 kg/head/day. There are two methods of wage system that
Borma
are currently being followed, input and output basis. Under the input basis, only the
wholes is taken into consideration after peeling for wages. On an average, 70% of
wholes are recovered in this method. Preliminary grading of 7-10 grades is completed
in this section. Those to be rejected are separated in the peeling section and graded as
black baby bits, completely spoiled, white reject and difficult to peel.
Grading and packing: Graders segregate a total of 14 grades. Broken kernels are
separated by manual sifting, based on their size. Material handling is done by using
bamboo baskets due to the lightweight and cheaper cost. Cleaned oil tins are used for
filling cashew kernels after washing thoroughly. The inner side of tin is covered with
polythene sheet for preventing spoilage. Flexible packaging is used to a limited extent,
based on market demand.
Capital investment: In a cashew nut processing unit, the highest amount is invested
on buildings (64.94%), followed by machinery equipment (22.08%) and then land. Page 50
Chapter - 04
Processing cost: The overall cost of processing has been estimated at Rs 3,845 per
ton of raw nut. As processing is a labour intensive process, workers’ wages are the
main component in the total cost of processing, which comprises of 59.52%. The
proportion of interest rates is at 11.70%. The cost of tins has been worked out at
13.56% due to kernel packaging in tin containers, as insisted upon by buyers. The
expenses incurred on other items are the least.
W320 is a benchmark grade meant for analysing the qualitative efficiency of cashew
processing. The out turn of kernels depends on the quality of raw nut, efficiency of
roasting and kernel drying and the dexterity of labour.
The drum roasting method of cashew nut processing, currently in vogue, creates Pollution is a
public health hazard due to emission of smoke during nut roasting. Existing large number serious problem
of cashew units create unhealthy processing environment. Processors should make in Drum roasting
up their mind to gradually switch over to the cost-effective method of processing i.e. method. Cost
steam boiling method, for higher qualitative and quantitative output. Commercial effective method
banks and agencies should extend possible help for the change in the system and of processing like
growth of cashew sector in this region, as rural economy is closely associated with steam boiling
this industry. method should be
Table 4.3 Investment pattern of the processing units
adopted for better
Items Amount (Rs.) % to total output
Land 50,000 12.98
Building 250,000 64.94
Machinery and equipment 85,000 22.08
Total 100.00
Table 4.4 Cost of processing 36 tons/month

Items of cost Amount Rs % to total cost
Utilities (Power, water & fuel) 3,075 2.22
Packaging materials
Cost of tin 18,766 13.56
Cost of sealing 2,474 1.79
Wages 82,375 59.51
Salaries 1,500 1.08
Overheads 9,250 6.68
Interest on
Working capital 18% 16,200 11.70
Fixed capital 10% 3,208 2.32
Depreciation on building & machinery 1,579 1.14
Total 138,427 100.00
Page 51
Chapter - 04
Table 4.5 Out turn of kernels and sales realisation

Total quantity of raw nut processed 36 tons/month
Amount (Rs) % to total
Out turn of kernels and by products
Cashew kernel -- 26.02
Shells -- 70.00
Testa -- 0.08
Moisture loss -- 3.46
Rejects -- 0.44
Sales realisation
Cashew kernel 1,620,335 --
Shells 31,500 --
Testa 3,960 --
Table 4.6 Proportion of different grades of cashew kernel at packing

Grades Quantity (kg) Proportion (%) Rate (Rs) Total amount (Rs)
WW 210/230 5.4 1.42 230 1,242
The grade that
WW240 26.3 6.9 210 5,523
fetches the best
WW285 102.3 26.85 197 20,153
WW320/340 49.4 12.96 187 9,237.8 price is
Desert wholes 7.8 2.05 100 780 WW320/340.
Splits 56.4 14.80 183 10,687 The B/C ratio is
Butts 11.6 3.04 172 2,490.6 1:1.36
Butts mixed 26.7 7.01 162 4,325.4
3/4th split 57.1 14.98 155 8,850.5
1/3rd split 13.0 3.41 120 1,560
1/8th split 6.0 1.57 90 540
Difficult to peel 5.86 1.54 20 117.2
Scrap 6.8 1.78 20 136
Spoiled 6.4 1.68 5 32
Table 4.7 Cost benefit Analysis

Particulars Cost (Rs)
Raw materials 1,080,000 (88.64%)
Cost of processing 138,427 (11.36%)
Total cost of production 1,218,427
Total sales realisation 1,655,795
Profit 437,368
Cost Benefit ratio 1:1.36
Based on the data obtained from the survey of cashew nut industry at Palasa, Andhra
Pradesh, the Profit analysis has been worked out as given from the table 4.8 to 4.11 Page 52
Chapter - 04
Table 4.8 Assumptions

Raw nut processed per month @ 1.44 tons/day 36 tons
Shelling percentage @ 24 kg kernel /80 kg raw nut 30% outturn
Moisture loss in kernel drying 9% dry basis
Cost of machineries i.e., Roaster, borma drier, weighing balance and miscellaneous Rs.85,000
Capital Investment (land and building) Rs. 300,000
Table 4.9 Income (Rs)

Sale of cashew kernels 1,620,335
Cashew shell (25,200 kg @ Rs. 1.25/kg) 31,500
Testa (495 kg @ Rs.8/kg) 3,960
Total 1,655,795
Table 4.10 Expenditure (Rs)
1. Processing cost
Drying raw nuts @ Rs.4.5 per bag 2,025
Roasting charges @ Rs.7.35 per bag 3,308
Fuel charges for roasting @ Rs.2.5 per bag 1,125
Shelling @ Rs.3.5 per bag 33,814
Kernel drying operator wages @ Rs.19.15 per 10 bags 862
Fuel charges for borma @ Rs.60 per 18 bags 1,500
Peeling @ Rs.4.25 per kg and Rs.2.00 for wholes and broken respectively 29,766
Grader charges @ Rs.140 /head/day 12,600
2. Packaging cost (Rs)
Tin cost @ Rs.22 per tin 18,766
Sealing charges with material @ Rs. 2.90 per tin 2,474
Carton box and wrapping belt @ Rs.11 per box At the cost of buyer
Total processing and packaging cost 106,240
Table 4.11 Cost benefit analysis
Fixed cost (Rs)
Raw material 1,080,000
Depreciation of machines (10%) and building (20%) 1,579
Interest on capital @ 10% 3,208
Salary to staff 1,500
Interest on running capital (18%) 16,200
Total 1,102,487
Operating Coast (Rs)
Processing cost 106,240
Maintenance cost 4,250
Electrical charges 450
Miscellaneous 5,000
Total 115,940
Total expenditure 1,218,427
Profit 437,368
Profit Percentage 35.90
Cost benefit ratio 1:1.36
Page 53
Chapter - 04
2. Oil Bath Roasting as Preliminary Process in Kerala
Kerala has an area of 0.122 million hectares under cashew plantations with a produc-
tion of 0.125 million tons of cashew nuts during 1999-2000. Kerala stands first in the
production and its share to the total production of raw cashew nut in India is 24%.
Kerala’s cashew producing industries are centred mostly in Quilon area. Processing
industries are also located at Trivandrum, Alleppey, Pathanamthitta and Thrissur dis-
tricts. Many factories have moved to Tamil Nadu’s Kanyakumari district, due to the
problems such as labour, legislation and wage rates. Of the total number of industries,
just 25% are capable operating all through the year and their utilisation capacity is in
the range of 1,000-5,000 tons per annum. The government of Kerala fixes the wages
for labourers, who work in different sections of industries. The workers also get a
minimum bonus of 8.33% .
Procurement of raw nuts: Raw nut procurement is done in four ways, i.e., direct Kerala stands
purchase from producers, purchases from local market, direct purchases from trade first in raw
agencies and through imports. Raw nuts of indigenous origin are mostly procured cashew produc-
from local markets located at Anchal, Paracode, Thamarakulam, Kadaikan, Kallara, tion and it con-
Milimanoor and Kadambanadu. But, 60-75% of total requirement of raw nuts is de- tributes about
rived from imports. Visual, floating and cutting tests are conducted for finding out the 24% to the total
quality of nuts and fixing prices by the processors. There are some reasons for import Indian cashew
of large quantities such as tax exemption (4% purchase tax), reasonable price and production
availability all over the year.
Drying and storage process: As soon as the nuts are brought to the processing
industries, they are dried on a semi-finished floor for bringing down the moisture level
to 8-9% (safer level of moisture). Workers turn it frequently at regular intervals for
uniform drying. Dried nuts are packed in gunny bags of 80-kg capacity and stacked in
warehouses. Pesticide is applied after three months of storage for preventing insect
infestation.
Oil Bath Roasting: In Kerala most of the processors follow drum roasting as prelimi-
nary process. Oil bath roasting is being followed, although there are modern tech-
nologies and other benefits, as the units face financial difficulties. In oil bath roasting,
nuts are soaked in water for three hours and stored in silos after draining the excess
moisture for three days. Soaked raw nuts are passed from the silo into the oil bath
tank, just above the belt conveyor and permitted to immerse fully in hot CNSL, that is
Page 54
Chapter - 04
maintained at 390 degree Fahrenheit. The total length is approximately at 12 feet and
the belt conveyor operates at 35 rpm. When the nut travels from inlet to outlet, it
gets cooked and 70% of total CNSL that is available oozes out. The roasted nuts are
passed on to the centrifuge for removing adhering oil and it is conveyed to the shelling
section through the bucket elevator. In this process, 25 bags of cashew shell cake are
required as fuel for 6 tons /day and four labourers are required for the process. The
temperature of CNSL oil, rpm of conveyor inside the tank and feed rate depends on
the size, origin and moisture of raw nuts.
Shelling: Mallet hitting is still done in oil bath roasted units. The shelling rate is slightly
less, when compared with semi-mechanised nuts. In drum roasting, the nuts are kept
on a concrete block for breaking purpose. This method is used for recovering about
92-95% of wholes. The effect of CNSL on the hands of workers is not much. Roughly,
two to three persons are needed for shelling 80-kg drum roasted nuts. The hand cum
pedal operated cutter is used in steam boiling method. Hand gloves are given to la-
Oil bath roasting
bourers, so that they can avoid CNSL effect on hands. Castor oil is used while scoop-
is the process
ing out the intact kernels from the shell. Just two labourers are needed for shelling 80-
followed for
kg steam boiled nuts.
kernel drying.
Shelling is a
A mechanical sheller has been developed at the Mechanical Engineering Research and
mechanised
Development Organisation (MERADO), Kalamassery, Kochi. This has been done to
process in Kerala
get over the problem of drudgery and health hazard in the traditional system of cashew
unlike in
shelling by placing the nut on a concrete block and reducing the hard shell with wooden
Andhra
mallets. The decorticator can be mounted on a work table and the worker, sitting at
Pradesh
the front, can operate it with the least drudgery. It is expected that the decorticator
can shell 20-25 kg of raw nuts per worker in an eight-hour shift. The required number
of decorticators can be used. This will depend on the capacity of the processing unit.
Borma dryer: In Quilon region, three types of borma dryer are used. One of them
is the ‘8’ Borma, which is of conventional type. In this, kernels are spread on wire
mesh trays and kept over the hot furnace. Utmost care must be taken by shifting trays
regularly and controlling the fire under the hot chamber, in order to avoid scorching of
kernels. In the tunnel borma, blowers are used for passing hot air into the drying
chamber through tunnels. In this, flow rate and temperature of hot air can be control-
led to a certain extent.
At Calicut region, the shelled kernels are dried up by using tunnel driers. Hot air is let
into the drying chamber at opposite ends for uniform circulation. The chamber is
Page 55
Chapter - 04
constructed with brick and mortar and has a total capacity of 8 tons. Cashew kernels
are held in trolleys with trays and about 140 degree Fahrenheit is maintained in the
chamber. Two labourers take part in the operation on the basis of shift and it takes 10-
11 hours to complete the drying. Ten bags of shell cake are used as fuel in the furnace.
Peeling: Women are fully engaged in the shelling, peeling and grading processes. In
this labour intensive process, peeling of testa is done by fingernails and sharpened
wooden sticks are used for removing skin of hard to peel kernels regardless of the
method used for roasting. In the peeling process, the recovery of wholes is rated at
80-90%. On an average, 8-12 kg cashew kernels are peeled per day per person. Initial
grading of kernels takes place at this stage. In the peeling section, about 7-10 grades
are graded. Labour wages are set at government approved rates and fixed at Rs 3.22/
kg for whole kernels just for peeling.
Grading and packaging: In this section, there is a high degree of cleanliness. Work- In Kerala,
ers are given apron and hair net. The grading that is done is based on size, colour, borma dryers are
broken (split, bits etc). Twenty-three grades are sorted out at the grading section. Six used for drying
workers with grading capacity of 45 kg/day are engaged in this section. Aluminium of kernels. Peel-
tables are used for spreading kernels and for segregation. Vita packing system is prac- ing process as in
tised in most of the industries and CO2 gas infusion is done for avoiding microbial Andhra Pradesh
spoilage during shipment. Packing is done in tin containers of 25 lb (11.34 kg). A lot of is a labour
companies have a tester for testing leakage. intensive one
After getting ISO 9000 and introducing Hazard Analysis and Critical Control Points
(HACCP), importing countries have been following stringent quality standards for cashew
kernels. The current system of tin packaging is bulky and it is not easy to dispose of
these tin containers. The Moulded Vaccum Packaging (MVP) system produces consist-
ent rectangular blocks ranging from 500 gm to 25 kg. This brings about a large and
obvious improvement in quality production, with benefits of transport, handling, dis-
play, stock point, etc. This also assists in saving the total cost that is spent on secondary
packaging to a significant extent. MVP is pesticide free, does not contain preservatives
and does not need irradiation. The vacuum barrier bag and cardboard box can be fully
recycled. There is minimum movement during transport and handling due to the rec-
tangular shape of primary packs. Removal of air and the use of gas flush can bring
down rancidity and bacterial growth. The vacuum also fully removes and exceeds any
infestation of insects.
In secondary packaging, the block is introduced into outer boxes that can be closed and
Page 56
Chapter - 04
sealed on a standard automatic machine. This unit has a unique design, the first of its kind
in the world. It is light, clean, sturdy and easy for transport. This does not result in any
damage to the product that it packs and requires power of just 220 V A/c.
The processing cost for one kg of raw cashew nut, including packing charges, has
been estimated at Rs 5.27. More energy is spent in this method of processing than in
the steam boiling method. The oil bath machine takes more space. It also takes more
time for processing nuts than any other method. The colour of the final product is
slightly brown and fetches lesser prices.
CNSL extraction: CNSL extraction is done by using expeller. The capacity of the
expeller has been estimated at 7 tons of cashew kernels per day. Thirty five per cent
of residual oil available after oil bath extraction is separated. Crude oil bath extraction
is subjected to high temperature of 420 degree Fahrenheit in big containers for five
minutes. Oil is refined by chemical methods and exported to Indonesia. Four men CNSL extraction
take part in the operation. Feeding cashew shell to the expeller unit is automised is done in Kerala
through bucket elevator and belt conveyors. using expellers.
The processing
The Kerala State Cashew Workers Apex Industrial Co-operative Society Ltd. cost for one kg of
(CAPEX): The society has the primary aim of organising the cashew sector in the raw cashew nut
state, providing assistance to procure raw nuts, making sufficient funds available for including pack-
processing and marketing of kernels and other items produced in the factory. CAPEX ing charges is Rs
has established about 10 factories in the state. These factories have generated em- 5.27
ployment for 6000 workers in the region. These units are situated in Alleppey, Quilon
and Trivandrum. Every day on an average of 80 bags of cashew are processed. All
these factories operate for only 100 days in a year. All the factories follow the drum
roasting method. Raw cashew nuts are imported and distributed in the lean period.
Of the total kernel production, 60% is exported.
Kerala State Development Corporation (KSDC): The Corporation, a govern-

ment organisation, was registered in 1969. The organisation has 34 cashew factories
under it. There are 27 in Quilon, 3 in Alleppey, 2 in Trivandrum, one each in Thrissur
and Cannanore. The processing capacity varies from 45 to 140 bags per day. The
factories have provided an employment opportunity for nearly 23,841 workers.
Processing cost
(Oil bath roasting - preliminary process)
A cashew nut processing unit is located in Choondum, Tellicherry, with an annual
processing capacity of 2,000 tons. Processing cost is worked out as follows, assuming
30% shelling percentage, 5% drying in tunnel drier and 7% husk/peel. Page 57
Chapter - 04
Table 4.12 Details of cashew processing industries in Kerala

CAAPEX, the
Number of cashew factories in the State (registered) 398
key organisation,
Installed capacity of cashew factories 600,000 tons/day
Utilised capacity 193,000 tons/day
provides finan-
Total number of cashew workers 223,000 cial assistance
Total quantity of raw cashew nuts required to provide full from procure-
employment to the cashew workers 1,782,300 tons ment to process-
ing of cashew.
Table 4.13 Cashew kernels grades and its proportion (Nigeria origin) KSDC, a Gov-
Wholes Proportion Splits Proportion Bits & Pieces Proportion ernment agency,
WW210 2.10 SW 2.2 Chuli 0.01
too is engaged in
WW240 2.71 SSW 6.81 DW Nil
cashew process-
WW320 37.07 Butts 0.4 BW 0.08
ing
WW450 17.18 Splits 6.01 DBW Nil
-- -- LWP 14.51 DSW Nil
-- -- SB 0.05 OW Nil
-- -- SS 0.15 WIII 0.77
-- -- SP 0.82 DP 0.14
-- -- SWP 2.39 PII (L) 1.94
-- -- DSP 0.28 PII(S) 0.25
-- -- SPS 2.68 UPP Nil
-- -- WBB 1.16 -- --
Total 59.06 -- 37.66 -- 3.19
Page 58
Chapter - 04
Table 4.14 Total processing cost of one-kg raw cashew nut

Particulars Rs/kg
Drying of nuts (unloading, spreading, heaping, loading and stacking in godown)
@ Rs 10/bag 0.13
Hot oil bath-6 tons/day capacity
Labour wages @ Rs.45/day (4 person) 0.03
Fuel charges @ 25 bags (40 kg/bag) 0.25
Shelling roasted nuts @ Rs 2.8/kg wholes + 27.7 DA/day 1.39
Kernel drying in tunnel drier
Labour wages @ Rs.60/day (2 person) 0.02
Fuel charges @ 10 bags (40 kg/bag) 0.1
Peeling @ Rs. 3.22/kg + Rs. 27.7 DA/day 1.39
Particulars Rs/kg
Grading @ Rs 19.27/day + DA 0.24
Packing @ Rs 24.67/day + DA (7 persons) 0.05
Karnataka is
Tin container @ Rs 16/tin and soldering cap Rs 0.5/tin 1.47
another important
Infusion of CO2 @ 500/tins/day and Rs 24/kg for cylinder (9 kg capacity) 0.02
Total processing cost 5.27
state for cashew
Raw material cost 30.00 production in
Total Process cost for 1 kg raw cashew nut 35.27 India. The
cashew sector in
3. Cashew Processing Industry in Karnataka the state is mainly
concentrated in
About 57% of the cashew processing industries in Karnataka are situated in Dakshina the Dakshina
Kannada district with a capacity ranging from 101-500 tons per annum. Women com- (south)
prise 90-95% of the total labour force. The steam boiling method of raw cashew Kannada district
conditioning is being followed, as recovery of kernel is more, when compared with
other methods. CNSL (Cashew Nut Shell Liquid) is derived by the expeller method
and this is followed in few industries. Most of the processing industries in Dakshina
Kannada are managed privately, either by proprietorship (10%) or partnership (81%).
Finance is the main constraint for running an industry in this region. Most of the process-
ing industries are categorised under partnership group due to heavy capital invest-
ment and insufficient finance as working capital. Non-availability of funds also makes it
difficult to maintain them as well organised units. Most industrialists rely on commer-
cial banks and state financial agencies for working capital. There are about 52.5% of
the industries that supply processed kernel to the domestic markets, while 39% in-
dustries export kernel as an end product. Cashew nut shell extraction takes place in
8.5% of the industry and no processor does value addition in bulk quantity.
Raw nut procurement: The harvesting of cashew nut begins in March and extends
till June. One of the major hurdles for processing is non-availability of sufficient supply
of raw materials at standard prices. Availability of financial resources during the time of Page 59
Chapter - 04
procurement ensures raw material in stock for operating the industry to full length of
their capacity. To some extent raw nuts are imported from other countries.
Most of the industries fully depend on indigenous nuts and procurement is in the range
of 100 to 5000 tons per annum. About 51% of the industries come under the cat-
egory of 100-500 tons per annum, 20% of units are capable of procuring 500-1000
tons per annum and 12% of industries capable of procuring 1,000-5,000 tons per
annum raw nuts. Nineteen per cent of the industries have a capacity of producing
kernels upto 25 tons per annum. Thirty six per cent of the industries’ annual kernel
production is in the range of 26-100 tons per annum and the 30% of the industries are
capable of producing kernels in the range of 101-200 tons per annum. In the normal
course, kernel yield is in the range of 20-25% of the raw nuts of Indian origin. The
reduction in kernel recovery is due to supply of immature and deteriorated nuts. While
raw nut procurement goes on, the processors conduct tests. In Karnataka
about 90-95% of
Visual test: Size and colour of the nuts are tested for checking maturity. women force is
Floating test: Some samples of about 5-kg are put into a vessel that contains water. employed in
Floaters are collected after stirring continuously and counted. The raw nut price is cashew industry.
fixed on the basis of the percentage of floaters. Only 22% of the
Cutting test: After gathering supplied nuts (5 kg) from different bags, they are mixed. industry function
Raw nuts of 1 kg, taken from the random sample are cut open with the hand cutter. all through the
Good kernels are collected, based on the colour, wrinkles and rejects. year
Employment potential: About 90-95% of women force is employed in these indus-

tries at various stages of processing. The total strength of work force of a factory is in
the range of 100-400. Mostly, men are engaged in drying, stacking, steam boiling raw
nuts, kernel drying and tin packing of kernels. About 80% of total women are engaged
in shelling and peeling. Labourers are confirmed at government approved rates. Bo-
nus and provident fund are the two motivating factors and good facilities are available
for employees. Only 22% of the industries are functioning all through the year, while
the rest of the industries operate for just 6-8 months, which depends on the availability
of raw material. Financial constraints and shortage of power or labour also result in
closure of industries.
Processing
Drying and storage: Drying of harvested nuts is done on the cemented yard under
the sun. This brings down raw nut moisture content and prevents spoilage at the time
of storage. Excessive moisture attracts insects and creates conditions for mould growth.
The duration of drying under the sun varies from place to place, which depends on Page 60
Chapter - 04
climatic conditions. Raw cashew nuts are dried immediately after procurement for
two or three days. Soon after drying, the nuts are filled in gunny bags and stacked in
godowns. The drying process continues at the time of storage in a dry climate. How-
ever, under conditions of high humidity, nuts can take up moisture till they come to
the point of equilibrium. Due to the disadvantages, the method of storing raw cashew
nuts in soils and building dump of nuts with a wall of cashew nut bags all round is not
prevalent in this region.
Steam boiling: Under the steam boiling process, a cylindrical drum with a hopper on
the top for feeding raw cashew nuts is used. A boiler is used for generating steam and
is sent to the drum through a pipe at the bottom. The pipe is connected to a perfo-
rated central stem and laterals inside the drum. A steam gauge is fitted with a valve for
controlling pressure to the steam pipe connecting the steam generator and drum.
Unique thing
Cashew shell cake is used as fuel and it requires about 50 kg of cake to steam boil a
about processing
batch of 320 kg of raw nuts and it costs Rs 1.50 per kg.
in Karnataka is
that steam boiling
The crucial parameters, i.e., steam pressure and duration, vary from industry to in-
method is
dustry, due to various factors such as variation of the origin of raw nuts, capacity and
adopted. It is a
efficiency of boiler, skill of a labourer, etc. Nearly all the factories follow the steam
cost effective &
boiling method as preliminary conditioning method. However, the production capac-
pollution process
ity varies from unit to unit. Baby boiler of 300-320 kg per batch is used by many
industries.
Shelling: A hand cum foot operated cutter is used for shelling. The nuts are placed
one by one between two blades and cut to the depth of the shell. A hand lever is used
for breaking open the shell. Another labourer separates the opened nuts and shells.
Due to the tiring nature of shelling, the labourers exchange positions. The output of
two workers ranges from 50-100 kg raw nuts per day. The average production is in
the range of 11-25 kg per day per pair. Partial mechanisation of shelling and steam
boiling results in release of shell oil that can affect workers’ hands. One must be care-
ful during cutting, as to avoid injury to labourers during the process.
Borma dryer: After separation from the shells, the kernel is dried to bring down the
moisture and loosen the adhering testa. The nuts are placed in trays with wire mesh
bottoms and loaded into chambers that are built with either brick or metal. The trays
are arranged in a trolley and in turn, put inside the chamber. The drying chamber gets
hot air from the generator where spent shells, after extracting CNSL, are burnt as a
source of heat. The kernels inside the chamber are put through varying temperatures
and require highly skilled labourers for avoiding scorching of kernels. Positions of trays Page 61
Chapter - 04
are changed at regular intervals of time for maintaining uniform heating. The positions
of trays are changed for the first six hours of drying after every 30 hours. The drying
percentage in borma dryer has been worked out at 4-5%.
The borma dryer is not designed properly at present. Heat utilisation from the cross
flow dryer is higher, when compared with the conventional type and it has the benefits
of uniform kernel drying and lesser time. Processors cannot switch over to cross flow
dryer from the poorly designed borma dryer due to cost constraints.
Peeling: Peeling takes place after drying the kernels in borma/cross flow dryer. The
kernel shrinks away from the testa that becomes brittle and can be removed easily.
Usually, peeling is done manually and is a labour intensive process. The estimated
capacity differs from 4 kg to 12 kg per person for eight hours per day. The first kernel
drying, ie., 4-7 grades, is also done in this section. Wages are set on the basis of whole
kernels that serve as a control for careful work. The average peeling capacity is in the
range of 6-10 kg per day.
Peeling, re-
humidification,
Re-humidation: This is essential for preventing excessive breakage by handling and
grading and
transport after final grading. Kernels are kept in a high humid room for a few hours till
packing practices
they come back to a moisture content of 5% lb (maximum limit).
are done in a
similar way in
Grading: Grading is done according to specifications laid down by the Cashew Export
Karnataka as in
Promotion Council of India. More than 25-30 grades are sorted out for domestic
other states
market and export. Grading is done manually. Cleanliness is maintained in this section
to a great extent. Different grading lists are available for export and indigenous supply
of kernels. Grading of whole kernel is based on counts, ie, the number of whole ker-
nels per pound. The main groups are white wholes, that are sub-divided into counts
200/210, 220/240, 300/320, 400/450 and 500/520, butts-wholes with small pieces
chipped off, white splits-kernel halves, LWP (Large White Pieces) of size over 60 mm,
SWP (Small White Pieces) of sizes < 40 mm, scorched grades showing some
discolouration due to over roasting, shrivelled or spotted or dessert kernels.
The permissible moisture content at the end of grading is in the range of 3-5% (dry
basis) and kernel must be free from any impurities and odour. For maintaining hygienic
condition, either plastic or aluminium containers are used for shifting from section to
section.
Packing: Vita packing system is followed in about 80% of the industries. Tin contain-
ers of 25 pound capacity are used for packaging kernel and these tins are packed in Page 62
Chapter - 04
carton boxes. In a kernel-filling machine, 4-6 tins are placed on a vibrating platform,
filled by a chute. Blowers that are provided across the chute remove dust and kernels
with less weight. The tins are vacuumised and flushed with CO2 with the help of
VITAPACK machine and sealed after wards. The use of CO2 brings down oxidative
rancidity and also assists in checking leakage. Any leakage in filled containers can be
detected by the hollow sound that comes out while tapping the sides of the tin. Tin
tester is also used for checking airtight packing by dipping in water.
Flexible Packaging (Moulded Vaccum Packaging) with nitrogen as inert gas is a better
method for bringing down the heaviness and incurs less cost of packing. Very few
factories have this facility in addition to the vita packing system in this region. MVP
system produces consistent rectangular blocks that ranges from 500 gm to 25 kg.
This is a good improvement in quality production with the advantages of transport,
handling, display, stock count, etc. The vacuum barrier bag and cardboard box are
fully recyclable. The rectangular shape of primary packs ensure that the movement is
minimum during transportation and handling, providing the maximum protection to Moulded
the contents. The removal of air and gas flush bring down the incidence of rancidity Vacuum Packing
and bacterial growth. is a better system
than Vita Pack-
CNSL Extraction: The expeller method is followed for CNSL extraction. On an ing. Expeller
average, 5-6 barrels of CNSL are extracted every day, in a well-developed industry. method is used
Each barrel is of 200 litres. About 200 ml of crude CNSL can be derived per kg of shell for CNSL extrac-
and the quality is checked by chemical method. The CNSL that is extracted is applied tion
in break lining, paint and varnish industry and mostly exported for more revenue.
The basic requirements for development of mechanised cashew processing units are
efficient in production of unscorched kernels and maximum recovery of CNSL. A
plant with a high degree of mechanisation will create social problems, as existing plants
are highly labour intensive. Due to this, simple mechanisation is tried, so that there will
be no social upheaval.
4. Cashew Fenny Extraction in Goa
Goa is the only place in India where cashew fenny has been distilled for the last four
centuries or more.
The cashew apple is left to ripe fully on the tree and when it falls down the grower
collects the fruit and separates the fruit from nut. The juice content in a cashew apple
is 70 - 75%. All the fruits are put in one place and pressed by the legs or with the help Page 63
Chapter - 04
of screw press so that juice is collected.

The apple from which the juice is extracted is used again to collect some more juice.
Weight is kept on the squeezed apple and the juice that comes out at this stage is called
cashew neera. This neera is being consumed as a beverage.
Fresh cashew apple is available during the cashew season from March 15th to first
week of June. And fruit is collected at 3 p.m. daily and if there is more demand the
juice is taken out immediately, if not juice is taken out once in three or four days.
Other than its own apple, Goa gets cashew apple from Maharashtra based on de-
mand.
The juice that is collected from screw press or leg pressing is kept for 3 to 4 days in a Only in Goa
big vessel where it gets fermented. cashew fenny is
prepared. It is
After fermentation of the cashew apple put the juice in a big copper vessel which has an alcoholic
an approximate capacity of 45-50 litres. The process of the fenny extraction is shown beverage ex-
in the diagram (Fig 4.1) tracted from
cashew apple.
Fig 4.1 Diagram showing extraction of fenny from cashew apple: The extraction
does not require
much capital
investment
1. Copper vessel where in the fermented juice is heated (approximate capacity is 45 – 50 litres).
2. This is a steel vessel where in the cold water is circulated so that the alcohol that gets evaporated
from the copper vessel condenses in this stage.
3. This is pipeline with a coil made of aluminium.
4. This is a bottle or vessel that is used to collect the alcohol or the ‘Urrak’ that comes out.
Page 64
Chapter - 04
The juice or alcohol that is collected in the bottle is called “Urrak”. Usually out of 45
litres of cashew apple juice only 20 litres of Urrak will be extracted. The left over in
the copper vessel is thrown out as a waste.
The alcoholic content in this Urrak is 45 -50% and this cannot be kept for long period
and its shelf life is 3 months.
Therefore the Urrak is again put in the copper vessel and mixed with cashew apple
juice at 2:1 ratio. The above mixture of Urrak and juice is heated again where in the
output is cashew fenny. From 30 litres of Urrak and 15 litres of cashew apple juice 18
– 20 litres of fenny will be extracted.
If one wants pure fenny the ratio of Urrak and juice is changed to (2.2:0.8) so that the
alcoholic percentage can be increased.
Some of the bottling companies go for filtration of fenny before bottling them. There Cashew fenny
are also companies, which use additives to reduce the smell. The bottling companies extraction is not a
also store the fenny for 1 to 1.5 years, as the fenny aged will have more taste and labour intensive
value. process. Actual
cost for extraction
Fenny is used as a healthy drink, used for medical purpose for stomach disorder, etc. is Rs 20-25 per
Medicinal roots are added to the fenny and taken as a drink. 750 ml.
Cost required for fenny extraction

Fixed cost: It is a low investment industry. The capital investment includes, big cop-
per vessel Rs. 5,000, steel vessel for condensation Rs.1,000, pipeline with a coil of
aluminium Rs.1,000, storing bottles and vessel Rs.1,000, barrels for storing the juice
cost Rs. 2,500 (five vessels), at field level the pressing arrangement requires Rs. 6,000
to 8,000.
Inputs or raw materials needed

Fruits from 5 hectares of land is the minimum requirement and it is purchased at the
rate of Rs.1 per kg. Other costs involve firewood, license charges and excise duty.
Formalities for getting the license

The area is first notified for extraction of alcohol/fenny from cashew apple from the
state government. The excise department conducts auction for the land and the high-
est bid will be given the permission for extraction of fenny for a period of 1 year.
Page 65
Chapter - 04
Manpower needed
For an area of five hectares two workers are needed per day to collect the cashew
fruits. For distillation and other purpose one worker is needed per day during the
season (60 days). One labourer is needed for extraction purpose for a period of 60
days.
Actual cost of fenny extraction is Rs. 20 to Rs. 25 for 750 ml. The extractor sells the
fenny for Rs. 35 to the wholesalers and the wholesalers filter and bottle the fenny in
their own brand name and price it at Rs. 80 to Rs. 125 for 750 ml. There are 54,000
hectares of area under cashew cultivation in Goa. There are 54 processing units in
Goa. Forty percent of the state production is consumed locally and 50% is sent to
other states and 10% is exported.
From 20 litres of cashew apple juice one can get one liter of fenny.
Total supply of fenny in Goa is more than the demand. Fenny is being allowed to take Cashew fenny is
to other states if one gets the import permit. And fenny is also exported to other a fermented
countries like the Gulf and Australia. The Goa government is earning more than Rs. 6 product of
million annually as excise revenue on fenny trade. cashew apple.
But there are
Other Uses of Cashew Apple many
Cashew apple can be used for preparation of various products. The cashew apple unfermented
contains 87.5% moisture, 11.6 % of carbohydrate and 0.2% protein. Cashew apple is products that can
one of the richest sources of vitamin C (0.26%) and minerals. be prepared like
cashew apple
Unfermented products of cashew apple juice, cashew
Cashew apple juice apple syrup etc
The juice can be extracted with screw press, basket press or by simple hand pressing.
The extracted juice is strained through muslin cloth, which is clarified by adding 1.4
gm of PVP (Polyvinyl Pyrolidone) per liter of juice and stir the mixture for two
minutes after which it is strained again through muslin cloth.
Add sugar according to taste and boil the juice.
It has the characteristic aroma and flavour of cashew apple. The finished product
may be chemically preserved by using Sodium Benzoate at the rate of 0.08 gm per
100 ml.
The mixture should be poured into well-sterilised bottles. Cork air tight with crown
cork and store it in a cool dry place.
Cashew apple syrup
Page 66
Chapter - 04
Extraction of juice and removal of astringency are done in the same way as the
pre-treatment of juice.
Add sugar at the rate of 1-1.25 kg for every liter of juice. 20-22 gm Citric Acid per
liter and 0.08% Sodium Benzoate are added to the juice. Dissolve Sodium Ben-
zoate in a small quantity of water before adding to the mixture. Mix all ingredients
thoroughly and keep it as such for three to five hours so that clear syrup forms a
separate layer which can be easily siphoned.
Bottling can be done as described for juice. The bottle should not be completely
filled, leaving some space at the top before heating over the water bath. Keep it in
cool dry place.
Dilute the syrup five times its volume with plain water for use as a fresh drink.
Cashew apple jam

Cashew apple must be thoroughly cleaned by washing with water.
Immerse the apple in 3% salt solution for three days to reduce the tannin content.
The fruits are steamed for 15-20 minutes at 0.7 to 1.05 kg stem pressure.
Then the apples are crushed and mixed with 750 gm sugar per kg of apple and boil
Canned cashew
it.
apple and cashew
A pinch of Citric Acid is added towards the end of the cooling process to improve
chutney can also
the taste.
be prepared from
Store it in well sterilised jam bottles.
the fruit
Cashew apple candy

Just as in the case with jam, cleaned apples are first immersed in a 3% salt solution.
Next day drain out the salt water and steep the fruits in fresh salt solution and
repeat the process for three times.
Remove the salt water and add Potassium Metabisulphite (625 mg/kg) and keep in
this solution for another two to three days.
The apples are then thoroughly washed in water.
Keep them in a perforated crate made of aluminium or stainless steel and blanched
in boiling water for five minutes, followed by steam in a pressure cooker for five
minutes at 0.35 kg pressure.
The apple should not be very soft.
Candy processing is then carried out as usual, starting with a 30 degree Brix syrup
containing 0.1% Citric Acid and 500 mg Potassium Metabisulphite per kg of apple.
Pour the syrup over the apples until they are completely submerged.
Keep the fruits immersed in the syrup by placing stainless steel, wooden or glass
disc.
Cover the container with lid and keep it as such for one day. Page 67
Chapter - 04
Next day the syrup is taken out and sugar is added to the same syrup for raising the
concentration upto 35 degree Brix. Syrup is again boiled for about ten minutes and
pour back over the apples.
Repeat the process daily, raising the sugar content by 5 degree Brix each time for
the coming three days and then raise the sugar content by 10 degree Brix each
time for the sixth and seventh day i.e., the final strength of the syrup is 70 degree
Brix.
Keep the apple for eight to ten days in the syrup for complete absorption of sugar.
Remove the syrup and dry up the apple, which can be stored in screw capped glass
jars in a cool dry place.
Canned cashew apple

Cashew apple is treated in boiling 0.5% NaOH solution for five minutes followed
by peeling and rinsing in water and a subsequent treatment for about five minutes
in boiling 0.2N solution of H2SO4.
Other fermented
Wash the apple thoroughly to remove the sticking peel pieces and steam them for
products that can
about five minutes.
be extracted from
The fruit should not become very soft. This is followed by washing in water.
cashew apple
The undesirable portions are trimmed off and place the apples in well sterilised
fruit are vinegar,
cans.
wine and liquor.
Pour hot sugar syrup of 40 degree Brix over the fruit in a can and halt it over water
bath.
Seal the can and cool under running water without contamination and store in dry
and cool place.
Cashew apple chutney

Wash the cashew apple after three days of salt treatment just as jam preparation.
Remove the undesirable portion and slice them.
Chutney is prepared as usual using one kg sugar, one onion, 30 gm ginger, one tea
spoon each cumin seed, pepper, cardamom, cinnamon and coriander powder, salt
to taste and 20ml glacial Acetic Acid for every one kg of fruit slice.
Tie all the powdered spices in a clean thin piece of cloth.
Make a syrup of sugar by adding equal quantity of water.
Add the sliced apples, chopped onion, grated ginger, vinegar and salt to it.
Drop the slice bag in when the mixture begins to boil.
Boil the mixture until it is sufficiently thickened and store in sterilised jars.
Cashew apple pickle

Page 68
Chapter - 04
Raw green fruit is washed, sliced and kept in 5% salt solution.

Drain out the salt solution in the second day and pour fresh 5% salt solution.
Repeat the process for three times.
On the fourth day remove salt water and pickle is then prepared in a usual way
using 50 gm chilli powder, 100 ml gingerly oil, 20 gm fenugreek powder, 100 gm
asafoetida, 5 gm turmeric powder, 10 gm garlic, mustard powder, a pinch of So-
dium Benzoate and salt to taste for every one kilogram of sliced apple.
Gingerly oil is boiled in a suitable vessel.
Asafoetida dissolved in hot water is added to the boiling oil.
Powdered turmeric, fenugreek, chilli, mustard are added to it.
Add cashew apple slices after a thorough stirring.
Finally add Citric Acid, salt and Sodium Benzoate dissolved in hot water.
Mix all ingredients well.
Transfer the pickle into clean dry glass jar and store the product for one week
before use. Cashew liquor
can also be
Fermented products from cashew apple prepared through
Cashew apple juice can also be used for preparing vinegar fermentation. One
Raise the Brix of the juice to 15 degree by adding sugar. litre of cashew
Cool and inoculate the juice with pure strain of yeast, sacharomyce scerevisiae or brew- liquor is obtained
er’s yeast for alcoholic fermentation. from 8 litres of
Keep it as such for four to five days and mix with one-third-mother vinegar. cashew apple
Keep it in a wide mouth clay pot for 15 days. juice
Filter and pasteurise the same, which is having 5-6% acidity and can compare well
with commercial vinegar.
Kerala Agricultural University has developed methods for producing four grades of
wines such as soft, medium, hard and sweet.
Wine fermentation will complete within 15-30 days depending on the grade of wine.
Ageing can be done in wooden cask or glass vessel. Minimum period of ageing is 6-12
months. Longer ageing can give good quality wine. Sweet wine is prepared by adding
sugar syrup, preferable cashew syrup before bottling. Nine litres of wine can be ob-
tained from 10 litres of cashew apple juice.
Cashew wine
Cashew wine is essentially the product of fermentation of hexose sugar of cashew
apple juice by intact yeast cells to form ethyl alcohol and carbondioxide. Method is
standardised for producing wine from cashew apple (Patent No. 196/MAS/82).
Page 69
Chapter - 04
Fresh crisp, tight and fully colour developed cashew apples are used for preparing
cashew wine. The steps involved in the preparation of cashew wine are Collection,
Washing and Extraction, Detanning, Fermentation, Filtration and Ageing.
Different grades of wine except soft wine involve one more step of adding sugar.
Fermentation can be completed within a period of 15-30 days based on the grade of
wine.
Stirring at one-day interval or the first 7 days and keeping the fermentation vessel in
cool dry place are important.
Ageing can be done in wooden case or glass vessel. Minimum period of ageing is 6-12
months. Longer ageing may give good quality wine. Sweet wine is prepared by adding
sugar syrup, preferably cashew syrup just before bottling. Clear and sparkling wine can
then be bottled.
Ten litres of cashew apple juice is required to get nine litres of cashew wine. Based on
the alcohol percentage and sweetness, wine was graded into 4 types such as soft,
medium, hard and sweet.
Cashew liquor
The steps involved in the production of cashew liquor are;
Collection, Washing, Extraction of cashew apple, Detanning, Fermentation, Distilla-
tion and Ageing process.
One liter of cashew liquor is obtained from 8 litres of cashew apple juice.
Acidity had a negative influence on the quality of cashew liquor. Passing the distillate
through inert clay like benetonite, raises the pH and reduces the acidity.
Pleasant smell of cashew was found to be agreeable to all, which could be obtained by
keeping the liquor in wooden cask. It also gives colour to the produce mainly due to
the dissolution of phenolic present in the wood.
References
Anonymous, 1999. Importance of quality in exports. Cashew Bulletin. Volume. 37
(2): 3-9
Anonymous, 2000. All time record in cashew exports. Cashew Bulletin. Volume 38(5):
7
Balasubramanian, 2000. Project reports on developing database on processing as-

pects of cashew industries in India. National Research Centre for Cashew, Puttur,
Karnataka.
Balasubramanian, 2000. Status reports of cashew processing industries in Dakshina

Kannada. The Cashew. 2002. Page 70
Chapter - 04
Laxminarayana S.K., Govindarajan V.S., Gupta, S.M. and E.S. Nambudiri, 1995.
Report of the CFTRI (Mysore). Study team on cashew processing industry.
Nair M.K. Rao, E.V.V.Nambiar, K. K. N and Nambiar M.C. 1979. Cashew Mono-
graph, CPRI, Kasaragod. PP:169.
Nagesh. A.K. and Shankaramurthy, H.G.1991. Processing of cashew nuts in

Karnataka, Agricultural situation in India. Volume 46 (3) 127-131.
Ohler J.G. 1979. Processing of the nuts. The Cashew. PP: 201-213
Patrao M. (1998) Science and Technology: To put in a nutshell. Deccan Herald: July
21, 1998.
Ramalingam Pillai, 1999. Changing needs in packaging of cashew for exports. Cashew
Bulletin. Vol.37, No.11.PP:3-7.
Srinivasa T. and Raju V.T. 1995. Economics of processing of cashewnut. Bihar Jour-
nal of Agricultural Marketing 3:284-288
Sivanadan R. Kandaswamy R and Ramaswamy C. 1980. Economics of forest plan-

tations- Cashew, Kissan World, Volume 7: 40-42.
Fig 4.2 Flow chart of cashew processing
Page 71
Chapter - 04
g unit
wnut steamin
Fig 4.3 Cashe
Fig 4.4 Shellin

g of roasted n
uts
Page 72
Chapter - 04
els
l grading o f peeled kern
Fig 4.5 Manua
Fig 4.6 Separa

tion of testa fr
om kernel
Page 73
Chapter - 04
Fig 4.7 Cashew sealed tins filled with nitrogen
Fig 4.8 Packa

ged cashew re ady for export
ady for mark ged cashew re
et Fig 4.9 Packa
Page 74
Chapter - 05
Performance of Indian Cashew Kernel Exports
I
t is to India’s credit that cashew kernel found its place in the global market
place. What was an essentially a wild crop till the early 1920’s, was con-
verted into an economic opportunity. This led to an organised manufac-
ture and export and a natural expansion in the country. The commercial export of
cashew kernel in the world was first started from India with shipment of about just 45
tons of cashew kernel in the year 1923 to the USA. India enjoyed a monopoly posi-
tion in the international trade supplying 95% of the kernels until three decades ago
and the same has declined to around 50% of the global trade at present. In 70’s other
countries gradually intercepted the Indian business and Indian share in global market
gradually reduced. Thus, Indian cashew exports moved from monopoly to compe-
tition.
Fig 5.1 India v/s World cashew kernel exports
India enjoyed a
monopoly posi-
tion in the inter-
national trade
until three dec-
ades ago till
competition came
in and declined
India’s share to
around 50% from
95%
Source: DGCIS, Calcutta.
The importance of cashew exports to Indian economy arises from the fact that
it has earned a sizable amount of foreign exchange and it provides wide employment
opportunities. The total exports earning from cashew kernel and allied product dur-
ing the year 2001-02 have been estimated at Rs. 17.90 billion. Among the agricultural
products exported from India during 2000-01, cashew stood at third position as a
foreign exchange earner, contributing 0.93% of the total export earnings of the coun-
try.
Direction of Indian cashew exports
The members of the Cashew Export Promotion Council of India, who are manufac-
turers and exporters of cashew kernels are the major exporters from India. India
exports to over 60 countries. The major consumers of Indian cashew kernel are
USA, Netherlands, UK, Japan, UAE, France, Saudi Arabia and Canada. The Indian
cashew kernel is well acclaimed for its good quality, taste and appearance. Page 75
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Chapter - 05
Table 5.1 Direction of Indian cashew exports

1996-97 1997-98 1998-99 1999-2000 2000-2001
Countries Qty Value Qty Value Qty Value Qty Value Qty Value
Tons Rs. mln Tons Rs. mln Tons Rs. mln Tons Rs. mln Tons Rs. mln
USA 24,877 4,556 29,678 5,360 34,793 7,220 47,190 12,328 41,371 9,265
Netherlands 16,708 3,215 17,827 3,328 14,222 3,034 18,668 5,026 16,070 3,801
UK 4,180 797 5,078 957 5,375 1,172 7,016 1,958 6,415 1,487
Japan 5,142 991 5,261 970 4,925 1,087 5,003 1,375 5,369 1,220
UAE 2,156 405 2,437 453 2,901 645 3,200 844 3,687 837
France 2,891 552 1,865 298 2,313 455 1,866 474 2,343 553
Saudi Arabia 705 127 1,013 182 1,110 248 1,093 291 1,630 377
Canada 427 75 630 114 447 101 1,547 410 1,463 325
Israel 1,115 226 1,170 241 1,116 264 1,088 313 1,205 292
Singapore 1,580 292 1,102 182 1,037 219 1,088 277 1,297 242
Italy 374 72 883 173 904 188 986 266 1,106 262
Spain 411 77 783 150 571 129 776 213 1,058 248
Germany 1,506 289 1,339 231 1,110 223 560 151 922 200
Australia 990 179 1,939 351 1,920 401 1,696 459 762 173
Hong Kong 1,075 210 700 140 957 229 652 185 626 156
Greece 457 90 874 165 427 92 434 120 586 139
Bahrain 166 29 285 48 244 50 286 74 454 95
Kuwait 285 56 258 51 229 53 351 98 230 57
Russia 664 88 1,190 162 368 48 363 74 352 58
New Zealand 303 59 349 64 382 82 531 144 229 55
Norway 0 0 34 6 38 7 16 4 175 42
Lebanon 276 45 133 28 16 3 270 79 245 46
Chinese Taipei 546 106 209 39 146 30 103 27 127 30
Malaysia 368 66 229 37 218 48 66 17 111 20
Korea Rep. 305 44 115 21 108 22 176 22 83 21
Others 1,156 207 1,212 210 1,199 254 1,780 466 2,219 527
Total 68,663 12,855 76,593 13,961 77,076 16,301 96,805 25,695 90,135 20,527
Source: D.G.C.I & S, Calcutta
Regular shipping facilities are available from India to all ports of the world, the front
runner in carrying out shipments being the Kochi port. The other contributing ports
are Tuticorin, Mangalore, Chennai and Mumbai.
Regular services of container ships are available from Indian ports on India-USA, India-
UK/Continent, India-Australia, India-Japan, India-Middle East and India-Singapore routes.
Trends in Indian Cashew Kernel Export

To find out the trends in cashew kernel exports from India, exponential function of the
form Y (t) = a bteu was used (refer Chapter 2).
The results obtained are presented in the table (Table 5.2) Page 76
Chapter - 05
Table 5.2 Compound Annual Growth Rate of Indian cashew export

Description Intercept Slope R2 Annual
(ln a) (ln b) Compound Growth
Rate (%)
EXPORT (Quantity)
Whole Period (1956-57 to 2001-02) 10.57 0.01 0.18 0.99
1956-57 to 1970-71 prior to the project (AICS&CDP) 10.45 0.04 0.78 3.88
1971-72 to 2001-02 after the project 10.49 0.02 0.30 2.15
60’s 10.65 0.04 0.73 3.75
70’s 11.10 -0.06 0.44 -5.70
80’s 10.33 0.03 0.47 2.92
90’s 10.75 0.07 0.80 6.75
Last 20 years 10.20 0.06 0.91 5.81
EXPORT (Value)
Whole Period (1956-57 to 2001-02) 11.50 0.11 0.97 12.09
60’s 11.82 0.15 0.93 15.99 Majority of
70’s 13.22 0.08 0.59 8.82 cashew kernel
80’s 13.99 0.11 0.80 11.52 from India goes
90’s 15.35 0.16 0.91 17.06 A and
to the USA
Netherlands
Fig 5.2 Actual and estimated exports of CK from India (Qty)
The export of cashew kernel has increased from 31,275 tons to 87,000 tons during
1957-58 to 2001-02. While the export value too has increased from Rs. 0.1453 billion
to Rs. 17.90 billion during the same period. Export of cashew kernel in terms of vol-
ume has exhibited a compound growth rate of 0.99% (Non Significant) per annum,
while the value registered a compound growth rate of 12.09% per annum.
Page 77
Chapter - 05
The estimated growth rate of cashew kernel export prior to AICS&CDP (All India
Co-ordinated Spices and Cashew Development Project) was 3.88% per annum, while
growth in value terms was 11.82% increase per annum. Estimated growth rate of
cashew kernel exports after the implementation of AICS&CDP was 2.15% per an-
num, while growth in value terms was 13.25% per annum.
Cashew exports registered a growth rate of 3.75, -5.70, 2.92 and 6.75% per annum in
60’s, 70’s, 80’s and 90’s respectively, while the value registered 15.99, 8.82, 11.52 and
17.06% increase per annum. All the coefficients were statistically significant at 1 and
5% level of significance.
The exports both

in quantity and
value terms
increased from
1957-58 to 2001-
The growth trends were extrapolated till 2005 and to 2010 AD. To predict the quantity 02. The CAAGR
exported, last 20 years growth rate is considered because the growth rate for the has also been
whole period is not significant (shown by lower R2 value). If the last 20 years trend impressive
continues in the quantity exports of cashew kernels it is expected that during 2005 the
export will reach 116,752 tons and further to 154,857tons by 2010 AD. In value terms
it is expected to reach Rs. 29.7 billion and Rs. 52.53 billion by 2005 and 2010 AD
respectively.
Measures to Strengthen the Indian Cashew Exports

Strengthening the non-traditional markets and exploring new ones
The USA is the major importer with around 46% share followed by Netherlands with
18%. It is a known fact that the Indian cashew industry is heavily dependent on inter-
national markets. Over dependence on one or two nations will adversely affect India’s
capacity to bargain for better prices even with a quality product, considering the size
of the major market. There is a need for diversification of the market by strengthening
the market in low intake countries such as Japan, Australia, Saudi Arabia, Kuwait etc
and developing new ones like South Korea, Sweden, China, Belgium, Norway, Turkey
etc. At the same time, India should sustain its relationship with the buyers in the tradi- Page 78
Chapter - 05
tional and established markets.

The key move in existing market should be to improve information, study the value
chain, remove irritants and obstructions, focus on non-price issues like costs, quality,
logistics, possible innovations and education of the consumer.
The scope for searching for new customers is high where individual incomes are high
and present per capita cashew consumption is low.
Export in value added form

Over 99% of Indian cashew goes in bulk packaging and as plain cashew kernel. These
are imported by big wholesalers in the consuming countries, repacked in retail packs
either as such or after roasting and salting and sold to retailers. These retail packs are
marketed under well-established brand names of the local packers. It is quite unfortu-
nate to note that even with over seven decades of experience in international trade in
cashew kernel, Indian export of cashew kernels in value-added forms/consumer packs
constitutes less than 1% and its value is less than Rs. 0.1 billion.
Value addition can be done by exporting spicy, yogurt, sugar, chocolate, honey coated
cashew, salted and roasted cashew etc in addition to exporting different forms of To strengthen
cashew like ground, granulated, paste and powdered forms. cashew exports
there is definite
Increase domestic raw cashew nut production
need for explor-
The production of raw cashew nuts in the country is far below the requirement of the
ing new markets,
processing sector and potential available for export. The production of raw cashew
adding value to
nuts is only around 0.45 million tons obtainable from 0.76 million hectares of cashew.
the product,
This production is very less when compared to demand put forth by the industry.
increasing pro-
Primarily, the export of cashew kernel depends upon imports of raw cashew nuts and
duction and
domestic raw cashew nut production. Cashew kernel exports, by and large is not
exploring viabil-
stable due to the lack of availability of raw nuts for imports and unpredictable domes-
ity of organic
tic production.
cashew exports
There is a huge domestic and international market potential for these products, which
should be reaped, for which proper marketing strategies should be planed.
Organic Cashew Export

The international market for organic food is booming. The whole organic market is
worth around US $15 billion. The single largest market for organic food is the USA
followed by Germany and Japan. In the last two years, the demand for organic food in
many countries in the world has shown a growth rate of over 20%.
In Europe, Japan and the United States and other regions of the world, the consumers
are becoming more and more health and environment conscious. This will increase
the demand for organic food. At present, the organic regulatory is not harmonised
between countries and regions. The organic markets are getting more and more Page 79
Chapter - 05
ruled by governmental regulations. The countries like USA, European Union and Ja-
pan are first in this direction.
At present, India as the biggest processor/exporter of cashew kernels doesn’t partici-

pate in the organic market for cashew. In India a good amount of raw cashew is pro-
duced organically, but it is not differentiated from non-organic raw cashew. Indian
exports of organic cashew products are still in an infant stage.
The cashew industry has hardly had any institutional support. Classified as a luxury nut,
it has been mostly left to trade and industry to fend for itself.
References
Balasubramanian P P., 1998, Cashew Development in India- Present status and fu-
ture strategies, The Cashew, J-S, 1998 pp: 7-31.
Bhaskara Rao, 1998, National perspectives for cashew development in India, The
Cashew, J-S, 1998 pp: 41-47.
Dattatreyalu M., 1977, Export Development of Cashew, Foreign trade review, Vol.
XII, No2, 1977 pp: 229-240.
Giridhar Prabhu, 1998, Is India’s global leadership sustainable? The cashew, J-S1998
pp: 169-174.
Krishnaswamy L., 1981, Production and supply of cashew. Cashew Causerie, III (4)
pp: 10-12.
Krishnaswamy L., and Krishnan K P. (1981), Area and production status of cashew-
a critical analysis. Cashew causerie, III (3) pp: 14-33.
Kulkarni, 1999, “Cash (new) for farmers, Deccan Herald, Oct 4, 1999.
Nagaraja K V., 1998, Quality of Cashew kernel in relation to export, The Cashew, J-
S.1998 pp: 143-147.
Nayar. K.G., 1995, Cashew- a versatile nut with unlimited growth potential, The
Cashew, 1995, 22 2, pp: 3-6.
Prafulla K Das (1985) Status of production and trade of cashew in India, Agricultural
situation in India, 34 (10) pp: 765-770.
Sandhu H K., 1982, An econometric analysis of Indian export share of cashew ker-
nels in the world trade, Indian Journal of Agricultural Economics, September (1982)
37(3) pp: 300-305.
Sridharan B., 1982, Cashew in India’s export trade, Indian Journal of Agricultural
Economics, September 1982, 37(3) pp: 317-322. Page 80
Chapter - 06
Instability in Raw Cashew Nut Imports
I
ndia is the world largest importer of raw cashew. The rapid increase in
global demand made Indian exporters to source globally for raw seeds in
the first three decades of independence i.e. from 1947 to 1977. Other
cashew kernel exporting countries are hardly imports raw cashew nuts.
Domestic Raw Cashew Sector

Scenario
Cashew is now well recognised as an important cash crop. It is truly a cash crop, as
demand for this commodity is instantaneous and is used as a raw material for an
industry, which is labour intensive and export oriented.
Raw cashew is a horticulture produce, which is harvested by the farmers usually in the
month of March, April and May. It hardly requires any preparation before marketing.
Farmers usually accumulate a reasonable quantity before they bring the produce to
the market.
The big problem
facing this indus-
Raw cashews have a ready market in growing areas. Usually buyers are traders in
try is imports of
villages and towns who are located in major cashew growing areas. As the availability
raw nuts.
is seasonal, generally traders take upon this as a seasonal trade. Most traders deal in
similar products or indulge in general trading around the area.
Different regions of the country have different patterns with regard to marketing of
raw cashews. In some places, notably in Kerala and Karnataka, raw cashews are sold
immediately after harvesting. In places like Maharashtra and Goa, they are accumulated
over a period of time and brought to the market during a particular time of the month.
In Andhra Pradesh and Orissa, in addition to the above, large growers tend to hold
back the produce and sell it in larger volumes. The entire crop needs to be marketed
during the short period of 3-4 months and the manufacturers are forced to cover
their annual requirements during this period.
The popular misconception is that there are innumerable middlemen in the cashew
trade. The fact is that in raw cashew trading, middlemen are minimised because it is
highly specialised. Secondly, it needs huge working capital. Thirdly, the trader has to
have a good working relationship with the manufacturers, who are few in number in
each area. Sometime, it is necessary for the manufacturer to have an intermediary,
who is a broker or a commission agent, who will consolidate the purchase.
Page 81
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Chapter - 06
It is a fact that the distribution of raw cashew nuts is done at fair margin and there is no
extraordinary or large difference between what the manufacturer pays and what the
grower gets. The advantage in raw cashew marketing is that any quantity from 5 kg to
10,000 kg is marketable in all parts of the country where it is grown. Difference in
prices may persist depending on locational factors.
Except in the state of Kerala, which has been having a monopoly procurement scheme
for the last few year, all other states has a free market. Some of the states have an
agricultural market fee, but the payers are not getting the worthwhile services.
There is a huge idle processing capacity in the country, which can be utilised by the
increasing availability of raw cashew nut.
The crop is
The industry pays more preference to imports than indigenous production for export seasonal, the
of kernels. Internal production is utilised by the industry only as cushion to make up manufacturers
the deficit for export. Kerala raw nut price is a determining factor for fair price of raw are few but the
nuts in other producing regions of the country. processing ca-
pacities are big.
The production of raw nuts in the country is far below the requirement of the processing So, there is a gap
sector and the potential available for exports. between domestic
demand and
Table 6.1 Demand for raw cashew nut in India supply of raw
2000-01
cashew.
Domestic raw cashew nut production 350,000 tons
Average imports of raw nuts 250,000 tons
Total rawnuts available for processing 600,000 tons
Total processing capacity of only organised sector, which process
60 to 70 per cent of total raw cashew nut 1,000,000 tons
Shortage of raw cashew nuts for organised sector 400,000 tons
The industry is unable to find adequate raw cashew nuts to sustain itself, thus forcing
many units to remain closed for a considerable part of the year affecting the employment
opportunities of the factory workers. Even if India doubles its production of cashew
nuts there would not be any marketing problem or price fall. There is undesirable
instability in the quantity of raw cashew imported.
Trends in Raw Cashew nut Imports

India imports raw cashews from Guinea-Bissau, Ivory Cost, Tanzania, Benin, Mozam-
bique, Indonesia, Nigeria etc.
Page 82
Chapter - 06
Table 6.2 Imports of Raw Cashews in India (1995-96 to 2000-01)

Year Qty Change Value Change Value Change
(Tons) %(+/-) (Rs.Mln) %(+/-) US $ Mln %(+/-)
1995-96 222,819 -2.32 7,600.8 10.01 227.00 3.18
1996-97 212,866 -4.47 6876 -9.54 194.09 -14.50
1997-98 247,181 16.12 7696 11.93 207.08 6.69
1998-99 241,161 -2.44 9,580.3 24.48 227.91 10.06
1999-00 253,577 5.15 1,1862 23.82 272.17 19.42
2000-01 249,707 -1.53 9,623.4 -18.88 210.36 -22.71
Source: DGCI & S, Calcutta., Conversion to US $ as per RBI average rates
Table 6.3 Direction of India raw cashew Imports (Quantity is in tons and Value is in Rs. Mln)
Countries 1995-96 1996-97 1997-98 1998-99 1999-2000 2000-2001

Qty Value Qty Value Qty Value Qty Value Qty Value Qty Value
Guinea Bissau 30,987 1,146 15,455 532 50,522 1,605 18,828 791 31,231 1,564 56,928 2,703.9
Ivory Coast 24,642 787 18,096 520 32,229 834 23,085 802 39,524 1,626 50,268 1,900.4
Tanzania 75,275 2,683 64,355 2,121 61,311 2,110 108,046 4,589 79,209 4,174 50,820 1,770.8
Benin 9,870 292 10,213 323 16,140 498 11,680 394 23,829 989 27,239 1,056.1
Mozambique 20,108 591 28,101 873 16,895 489 28,162 1,042 23,508 1,059 20,971 625.2
Indonesia 15,696 611 6,862 228 32,628 1,096 18,829 719 20,941 964 9,700 393.8
Nigeria 19,529 575 14,507 370 13,220 344 7,699 230 13,001 457 10,858 319.3
Senegal 3,829 140 1,679 60 1,818 59 6,297 270 9,360 463 6,679 228
Kenya 0 0 1,004 28 79 3 9,428 406 6,311 292 6,382 218.8
Ghana 0 0 632 20 3,725 113 1,795 64 3,198 129 3,475 134.1
Australia 0 0 0 0 969 24 0 0 168 7 184 5.7
Togo 1,586 50 463 14 265 7 334 12 167 7 121 4
Malagasy Rep. 1,901 66 2,661 78 0 0 1,686 58 1,135 42 0 0
Singapore 303 9 44,758 1,577 7,608 228 246 11 360 15 0 0
Philippines 778 25 302 10 103 3 981 41 0 0 0 0
Vietnam 14,109 497 0 0 4,529 137 0 0 0 0 0 0
South Africa 0 0 920 30 2,022 59 0 0 0 0 0 0
Cameroon 0 0 0 0 1,521 46 0 0 0 0 0 0
Others 4,206 130 2,858 92 1,598 41 4,065 151 1,635 74 6,082 263.3
Total 222,819 7,601 212,866 6,876 247,181 7,696 241,161 9,580 253,577 11,862 249,707 9,623.4
Page 83
Chapter - 06
FIg 6.1 Imports of RCN in India
Processing
The above graph clearly shows the instability in Indian raw cashew imports.
factories came up
in many a
India’s early entry into export trade with lucrative and expanding markets of cashew number but
led to the establishment of many cashew-processing factories in the country.
increase in do-
mestic production
Table 6.4 The Compound Annual Growth Rate for Raw Cashew Imports
of nuts has been
Description Intercept Slope R2 Annual Compound
low and this led
Import (Qty) (ln a) (ln b) Growth Rate (%)
to increase in
Whole Period (1956-57 to 2001-02 ) 11.43 0.00 0.00 0.01*
imports in a big
1971-72 to 2001-02 after the project 10.49 0.05 0.14 4.87 way to meet the
60’s 11.69 0.04 0.45 4.56 domestic demand
70’s 12.78 -0.25 0.79 -21.90
80’s 8.96 0.21 0.33 23.41
90’s 11.51 0.10 0.66 9.55
Import (Value)
Whole Period (1956-57 to 2001-002 ) 10.51 0.11 0.69 11.19
60’s 11.03 0.17 0.90 17.96
70’s 13.00 -0.12 0.62 -11.65
80’s 11.07 0.26 0.45 30.26
90’s 14.44 0.19 0.80 20.33
* Non significant
Imports of raw cashew nuts have increased from 71,000 tons in 1956-57 to 0.25
million tons in 2000-01. Value of imports too have increased from Rs. 498 million to
Rs. 9.622 billion during the same period. Raw cashew nut imports registered a nonsig-
nificant growth rate of 0.01% per annum with a growth in value of 11.19% per an-
Page 84
Chapter - 06
Fig 6.2 Actual and estimated imports of raw cashew (Qty)
num. Unit value has significantly improved over years.
Import of raw cashew nut increased at the rate of 5.58% per annum while the value
registered 14.25% increase per annum before the implementation of AICS&CDP.
Estimated growth rates of raw cashew nut imports after AICS&CDP was 4.87% per Imports of raw
annum while the value was 17.66% per annum. cashew nuts in to
India increased
The import of raw cashew for 60’s, 70’s, 80’s and 90’s exhibited a compound growth both in quantity
rate of 4.56, -21.90, 23.41 and 9.55% per annum respectively, while the value regis- and value terms
tered a compound growth rate of 17.96, -11.65, 30.26 and 20.33% per annum re-
spectively.
The level of imports of raw nuts were highest in 1994-95 & 1999-2000, with the
purchases being at 0.228 million tons & 0.25 million tons and the value being at Rs.
6.90 billion & Rs 11.862 billion respectively. There has been an increasing trend in
Fig 6.3 Actual and estimated imports of raw cashew nuts in India
Page 85
Chapter - 06
imports in the 90’s. East African countries, particularly Tanzania and Mozambique have
been the major sources of supply of raw nuts to India.
As already mentioned, the level of imports have declined steadily in 70’s and 80’s. The
main reason for the decline in imports was the import policy of the government. Up
to 1970 private importers used to import large quantities of raw nuts at high prices
from the international markets. This prevented the import of raw nuts by majority of
the processors. In order to ensure equitable distribution of imported nuts, govern-
Though imports
ment of India introduced the policy of canalization. Under this policy the entire import
have shown
was centralised and canalised through the Cashew Corporation of India established in
growth, it was
1970. However, past experience has revealed that the new policy has impeded the
not a linear one.
imports. This is mainly because of unorganized collection of raw nuts in the East
Government
African countries. Further, the monopoly trade of imported nuts by the Cashew Cor-
policy of bring-
poration though controlled prices, dampened the enthusiasm of growers and collec-
ing raw cashew
tion agencies in procurement operations. It is reported that this policy encouraged the
nut in the canal-
East African countries to set up processing units. Further, the lower rates offered by
ised item came
the Cashew Corporation led to diversion of exports to competitors.
into play and as
has been the
In view of the difficulties experienced by the industry, the government of India has
experience with
revised the import policy permitting the import of raw nuts under Open General Li-
any canalised
cense (OGL). Therefore, there was an increase in growth rates of imports of cashew
product in India,
in 90’s.
this Government
policy too failed.
Further, the import of cashew is likely to suffer in the years to come, as more and
Cashew nut had
more countries are resorting to processing and imports of cashew nuts. International
to be brought
development agencies have recognised cashew cultivation and processing as an effec-
back to the OGL
tive poverty alleviation measures in developing countries. They are providing funds to
again
Africa and South east Asia for the development of cashew industry. Development of
the cashew processing in these countries would affect India’s import of raw nuts.
In addition to this, Vietnam has emerged as a major competitor to India in the East
Asian markets like Hong Kong, Taiwan, Japan, China, Malaysia, Thailand and Singa-
pore. India, which used to get around 30,000 tons of raw nuts every year from Viet-
nam until a few years ago, could not be able to import raw cashew nuts in three digits
from 1996-97 and in recent years it is almost stopped. Vietnam has also levied export
duty on raw cashew nuts. All these factors point to the fact that India cannot maintain
its prime position in the world market, by depending on imported raw cashew nuts
for making up the shortfall in the availability of raw cashew nut for the domestic mar-
Page 86
Chapter - 06
ket.
If we closely observe the data, it is evident that in future it is very difficult for Indian
processing factories to source raw cashew nuts from other countries as they have
started processing in their own countries. Even though the prediction shows there is
an upward trend in imports of raw cashews in the coming years, but it may not come
true due to unavailability of raw cashew nuts. Instead of spending nearly Rs.9 billion on
raw cashew nut imports every year, processing it and re-exporting, India can develop
commercial cashew plantation on wastelands and forest areas. By this there will be There is bad
stability in raw cashew availability and thus exports will be stabilised and the foreign news for the
exchange can also be saved along with wasteland development. Indian imports
of cashew in the
Reference future. Competi-
Sen S R. (1980). “Growth and Instability in Indian Agriculture”, Agricultural Situation tion is increasing
in India, 21(10): 827. in other countries
and the demand
Balasubramanian P.P., 1987, Cashew can be still promissive in India; The Cashew for the same pie
1(3) P.13-18. of raw cashew is
increasing.
Balasubramanian P.P., and Rema, M. (1996). Pricing and transaction trend of raw
Vietnam has
cashewnut in India. In National seminar on development of cashew industry in India.
become a major
PP.113-125. December 14-15, 1996, Bhubaneswar. Directorate of Cashewnut Devel-
competitor.
opment, Cochin, India.
Giridhar Prabhu G (1993), Marketing aspects of raw cashewnut in India, The Cashew,
July-Sept, 1993, pp:17
Prabhu G. (1996) Cashew in international trade- Problems and prospects. In Na-

tional seminar on development of cashew industry in India. Pp 138-143. 14-15 De-
cember 1996, Bhubaneswar. Directorate of Cashewnut Development, Cochin, India.
Rao V L. (1978). Problems of Ago-industries in Quilon District with reference to

cashew industry. Cashew Newsletter 11(10-12): 16-19.
Page 87
Page 88
Chapter - 07
Indian Cashew Nut Shell Liquid (CNSL) Exports
C
ashew Nut Shell Liquid (CNSL) can be considered as a potential natural
source for monomers for polymer production. Cardanol, its main
constituent possesses special structural features, which can be chemically
transformed into speciality and high value products/polymers.
The significance of CNSL is evident from the fact that CNSL and its products are cited
in a large number of patents, reports, monographs and reviews.
Demand and Supply

It is estimated that the approximate average annual world production of CNSL is
40,000-50,000 tons. Brazil is the largest producer with at least 20,000 tons in a normal
year. India is second at 12,000 tons, followed by Vietnam with 7,000 tons. Africa and
Indonesia each produce not more than 2,000 tons each. Others such as Myanmar,
Ivory Coast, Nigeria, Thailand, etc ., produce about 2,000 tons in all.
CNSL the by-
Table 7.1 The Major destinations of CNSL product of raw
Destination Quantity No of major buyers * nut processing
North America 20,000 tons 2 has very good
South America 2,000 tons 1 applications. A
Europe 9,000 tons 4
large number of
Asia 13,000 tons 3
CNSL based
Total 44,000 tons 10
products are
*Major buyer means one who is taking at least 1000 tons/year and buying
directly from producers. patented. Avg.
annual world
These figures can certainly be disputed and may be understated somewhat, but they
reflect what is seen by the major buyers in the world. production is
40,000 -50,000
The conclusion to note on supply and demand is that they are approximately in bal-
tons
ance. This is not surprising because those CNSL producers using the mechanical proc-
ess provide the base supply due to the by-product nature of their process. Areas such
in India pressing shell for the CNSL can be done depending upon demand which makes
the balance of the demand. The trend in India for shelling process makes it likely that
plenty of feed stock for CNSL is available to satisfy any shortfalls in production from
mechanical cracking. Therefore, the numbers will show supply and demand to be in
balance, but the inference should not be drawn that supply is tight.
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Chapter - 07
Uses of CNSL
In friction market
Over 75% of CNSL produced is used in friction particle. Friction particle is used to
modify the frictional properties of brake linings and pads. The other use of CNSL in
the friction market is as a binder resin for rail road block and drum linings.
In coatings market
This can be the relatively simple varnishes and air-drying resins or the glue related
compounds and curing agents.
As a modifier for Phenolic resins

The end use markets for resins vary. Examples are friction pad binders, wood binders
and rubber reinforcing resins etc.
Uses of CNSL
In production of Alkyl Phenol and 3-n-Pentadecyl Phenol are very wide. In
For many years this compound was an important part of some of the colour systems coatings, phenolic
of major photographic film manufacturers. resins, in inks &
rubber CNSL is
Other significant uses of CNSL occur in the ink and rubber technologies as well as an important
in polyurethane technology. Although potentials should be great for these mar- constituent
kets, the true potential has yet to reach.
The common theme running through all these applications is that CNSL provides unique
properties at an economical price. Over 70 years of research on CNSL based prod-
ucts have proved that few, large, truly unique applications have appeared where a
significant cost premium over competing technology can be obtained.
Future uses of CNSL

Coatings are slightly increasing;
Phenolic resin modification is slightly increasing;
Other new applications are also increasing. However, since the major use of CNSL is
in the friction industry, which is declining, the growth of the newer applications is com-
pensating for friction’s decline.
Specific applications
Considering the special structural features of Cardanol and the need for finding better
opportunities for an appropriate utilisation of CNSL, novel strategies were developed
to design speciality polymers from Cardanol. This includes methods such as Page 90
Chapter - 07
functionalisation, introducing free radically polymerisable groups, selective oxidation

etc.
Functionalisation
This involves introducing appropriate functional groups (Phosphate, Bromide etc) into
CNSL such that a certain specific properties are built up to ensure value addition.
Multipurpose resins obtained by phosphorylation and polymerisation

PCNSL is prepared by the phosphorylation and simultaneous polymerisation of CNSL
in a single step reaction without the use of solvent and catalyst.
Applications
As matrix resin for brake linings provides longer life and lower lade values
As adhesive for wood plywood and similar materials
PCNSL gives better bonding than phenolic resin and can also replace synthetic
adhesives of the water based vinyl resins
As raw material for the preparation of thermally stable non flammable friction By introducing
dust for brake linings appropriate
As a matrix resin for composites to replace costly phenolic resin functional groups
As raw material for the preparation of anorin-44 to CNSL, its
Can be used as leak proofs in concrete buildings applications
As a multifunctional additive for natural rubber become all the
Can be used to substitute foundry core oil more wider
Controlled bromination of PCNSL

Controlled bromination of PCNSL prepolymer gives a brominatied prepolymer
(BrPCNSL) which shows interesting flame-retardant properties.
Applications
As a FR (Flame Reatardants) additive for plastics, elastomers, natural rubber and
composites
As a matrix resin for composite materials
As surface coating for thermal insulation
As the material is black in colour and has a very low thermal conductivity it will
turn out as suitable coasting for the interior of cars and refrigerators for control-
ling heat.
Fully brominated CNSL (TBPTP)

This is obtained by the direct bromination of CNSL such that a total of seven bromine Page 91
Chapter - 07
atoms are introduced between the aliphatic (4) and aromatic (3) moieties.
Applications
As flame retardant (FR) additive for plastics, elastomers and composites
As low smoke flame retardant for EVA cable materials
As FR for other cable materials
As FR for surface coatings
As matrix resin for brake linings-longer life and lower lade values
CNSL and cardanol have found extensive uses in automotive brake lining and
clutch facing applications
Addition of CNSL resins/friction dust improves impact properties and reduces lade
considerably by dissipating heat faster than PF
It imparts better water repellence, which is required in wet condition
CF resins give rise to a softer material, which is more efficient in ‘cold wear’
CF resin costs 3 times lower than PF resins
As matrix resin
for brake-linings;
However, CNSL resin alone can not meet the required mechanical properties. Modi-
as flame retard-
fied CNSL resins such as Phosphorylated CNSL Prepolymer (PCNSL Anorin-35) are
ants for plastics
found to give considerable improvement in properties without additional cost (cost of
etc., the modified
PCNSL and CF or more or less same). PCNSL can substitute PF totally and meet all
CNSL emerges
the specifications of brake linings.
the scope of
applications
Additionally, it improves impact properties, reduces lade, and dissipates heat much
more efficiently than PF resin and has a better heat resistant than that of CF resin
alone. It has a bonding capacity 500 times than that of CF resin alone and also is supe-
rior to PF resin. As wear rate is much lower, PCNSL based brake linings are expected
to last longer. It provides requirements for vehicles lining in hilly tracts.
The cost of PF resin is about Rs.64/kg whereas the cost of PCNSL is only around
Rs.30/kg
As adhesive for wood plywood and similar materials

PCNSL can easily be made into emulsion form and can be used as binder for plywood
and wood materials. PCNSL is a typical product that has shown multi-functional prop-
erties such as adhesive for wood and plywood, matrix resin for brake lining and as
foundry core resin substitute. Among theses applications, the PCNSL as a bonding
agent appears to have industrial importance.
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PCNSL has been test proofed to give lap shear strength of about 40 N/m2 which is
above that of Phenol Formaldehyde resin and slightly below that of Poly (Vinyl Ac-
etate) based resins. The significance of the product becomes evident when the prices
of these products are compared. The approximate selling price (calculated based on
actual inputs) for PCNSL is around Rs.30-50/kg where as that of phenol formaldehyde
is Rs 60-80/kg and Poly (Vinyl Acetate) based resin costs Rs.150/kg. This technology,
however, requires refinement to apply at a commercial level.
Application as Flame Retardant

In the Cardanol, the presence of both hydrophobic and hydrophilic groups in the
same molecule makes it an ideal material that can be compatible with a wide spec-
trum of polymers. It has reactive sites for incorporation of flame retardant elements
such as Phosphorus and Bromine.
Cardanol the
It can also be polymerised to a prepolymer so that the problems of conventional FRs main constituent
elements such as migration to surface, blooming etc can be overcome. The resulting has reactive sites
wide spectrum FRs can be used for a variety of polymers so that definite cost reduc- for incorporation
tions can be achieved. of flame-retard-
ant element. The
It can be phosphorylated by quiet a simple reaction of Orthophosphoric acid/ Phos- residual friction
phoryl Chloride/ Phosphorus Pentoxide. BrCNSL is a resin containing both Phospho- dust from CNSL
rus and Bromine that can provide self-extinguishable type protection from fire. When has good applica-
five Bromine atoms were introduced by controlled bromination, the resin showed tion. CNSL has
excellent flame resistance. applications in
foundry core oil
Cardanol and friction dust from CNSL too
A process of distillation of CNSL to get Cardanol and conversion of the Residol into
friction dust has been worked out for technology transfer.
Foundry Core Oil and other chemicals

Application of CNSL as foundry core oil shows its versatility. CNSL resins are known
to impart good scratch hardness to sand cores after baking them. It also provides
resistance to moisture and weathering, good green strength and surface finish to
moulded articles. It particularly replaces linseed oil in this respect. PCNSL when used
as core binder was found to improve collapsibility of the core and enhances bench life
and antidamp behaviour in comparison to conventional core binders.
As multifunctional additive for natural rubber (NR)

The Anorin-38 improves processing and curing behaviour and enhances tensile prop- Page 93
Chapter - 07
erties, positively affects fatigue life, acts as anti-oxidant and anti-ozonant, marginally
enhances flame retardancy and thermal properties, reduces cross link density so that
poly-sulphide linkages increases and increases self-adhesion apart from acting as a
palsticizer and process aid. It is evident that the additives added to NR can be effec-
tively be reduced to a minimum so that a cost reduction can be achieved.
FRLS EVA Cable Material

FRLS EVA cable materials refer to a low smoke flame retardant cable material based
on Ethylene Vinyl Acetate copolymer containing TBPTP as flame retardant formu-
lated and compounded to get low smoke and self extinguishing flame retardant char-
acteristics maintaining all the other properties such as mechanical, electrical, ageing,
acid emission etc. within specifications. The price of DBDPO is Rs. 280/kg compared
to the cost of production of TBPTP of Rs.120/kg.
Futuristic products from CNSL

CNSL based surface coatings possess excellent glossy surface finish with optimum
levels of toughness and elasticity As an additive
CNSL resin is added to synthetics by paint/varnish manufacturers to control prop- in natural rub-
erties and to reduce cost ber; as flame
Its anti-termite and anti-microbial properties are well known from very ancient retardant cable;
times as its use in protecting bottom of the boat hulls and for in other
Because of its dark colour its outlets are restricted to anticorrosion primers, black various product
enamels, marine paints etc CNSL applica-
Cardanol grafted cellulose: The grafted product is excellent water repellent and tions seem to be
resistance to acid ageing very for-fetching
It is known that CNSL has the structural requirements for developing into high value
polymers. Development of transparent resin from CNSL has the maximum possibility
for ultisation as an industrial technology. This resin can be utilised not only in surface
coatings, but also as a high tech products such as photo resistant polymers, polymer
supports etc. Applications exists as aqueous emulsion for bonding wood and plywood
material.
Important Factors for CNSL Buyers

First in bulk handling to ship atleast 1,000 tons in a parcel tanker. No major user of
CNSL can afford the efficiency and the cost associated with drums or ISO containers.
Second item is related to the CIF terms for the bulk shipping. This is because buyers
have little influence at the loading ports on loading rates and berthing priority resulting
in significant demurrage costs are incurred. The third is stable pricing.
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Chapter - 07
Periodically the CNSL market has spiked over the years for no logical reason. At-
tempts to drive up the price in the spikes have only resulted in the formulating non
CNSL based products as competing technologies are used. Regaining the CNSL prod-
uct’s position when pricing returns has usually not been quick. The contribution of
CNSL to the cashew nut processor’s normal economics is virtually insignificant, as are
the costs of production. It is believed that pricing stability will be obtained in the future
as different parts of the CNSL producer’s world compete for the few buyers who
purchase the CNSL.
Another important feature is that CNSL buyers require predictable quality. Most
CNSL producers put little effort in this area leaving it to the buyers to try and figure
out differences.
Though CNSL
The current specifications do not identify the parameters that would alert a buyer
has such wide
to adjust his process properly. Therefore, one has to put all his efforts into character-
applications;
ising the CNSL after the receipt and then making adjustments.
efforts to encour-
age its usage has
The desire of a CNSL buyer is readily available supply keeping in mind the first require-
not been satisfac-
ment, bulk shipping. A large portion of the CNSL cost is transportation to the user.
tory. Stable
Efficient freight rates lie with larger shipments and sometimes with opportunity (a ship
pricing, restrict-
with space). Adequate inventories at the shipment point would allow the buyer to
ing supply will
take advantage of these possibilities.
only curtail any
effort to reap the
In summing up, the goal of the CNSL producers should be to provide an economical,
benefits of cnsl
stable, source of CNSL to the market. Efforts to drive up price or restrict supply on a
long or short-term basis will only kill the end market. Most of the CNSL based prod-
ucts are in markets that require long approvals. Therefore, once removed from the
formulation with alternate technology, regaining a portion for the CNSL based tech-
nology is difficult if not impossible.
Direction and Trends of CNSL Export
While studying the role of cashew in the export trade, it is necessary to study the
contribution made by this by-product Cashew Nut Shell Liquid (CNSL).
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Chapter - 07
Table 7.2 Directionwise exports of cashew nut shell liquid from India
1996-97 1997-98 1998-99 1999-2000 2000-2001
Countries Qty Value Qty Value Qty Value Qty Value Qty Value
Tons (Rs.mln) Tons (Rs.mln) Tons (Rs.mln) Tons (Rs.mln) Tons (Rs.mln)
Korea Rep. 263 4.4 616 11.1 185 4.6 715 17.1 697 13.5
USA 0 0 2,095 27.2 100 1.2 620 7.9 653 7.6
Spain 0 0 0 0 0 0 0 0 469 7.4
Indonesia 160 2 0 0 0 0 128 2.1 192 2.9
Russia 0 0 0 0 0 0 0 0 79 2.6
Japan 848 9.2 1,072 14.5 233 4.1 291 6.3 66 1.8
UK 357 10.9 586 17.1 923 24.9 23 0.9 53 1.9
Romania 0 0 0 0 0 0 96 1.8 0 0
Belgium 0 0 0 0 90 1.3 32 0.6 0 0
South Africa 0 0 30 0.7 0 0 16 0.5 0 0
Malaysia 10 0.2 0 0 0 0 0 0 0 0
Germany 97 1 0 0 0 0 0 0 0 0
Others 0 0 47 1.1 381 6 9 0.2 37 1.2
Total 1,735 27.7 4,446 71.7 1,912 42.1 1,930 37.4 2,246 38.9
Graph 7.1 Actual and estimated exports of CNSL from India (Qty)
The export of CNSL has been highly fluctuating over the periods. The growth rates
calculated for exports of CNSL were statistically non significant (qty. & value) but the
unit value in rupees registered a growth rate of 8.87, 12.54 and 10.08% per annum
for whole period, for 80’s and 90’s which, were statistically significant. The CNSL
exports decreased from 6,005 tons in 1982-83 to 2,246 tons in 2000-01. Where as in
terms of value it has increased from Rs.18 million to Rs.38.9 million during the same
period.
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Graph 7.2 Actual and estimated exports of CNSL from India (Value)
There is one big

problem with
harnessing the
Table 7.3 CAGR of CNSL exports from India CNSL advan-
Description Intercept Slope R2 Compound Annual
tages. The proper-
Growth Rate (%) ties of raw CNSL
CNSL ( Quantity ) and cardanol
Whole Period (1981-82 to 2000-01 ) 8.53 -0.05 0.27 -4.72 material are not
80’s 8.53 -0.06 0.21 -6.19 consistent enough
90’s 8.62 -0.13 0.37 -12.36 in each batch and
CNSL ( Value )
such variations
Whole Period (1981-82 to 2000-01 ) 9.79 0.04 0.23 3.93
acts as a deterrent
80’s 9.66 0.05 0.13 5.59
90’s 10.53 -0.02 0.02 -2.30
in gaining con-
sistent quality in
Variations in the properties of the raw materials from place to place makes serious the end product
impediments in its developments particularly for products with specific property pro-
files.
CNSL and its distillation product Cardanol are mixtures of a number of components
and hence their polymer products may have variations in property profiles from batch
to batch.
There is a long way for Indian CNSL industry to develop.
Reference
Anon (1978). Cashew Nut Shell Liquid: A survey of world patents, The Cashew Ex-
port Promotion Council, Cochin, India.
Anthony M.Stonis, President, Cardolite, Current Status of the Cashew Nut Shell
Liquid Market from a Buyer’s Perspective, a paper presented at World Cashew Con-
gress held at Cochin, 2001. Page 97
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Direction and Changing Patterns of Cashew Trade

- An Application of Markov Analysis
Introduction
I
ndia is the largest producer of raw cashew, the largest manufacturer of
cashew kernel, the largest exporter of cashew kernel, the largest importer
of raw cashew and the second largest consumer of cashew kernel in the
world. India is the only importer of raw cashew nuts in the world to produce cashew
kernel.
India exports cashew kernel to over 60 countries. The major consumers of Indian
cashew kernel are USA, Netherlands, Singapore, Japan, UK, Australia and UAE. The
rest of the countries are Germany, France, Russia etc. (Table. 8.1)
Table 8.1 Direction of Indian cashew kernel exports (2000-01)

India cannot be
Countries Qty Value
having as many
Tons (Rs. mln)
firsts in any
USA 41,371 9,265
Netherlands 16,070 3,801 sector as it has in
UK 6,415 1,487 the trade of
Japan 5,369 1,220 cashew. From 1st
UAE 3,687 837 in manufacturing
France 2,343 553
of kernel to 1st in
Saudi Arabia 1,630 377
imports of raw
Canada 1,463 325
Israel 1,205 292
nuts India is
Singapore 1,297 242 definitely up
Italy 1,106 262 there and in the
Spain 1,058 248 thick of happen-
Germany 922 200 ings in this trade
Australia 762 173
Hong Kong 626 156
Greece 586 139
Bahrain 454 95
Kuwait 230 57
Russia 352 58
New Zealand 229 55
Norway 175 42
Lebanon 245 46
Chinese Taipei 127 30
Malaysia 111 20
Korea Rep. 83 21
Others 2,219 527
Total 90,135 20,527
Source: D.G.C.I & S, Calcutta. Page 99
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Chapter - 08
Primarily, the export of cashew kernel depends upon imports of raw cashew nuts and
domestic raw cashew nut production. Cashew kernel exports, by and large are not
stable due to the unavailability of raw nut for imports and unpredictable production.
This scarcity of raw cashew nut leads to changes in export pattern of cashew kernel to
different countries. In this context, it is appropriate to study changes in exports of
cashew kernel to different countries with a suitable econometric model. This econo-
metric analysis not only helps to know the trend in sustaining existing market over
study period but also to know the shift in market shares from one country to another
over a period of time.
Markov chain
analysis has been
Objectives
used to study the
An attempt is made to measure the changes in the patterns of exports in cashew
direction and
kernel from India to different countries with the following specific objectives.
changing pattern
1. To study the dynamics of changes in exports of cashew kernel by estimating the
of Indian cashew
probability of retention / loss of markets by developing a suitable one-step and n-
kernel exports
step Markov chain model.
2. To project future exports of Indian cashew share of different importing countries,
and
3. To project the future exports of cashew kernel from India.
Data
There are seven major Indian cashew kernel importing countries consistently, namely,
the USA, Netherlands, Singapore, UK, Australia, Japan and the UAE. The exports to
remaining countries are pooled under ‘other countries’. The data used for the study is
presented in the Table 8.2. Most of the Indian cashew kernel goes to the USA and
Netherlands.
Table 8.2 India’s exports to major destinations (in terms of value - Rs. mln)
USA Netherlands UK Japan UAE Singapore Australia Others Total
1995-96 3,508.3 2,098.3 428.6 1,005.5 384.1 235.0 115.1 4630.2 12,405
1996-97 4,555.5 3,215.0 797 991.0 405.2 292.4 179.5 2419.5 12,855
1997-98 5,360.0 3,328.0 957 970.0 453.0 182.0 351.0 2360.0 13,961
1998-99 7,219.8 3,034.0 1,172.3 1,087.0 644.8 218.5 401.3 2522.9 16,301
1999-00 12,328 5,026.0 1958 1,375.0 844.0 277.0 459.0 3428.0 25,695
2000-01 9,264.6 3,801.0 1,487.1 1,219.7 836.5 241.7 172.5 3503.9 20,527
Source: D.G.C.I & S, Calcutta.
Refer Appendix (page # 143) for methodology
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Chapter - 08
Results and Discussion

One-step transition probabilities
The transitional probability estimated through MAD (Minimum Absolute Deviation)
method is presented in Table -8.3. It is evident that USA is one of the most stable
countries among major importers of Indian cashew kernel as reflected in high prob-
ability of retention at 0.6695, i.e., the probability that USA retains its share from one
period to another period is about 67%. Similar interpretation could be made for
Netherlands with probability of retention of 0.3779, UK with the probability of reten-
tion of 0.0271 and “Other countries” with the probability of retention of 0.2918. On
the contrary, Japan, UAE, Singapore and Australia have a probability of retention of
zero indicating that they are the unstable importers of Indian cashew kernel.
Table 8.3 One step transitional probability for exports of cashew kernel
USA Netherlands UK Japan UAE Singapore Australia Others

USA 0.6695 0.0669 0.0927 0.0328 0.0780 0.0113 0 0.0486
Netherlands 0 0.3779 0 0.1437 0 0 0.0912 0.3872
UK 0.9600 0 0.0271 0 0 0 0.0128 0
Japan 0 0.6265 0.3735 0 0 0 0 0
UAE 1 0 0 0 0 0 0 0
Singapore 0 1 0 0 0 0 0 0
Australia 0.6925 0 0.3075 0 0 0 0 0
Others 0.2529 0.2613 0.0045 0.1165 0.0252 0.0478 0 0.2918
USA lose to the tune of 9.27% to U.K, 7.80% to UAE, 6.69 % to Netherlands,
4.86% to ‘Other countries’, 3.28% to Japan and 1.13% to Singapore whereas it gains
full share of UAE, 96 % from UK, 69.25% from Australia and 25.29% from “Other
countries”. Therefore, USA retains its original share of 66.95% and lose about 33.05% USA is the most
to Netherlands, Singapore, UK, Australia, Japan, Singapore and to ‘Other countries’. stable importer of
Indian cashew
The major gainer among importers of Indian cashew kernel over a period of time where as Japan,
after USA is Netherlands, which is having a transfer probability of 1 from Singapore, UAE, Singapore
0.0669 from USA, 0.6265 from Japan and 0.2613 from ‘Other countries’. That is, the and Australia are
probability that Netherlands would gain in the export share of Indian cashew kernel the unstable
from one period to another at the cost of Singapore, USA, Japan, and ‘Other coun- importers
tries’ are 1, 0.0669, 0.6265, and 0.2613 respectively. Whereas it loses 38.72% to
“Other countries”, 14.37% to Japan and 9.12% to Australia. Therefore, Netherlands
loses about 62.21%.
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Chapter - 08
UK sustains its original share of 2.71% and gains 37.35% from Japan, 30.75% from
Australia, 9.27% from USA and 0.45% from “Other countries”. Whereas it loses 96%
to USA and 1.28% to Australia. Therefore, UK loses about 97.28%.
Japan could not retain its original share and gained 14.37% from Netherlands, 11.65%
from “Other countries” and 3.28% from USA. Whereas, it lost its 62.65% share to
Netherlands and 37.35% to UK.
UAE could not retain its original share and lost its entire share to USA. While it has
gained 7.80% from USA and 2.52% from “Other countries”.
Singapore could not retain its original share and lost to Netherlands its entire share,
whereas it has gained from “Other countries and USA by 4.78%, 1.13% respectively.
Australia could not sustain its original shares, it has gained 9.12% from Netherlands
and 1.28% from UK. Whereas it has lost its share to the tune of 69.25% to USA and
30.75% to UK.
USA is the
‘Other countries’ retained their original share of 29.18% and gained 38.72%, and largest importer
4.86% from Netherlands and USA respectively, whereas it has lost 26.13%, 25.29%, of Indian cashew
11.62%, 4.78%, 2.52%, and 0.45% to Netherlands, USA, Japan, Singapore, UAE, and kernel followed
UK respectively. Therefore, the total loss of ‘Other countries’ is 70.82%. by Netherlands,
UK, Japan in
Indian cashew kernel exports to major importing countries that order
Using the one step transition probability, shares of major importers of Indian cashew
kernel were estimated and the same was compared with observed export shares
(Table 8.4). A close look at the observed and expected shares in all the countries has
revealed that the differences was by and large small. The calculated chi square value
(χ2) was less than the table value at 42 degrees of freedom indicating that the ob-
served and the predicted proportions of exports of cashew kernels are identically
distributed. That means, the observed proportions of export shares are consistent
with the predicted shares of exports, which were derived from the Markov process
validating the use of the Markov chain model for estimating the market shares of
different countries by using transitional probabilities.
The USA and Netherlands, two important importers of Indian cashew kernel together
account for about 64% of the export share. USA, the major importer in 1995-96 with
about 28% share in the total Indian exports is maintaining its status as the major im-
porter of Indian cashew kernel with higher share of about 45% in 2000-01. The
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expected shares of the USA, estimate based on Markov model for different years, is
not showing much difference from the observed values for most of the years indicat-
ing the validity of the fitted model.
Table 8.4 Observed and expected shares (%) of cashew kernel exports from India
USA Netherlands UK Japan UAE Singapore Australia Others
Obs Exp Obs Exp Obs Exp Obs Exp Obs Exp Obs Exp Obs Exp Obs Exp
1995-96 28.28 16.92 3.46 8.11 3.10 1.89 0.93 37.33
1996-97 35.44 35.43 25.01 25.01 6.20 6.20 7.71 7.71 3.15 3.15 2.27 2.10 1.40 1.59 18.82 18.82
1997-98 38.39 38.56 23.84 23.84 6.85 6.85 6.95 6.95 3.24 3.24 1.30 1.30 2.51 2.36 16.90 16.90
1998-99 44.29 41.55 18.61 21.65 7.19 7.19 6.67 6.66 3.96 3.42 1.34 1.24 2.46 2.26 15.48 16.03
1999-00 47.98 46.13 19.56 19.56 7.62 7.62 5.35 5.93 3.28 3.85 1.08 1.24 1.79 1.79 13.34 13.88
2000-01 45.13 47.33 18.52 18.52 7.24 7.26 5.94 5.94 4.08 4.08 1.18 1.18 0.84 1.88 17.07 13.80
2001-02 -- 46.15 -- 19.38 -- 6.94 -- 6.13 -- 3.95 -- 1.33 -- 1.78 -- 14.35
(χ2 cal : 3.131418, χ2 tab at 42 d.f, 1% :66.21)
In case of the USA, the export share has increased from about 28% to about 45%
during the study period. The other countries, which have significantly increased their
shares during the study period, are UK (from 3.5% to 7.2%), Netherlands (from
16.9% to 18.5%) and UAE (3.1% to 4.1%). The countries, which have significantly
decreased their shares during the study period, are Japan (from 8.1% to 5.9%), Aus-
tralia (from 0.9% to 0.8%) and Singapore ( from1.9% to 1.2%). The differences in
export shares between observed and expected values in these countries were by and
The differences in
large found to be small.
export shares
There are some differences in observed and expected export shares in few years in between observed
countries like USA, Netherlands and “Other countries” which are mainly due to limi- and expected
tation of the model that the present estimates depend only on the previous year’s values obtained
observation. from Markov
were found to be
Forecasting of exports of cashew kernel
small
The export shares of Indian cashew kernel to different countries were predicted for
different time periods viz., 2001-02, 2002-03 and 2003-04 (Table 8.6) by using one-
step, two-step and three-step transitional probabilities respectively (Table 8.5). The
one-step transitional probabilities are used with the n-step transitional probabilities (in
the present study it is 2-step and 3-step) to predict the export shares for ‘n’ years
from now (i.e. for 2002-03 and 2003-04). These n-step transitional probabilities indi-
cate the possibility that exports will switch over from one country to another country
and probability of retaining exports of a country after n-years from now.
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Chapter - 08
Table 8.5 Transitional probabilities for exports of cashew kernel to different countries
2-step transitional probabilities (n = 2)
USA Netherlands Singapore UK Australia Japan UAE Others
USA 0.6276 0.1147 0.0771 0.0373 0.0535 0.0099 0.0073 0.0727
Netherlands 0.1611 0.3340 0.0835 0.0994 0.0098 0.0185 0.0345 0.2593
Singapore 0.6777 0.0643 0.0937 0.0315 0.0749 0.0109 0.0003 0.0467
UK 0.3586 0.2367 0.0101 0.0900 0.0000 0.0000 0.0619 0.2426
Australia 0.6695 0.0669 0.0927 0.0328 0.0780 0.0113 0.0000 0.0486
Japan 0.0000 0.3779 0.0000 0.1437 0.0000 0.0000 0.0912 0.3872
UAE 0.7589 0.0464 0.0726 0.0227 0.0540 0.0078 0.0039 0.0337
Others 0.2727 0.3127 0.0684 0.0798 0.0271 0.0168 0.0239 0.1986
3-step transitional probabilities (n = 3)

USA Netherlands Singapore UK Australia Japan UAE Others
USA 0.5711 0.1376 0.0768 0.0456 0.0508 0.0106 0.0115 0.0962
Netherlands 0.2872 0.2855 0.0661 0.0835 0.0191 0.0142 0.0315 0.2128
Singapore 0.6306 0.1125 0.0775 0.0369 0.0541 0.0099 0.0071 0.0715
UK 0.3541 0.2332 0.0873 0.0741 0.0341 0.0156 0.0217 0.1799
Australia 0.6276 0.1147 0.0771 0.0373 0.0535 0.0099 0.0073 0.0727
Japan 0.1611 0.3340 0.0835 0.0994 0.0098 0.0185 0.0345 0.2593
UAE 0.6430 0.0992 0.0822 0.0355 0.0601 0.0102 0.0052 0.0647
Others 0.3421 0.2551 0.0652 0.0770 0.0263 0.0126 0.0294 0.1923
The export of cashew kernel from India is likely to increase to about 20,527 million
tons during 2002-03. USA and Netherlands will continue to be the major importers of
Indian cashew kernel in next decade also. But, it is expected that the USA is likely to
have higher share at 48% during 2006-07, while Australia is likely to sustain the same
level of its shares during 2006-07, which is at 1.78%. Netherlands, Japan and Singa- USA A & Nether-
pore are expected to decrease their shares gradually to 18.52%, 5.79% and 1.18% lands will con-
respectively during 2006-07 from 19.38%, 6.13% and 1.33% at 2001-02. tinue to be the
biggest importers
Table 8.6 Expected shares of exports of Indian cashew kernel by different of Indian cashew
importing countries (%) kernels. So focus
2001-02 2002-03 2003-04 should be on
USA 46.15 46.89 47.21 strengthening the
Netherlands 19.38 19.00 18.82 links in cashew
UK 6.94 7.36 7.39 trade with these
Japan 6.13 5.92 5.88 countries
UAE 3.95 3.97 4.01
Singapore 1.33 1.19 1.19
Australia 1.78 1.86 1.83
Others 14.35 13.81 13.67 Page 104
Chapter - 08
Conclusion
USA and Netherlands are stable importers of Indian cashew kernel with high probabil-
ity of retention while UK is moderately stable importer. Singapore, Australia, Japan
and UAE were the unstable importers.
USA and Netherlands will continue to be the major importers of Indian cashew kernel
in future also although other importers like UK, and UAE are likely to increase their
share at the cost of Netherlands, Japan and Singapore.
References
Atkin M. and Blandford D., (1972), ‘Structural changes in import shares for apples
in the United Kingdom’. European Review of Agricultural Economics, 9(1): 313-326.
Cashew journal, various issues, Export Statistics. Published by Directorate of Cashew

nut Development (GOI), Ministry of Agriculture, Cochin.
Dent W. T. (1967), ‘Application of Markov analysis of international wool flows’. Re-

view of Economics and Statistics, 49(2): 613-616.
Fisher W. D. (1961), ‘A note on curve fitting with minimum deviations by linear pro-
gramming’. Journal of the American statistical Association, 56: 359-363.
Kendall M. G. and Stuart, A. (1961), ‘The advanced theory of statistics’. Charles

Griffin and Co. Ltd. London.
Kulkarni (1999), ‘Cash (new) for farmers’. Deccan Herald, October 4, 1999, P-8.
Lee T. C., Judge G. G. and Zellenner A. (1970),’Estimating the parameters of the

probability model form aggregate time series data’. North Holland publishing Co.,
Amsterdam.
Power A. P. and Harris (971), ‘Application of Markov chain to farm type structure
data in England and Wales’. Journal of Agricultural Economics, 22: 163-177.
Prasad Y., Lalith Achoch and Radha Y. (1997), ‘ Farm technology in relation to
changing structure of land-holdings’. Agricultural Economics Research Review, 10(2):
78-87.
Richard, Charles, David (1996), ‘Markov Analysis’, Quantitative Approaches to Man-

agement. 5th edition, P. 657-685.
Sreenivasa Murthy D. and Subrahmanyam K. V. (1999), ‘Onion exports markets

and their stability for increasing India’s exports: Markov chain approach’. Agricultural
Economics Research Review, 12(2): 118-128.
Page 105
Chapter - 08
Veena U. M. (1992), ‘An Econometric analysis of Indian coffee exports. Unpublished

M.Sc. Thesis, University of Agricultural Sciences, Bangalore.
Wagner H. H. (1959), ‘Linear programming for regression analysis’. Journal of the

American Statistical Association, 54: 206-212.
Wilson W. W., Woo, W. W. and Carter C. A. (1990), ‘Importer loyalty in the inter-
national wheat market. Journal of Agricultural Economics, 41(1): 94-102.
Page 106
Chapter - 09
Price Behaviour of Indian Cashew Kernel

Peek at Indian Cashew Kernel Price
P
rice fluctuations are common phenomena in any commodity. But in a
commodity like cashew, which does not have multiple uses, fluc-
tuations in prices reflect not only the factors of demand and supply but also
the economic costs or inefficiencies. As prices reflect information, they can reveal
inconsistencies in information that flows from producers to consumers and vice versa.
Prices are signals of shortages and surpluses but if they come in regular cycles they are
the first prey to speculation. While speculation has an economic function, it should not
come in the way of other necessary ingredients required for the flow of goods and Price fluctuations
that is performance,” says Giridhar Prabhu, former President of Manglore Cashew in any trade are a
Manufacturers Association. result of demand
and supply
It is probably due to this that the American association of cashew’s the standard inter- functions. From
national price for cashews is determined in terms of US$ per lb, while the whole 20's till 60's
world other than USA is following the metric system, the price is still standardised to cashew prices
this unit. were stable with
less fluctuations.
During 1920- 1960 period the price trend for cashew kernel in the international But 70's was the
market has fluctuated in the region of 40 to 50 cents per lb. The cashew trade saw a most tumultuous
steady movement with minor fluctuations during 1960’s. The price has increased and happening
from 50 cents a lb to 75 cents a lb during this decade. time in cashew
with imports of
The 70’s raw nuts to India
The decade of the seventies could be described as tumultuous in the cashew trade. decreased
Cashew trade peaked in the year 1974. Consequently, state control of trading of raw
cashew and embarking on manufacture of cashew kernels by raw cashew exporting
countries halted the export of raw cashew from the producing countries to India. The
result was for the first time a shift in unit value to a higher trajectory. Unit prices were
in the range of US$ 1.00 to 2.5 per lb.
Another reason for this was marketing a large volume of cashew kernels to the erst-
while Soviet Union. Western markets had to hike store prices. Thus a core demand
for cashew kernel at a price was established.
Page 107
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Chapter - 09
The 80’s
The trend in 1980’s was one of consolidation and development of the Indian crop.
Better prices offered to Indian raw cashew producers, induced cultivation. A World
Bank programme went underway which holistically looked into the agricultural side of
cashewnut. There were cashewnut development programmes in many other coun-
tries in West Africa and South East Asia. The seed of the growth in the coming decade
was planted in this decade. The Soviet market was still active. But what was more
important was the emergence of the domestic market in India as an attractive and
expanding market. The Indian consumption had a phenomenal annual growth from
1980 till 1998. This was marked more in the broken grades and grades of higher
counts. Prices fluctuated widely between US$ 1.7 to 3.45 per lb.
Slowly and surely, India’s imports picked up, back from an all time low in 1984 to the
present level of 325,000 tons in the year 2001. A lot of credit is due to Indian firms and If 70's was bad
their representatives, traders based in India and in those exporting countries. Trading 80's was the
firms in service countries especially in Singapore and Europe offered raw cashews out future for the
of all developing countries. Indian manufacturers went out to source them and brought Indian cashew.
them into India. This has increased the capacity utilisation of factories and met the New develop-
growing demand of cashew kernels. ments like emer-
gence of domestic
Fig 9.1 Price movement of W320 cashew nut FOT Rotterdam
market, increase
(1983 - 2001 - Quarterly)
in local con-
sumption and
also imports of
raw cashews
have taken place
Source: CEPC, India (1983-1986), Man Product Rotterdam B.V (1987-1996), CEPC, India (1997-2001),
Page 108
Chapter - 09
The 90’s
The decade of 1990’s saw a phenomenal growth in the European market. The appre-
ciation of European currencies against the US Dollar saw cashew prices drop in real
terms. The Dutch market grew enormously in per capita consumption. Rotterdam in
Netherlands became the focal market for the whole of Europe. Trading companies in
Rotterdam and London became the main suppliers to Europe.
The year 1999 ended with a bang with prices touching over US$ 3 per lb. However
the beginning of the new millennium again witnessed sliding prices in all the grades.
The 20’s
The 90's saw
The year 2000 has not been kind to the global cashew industry. The entire trade in the
European cur-
Value Chain from producers, industry and traders has suffered in the process of a
rency apprecia-
significant decline in prices.
tion, drop in
cashew prices
It is said that in a market economy, “under certain conditions, including perfect com-
and again peak-
petition, no person is better off without any other person being worse off”. The same
ing up. The
is true in this case that the net benefit of decline in prices will go to the consumers.
2000's was again
bad for the
The Indian cashew prices for the year 2000 have been on a one way course of steep
cashew industry.
decline from the peak in the beginning of the year at US$3.05 per lb to a 16 year low
The pries were on
of US$1.95 per lb at the end of December 2000.
a steep decline,
kernel market
The kernel market began to decline in February – March and continuously through-
declined hitting
the Indian manu-
Fig 9.2 Average value of RCN imported into India facturers very
badly
out the year due to pressure on supplies. This hit the Indian manufacturers very hard.
The increase in supply from Brazil was due to a recovery in Brazil’s crop of 1999 over Page 109
Chapter - 09
Fig 9.3 Average unit value of CK exported from India
1998 to the extent of 75,000 tons (165,000 tons in 1999 from 90,000 tons in 1998).
This resulted in a supply of additional material in comparison to a lean supply from
Its time for the
1998 crop.
policy makers to
have some serious
The Cashew Kernel market experienced a double some result both by increased
thinking and
supply on one hand and decreased consumption on the other.
revive the local
cashew industry
The European factor introduced tacitly a certain amount of rivalry between USA trad-
ers, who were traditional buyers and the European buyers. The decades old agency
system in the USA went into a decline.
Russia was buying about 75% of Indian cashew. But their sudden withdrawal from the
market resulted in the fall in prices.
The channel of distribution both from origin countries and within consuming countries
is more or less the same. The agencies shifted from USA to India in the case of Indian
exporters.
There is a slow and steady growth in the global production of raw cashew. This has a
direct bearing on the increase in supply of cashew kernels. This should be addressed
from the point of generating additional consumption and not merely to seek lower
price level. The universally liked cashew kernel is considered as a “luxury” nut and is
priced accordingly. Whether it will go as a necessity, depends on the efforts of plan-
ners and policy makers whether they are corporate, government or institutional lev-
els.
Given the historic values for the last decade, policy makers should be very careful in Page 110
Chapter - 09
assessing whether the cashew prices have reached equilibrium levels. The prices can
bounce back on demand considerations or supply aberrations.
Market Integration
Cashew is an export-oriented commodity and the domestic market prices are influ-
enced by the international prices. In order to remain competitive in the world market
a closer monitoring of prices in both domestic and overseas market is necessary, so
that it can respond quickly and effectively to the changes in the demand and supply
conditions. This is reflected by the efficiency with which prices are transmitted and
adjusted between the geographically separated markets. In other words domestic
prices should not stray away from international prices but on the contrary it should be
well integrated with the world prices, so as to provide the right signal. The nature of
market relationship was studied by examining the integration between domestic and
international prices. The cointegration
is a useful analy-
In the present context, cointegration analysis is adopted to examine whether the sis to see whatever
domestic market is integrated with the international market more specifically, the prices align with
USA and Netherlands for cashew kernel. This is studied by testing whether the Law the international
of One Price (LOP) holds in these markets. Cointegration can be regarded as an market prices or
empirical manifestation of a long-run relationship between variables. Cointegration not. This is im-
between prices was evaluated by regressing the domestic prices of cashew on the portant because
overseas market prices using annual price series from 1980 to 2001. The residuals of over depend-
were examined for the order of integration. (Refer Appendix Page # 146 for methodology) ence on exports
The first step is to find the order of integration of the different price series i.e., USA,
Netherlands, International reference price and Indian price. They all have to be
integrated to the same order to be considered for cointegration tests.
In determining the order of integration of the price series under study, the Augmented
Dickey Fuller (ADF) test was employed. The result of the degree of integration of
price series is presented in Table - 9.1 computed in the framework of the Dickey
Fuller test.
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Chapter - 09
Table 9.1 ADF test for stationarity of the price series for cashew kernel
(5% Desired Error Level)
Sl. No. Price series Test Statistic Test p-value
under Null Statistics (Error level
Hypothesis Calculated achieved)
1 India 5.18 3.96 >10%
2 USA 5.18 3.29 >10%
3 Netherlands 5.18 2.11 >10%
4 World Reference Price 5.18 2.35 >10%
Result: P-value > Desired Error Level. Hence, we cannot reject the Null hypothesis that the series has
a unit root - and hence are not stationary.
The above table shows the original price series are not stationary because regression
coefficient values are higher than D.F. critical value. This means the null hypothesis
cannot be rejected. Therefore series are not having unit root. Since the data is not
stationary, it has to be stationarised before proceeding with Cointegration tests. There-
fore, all the price series were differenced once again. Augmented Dickey-Fuller test
was done again on the differenced series to find whether the differenced data has a The results of
unit root. Cointegration
shows domestic
Table 9.2 ADF test for stationarity of the price series after 1st difference
(5% Desired Error Level) prices align with
USA while not so
Sl. No. Price series Test Statistic Test p-value
with Netherlands
under Null Statistics (Error level
1 India 5.18 10 <1%
2 USA 5.18 9.57 <1%
3 Netherlands 5.18 10.06 <1%
4 World reference price 5.18 8.91 <1%
Result: P-value < Desired Error Level. Hence, we reject the Null hypothesis that the series have a unit
root - and hence they are stationary.
It is found that all the price series are stationary after first difference. The condition for
checking the cointegration of the price series is that all the price series being analysed
should have the same order of integration. In this case all the 4 series are integrated to
the order of 1.
The second step in the process is to regress the Indian price on the other three price
data separately along with a constant. Wherever the constant is not significant as indi-
cated by the p-value associated with the test statistic corresponding to the constant, it
is dropped and the regression is rerun with the independent variable alone. In these
price series both the constant and the co-efficient corresponding to the independent
variable are significant and where the constant is not significant the co-efficient of the Page 112
Chapter - 09
independent variable is significant.
After doing this regression, the residuals are taken and checked for unit roots in the
residual using the same Augmented Dickey-Fuller test. The criterion for saying the
prices are co-integrated is that the residuals should be stationary. The residuals are
stationary in the case of India-USA price comparison and in the case of India–Interna-
tional Reference Price comparison. Hence it can be concluded that these two sets of
prices are co-integrated. The residuals exhibit a unit root in the case of India- Nether-
lands price comparison and hence indicate that these two price series are not co-
integrated.
The extent of integration of the price in the Indian market with the USA, Netherlands
and International Reference Prices was examined by testing the deviation of the two
price series for its order of integration. The results presented in Table 9.3 confirmed
the existence of Law of One Price (LOP) as the deviations were found to be station-
ary for two of the three comparisons namely India-USA and India-International Refer-
ence Price.
Table 9.3 ADF test for cointegration of domestic prices with USA, Nether-
lands and International Reference Prices for cashew kernel (5% Desired
error Level)
Sl. No. Price series Test Statistic Test (Error
under Null Statistics level
1 India --USA 5.18 7.3930 <1%
2 India - Netherlands 5.18 4.1550 >5% (~9%)
3 India-International Reference Price 5.18 8.0291 <1%
Result: Cointegration of prices exists between India-USA and India- International Reference Price but not
with the Netherlands price data.
The results amply proved that there is a long-run equilibrium of the prices of cashew
kernel in the above two markets. This explains the tendency of domestic cashew
prices to move in-unison with the international market prices in the long - run con-
firming the Law of One Price (LOP). The reasons for India-Netherlands may be due
to short-term disturbances. However the same shall be studied with rigorous analy-
ses procedures and it has to be established, whether this out of co-integration result is
temporary or permanent. In that case there might be some inefficiencies in the price
transfer between Netherlands and Indian market.
Page 113
Chapter - 09
Reference
Acharya S.S. and Agarwal (1994), Agricultural Prices- Analysis and Policy, Oxford
and IBH Publishing Co. Pvt. Ltd., New Delhi.
Ardeni P.G. (1989), “Does the Law of One Price Really Hold for Commodity Prices?”,
American Journal of Agricultural Economics, Vol71, pp.661-669.
Baharumshah, Ahmad Zubaidi and Muzafar Shah Habibullah (1994), “Price Ef-
ficiency in Pepper Markets in Malaysia: A Cointegration Analysis”, Indian Journal of
Agricultural Economics, Vol.49. 2, April-June pp. 205-216.
Blyn, George (1973) “Price Series Correlation as a Measure of Market Integration,”

Indian Journal of Agricultural Economics, Vol.23, No.3, July- September.
Davidson, Russell and James G. Mackinnon (1993), Estimation and Inference in

Econometrics, Oxford University Press, New York.
Dickey, D.A. and W.A. Fuller (1979), “Distribution of Estimates for Autoregressive
Time Series with Unit Root”, Journal of American Statistical Association, Vol.74, pp.427-
443.
Engle R.F.C, and C.W.J. Granger (1987) “Cointegration and Error Correction: Rep-
resentation, Estimation and Testing”, Econometric, Vol.55, No.2, pp.251-276.
Granger C.W.J.(1986), “Developments in the Study of Cointegration Variables”, Ox-

ford Bulletin of Economics and Statistics, Vol.48, No.3, pp.213-228.
Granger C.W.J. (1986), “ Developments in the Study of Cointegrated Variables”, Ox-

ford Bulletin of Economics and Statistics, Vol.48, no3, pp213-228.
Gujarati, Damodar N. (9196), Basic Econometrics, Third Edition, McGraw-Hill, Inc.,

New York, Chapter 21, P-719.
Gupta S. and R.A.E. Muller (1982), “Analysing the Pricing Efficiency in Spatial Mar-
kets: Concept and Application”, European Review of Agricultural Economics, Vol. 9,
pp301-312.
Nelson, Charles R. and Charles I. Plossar (1982), “Trends and Random Walk in
Macroeconomic Time Series: Some Evidence and Implication”, Journal of Monetary
Economics, Vol. 10, pp.139-162.
Page 114
Chapter - 10
Export Competitiveness of Indian Cashew
I
ndia enjoyed a monopoly position in the international trade supplying
95% of the kernels until three decades ago and now it has declined to
around 50% of the global trade. In 1970’s other countries gradually inter-
cepted the Indian business and Indian share in global market gradually reduced. Thus,
Indian cashew exports moved from monopoly to competition. Significant interna-
tional competitive for India is from Brazil. The advantage they enjoy over Indian ex-
porter is their proximity to the USA and European markets. However, the global
demand is high and India is ranked as one of the major exporters to both European
markets and the USA.
The prime advantage of Indian processors is that the processing is done manually
whereas in Brazil they have mechanised process, which results in a lot of broken Competition from
grades. Broken grades do not have regular markets. In India the percentage of bro- other countries
ken is less than 10% whereas in Brazil the percentage of broken grades is more than has eaten India's
40%. Vietnam, which in the last few years had a small role, has now grown up to be a export share. But
major processor and competitor to the Indian exporters. The Government of Viet- the India's
nam has given a lot of incentives to encourage forex inflow into the country. Of late, advantage in
the USA is also encouraging imports from Vietnam by giving duty exemption for Viet- terms of less % of
namese imports. broken kernels
has brought the
Increase in domestic raw cashew production by increasing area, replanting unproduc- US and European
tive tree, using HYV (High Yielding Varieties) are the only ways to maintain competi- buyers to its
tiveness in the international market. The availability of raw cashew from other coun- proximity
tries is highly unstable. Mozambique and Tanzania were the major suppliers of raw
cashew nuts to India. Vietnam, which used to be one of the major sources of raw
cashew for the Indian industry, has stopped exporting raw nuts. This is because of the
Vietnam’s foray into global cashew market with value addition. Vietnam has set up a
string of cashew processing factories to process raw nuts. Indian cashew industry has
been finding it’s going tough following acute shortage of raw nuts.
Value Chain of Indian Cashew

1. Raw Cashew price
The cashew prices are linked to the demand and are inter dependant on the quality of
raw cashew nut.
Quality of raw cashew nut is measured in terms of Out Turn i.e., the yield which is
again referred for a bag of 80 kg (standard raw cashew nut bags are of 81 kg gross Page 115
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Chapter - 10
weight, gunny bag weighs one kg and net weight of raw cashew is 80 kg). A very good
quality raw nut is estimated to be above 54 lb plus (24.50 kg plus for a 80 kg bag or
31.25 % out turn) and a good quality raw nut is between 50 & 54 lb and an average
quality raw nuts is 48 to 50 lb per 80 kg bag.
Out turn varies from country to country, for example average raw nuts from Ghana is
between 50 & 51 lb and that from Nigeria is in the range of 47 & 49 lb and Guinea
Bissau is at 52 & 53 lb and Tanzania is at 53 & 54 lb.
The current ruling average prices

a) Domestic raw cashew price: Local variety (Kollam, Orissa, Rajamundhry, Palasa
etc.,) raw cashew prices are ruling in the range from Rs. 28 to Rs. 32 per kg. A pur-
chase tax at 4%, plus Transportation costs totalling to approximately Rs.10,000 per 10
ton or Rs. 1 per kg and handling cost Rs. 0.50, which works out to be an average of Rs.
32.70 landed cost for 1 kg, procured at Rs. 30 per kg.
b) Imported raw cashew price: depends on it’s origins - the prices for the good qual- Prices of the
ity Guinea Bissau and Tanzania, which under current market conditions, are charged at imported raw
US$ 700-750 per ton CIF [Cost + Insurance 0.125 % + Freight 0.04 cents (1 full cashew vary
container load of 16 tons)], Ivory coast is charged at US$ 100 less & Nigerian origin at based on out turn
US$ 150 less to the Guinea Bissau and Tanzanian prices.
Therefore prices fluctuate a lot, except that demand the quality also influences the
price trend. We can assume the above figures as rough estimates and will not have
relevance once the market goes up or down.
2. Middlemen or local agent commission

The average commission for brokers/agents/middlemen is 0.5% and in some cases
they may insist on 1% where they have good hold on certain origins and which cannot
be penetrated by other brokers. This applies for both local and imported raw cashew
nuts.
3. Transportation of imported raw cashew to factory, loading and unloading

charges
The transportation cost of raw cashew nuts from Cochin to Kollam is around Rs.
6200 - 6400 (additional expenses involved are ‘Tea Money’ of Rs. 150 and unloading
charges of Rs. 400 per truck). Each truck will transport one 20 foot container, which
holds approximately 15 to 17 tons.
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4. Estimated processing cost of cashew kernel (including packaging costs)

Average processing cost of cashew kernel for a standard bag is Rs. 750 in Quilon
(Kerala). (In Kerala a number of factories are available on lease ie,, an exporter can
deliver his raw cashew nuts to these processors, who will process the raw nuts and
deliver the kernels – the exporter will put in his supervisor and security to ensure the
quality and safety of the goods – the processing charges at Rs. 750 will be paid per
standard bag (80 kg) for the processing.
5. The processors margin

Average margin of the processor is US$ 50 per ton.
6. Transportation and loading charges of cashew kernel from factories to

port
The cashew kernels are packed into containers (20 Foot or 1 FCL = Full Container
Load = 700 cartons of 50 lb each/35,000 lb/15.876 tons.) and the freight from Kollam
to Cochin is Rs. 6250 - 6500.
The costs involved
7. FOB Price in the trade are
The FOB price varies from grade to grade. There are normally 24 different grades processing costs,
processed from raw cashew nuts and out of which 13 grades have the export mar- processors'
kets and the balance will go to domestic markets. margins, trans-
portation costs,
Table 10.1 FOB price of cashew kernel at Tuticorin/Cochin port
FOB price that
Grade US Dollar per Pound*
varies from grade
W180 4.00
W210 3.50 to grade
W240 2.40
W320 1.85-1.95
W450 1.70-1.75
SW320 1.65-1.75
SW360 1.55-1.60
SSW 1.30-1.40
FS 1.60-1.65
FB 1.55-1.60
LWP 1.50-1.55
SS 1.45-1.50
SB 1.45-1.50
SP 0.85-0.90
*Price as on July 06, 2002, Note: WW = Whole white, SW = Scorched wholes, SSW = Scorched
wholes seconds, LWP = Large white pieces, FS = Fancy splits, FB = Fancy butts, SS = Scorched splits,
SB = Scorched butts, SP = Scorched pieces Page 117
Chapter - 10
8. Taxes
There is no tax levied on export or import since these are exported and imported
under OGL (Open General Licence). At the time of export, an exporter has to pay
cess, which is standard and is currently at Rs. 4,763 for a 20 foot container. For im-
ports there is no duty but one needs to get an import permit from the Plant Quaran-
tine Department at a cost of Rs. 150 per permit per import.
9. Freight charges
The freight charges for European countries for a 20 foot container is US$ 1,100.
The freight charges for US East Coast is US$ 1,800.
The freight charges for US West Coast is US$ 2,200.
10. Insurance
Insurance is 0.125 % on the FOB value.
11. Prices of cashew kernel at US port (whole sale)

The cashew kernels (without value addition) are sold at a mark up price of 10% to
There is no tax
15% on the FOB value.
on imports for
raw cashew nuts.
12. Prices at shelf
Value added,
The prices at the shelf vary from brand to brand and the type of value addition.
branded, nuts
Value addition in the form of roasting, sweetening, salting, honey coating etc., is done
fetch better prices
by retailers and this will have a mark up price of 150 to 200%.
in the market
If there isn’t much value addition then the raw cashew kernels in consumer packs are
sold at a mark up price of 50 – 60% as a single product.
Generally, it is mixed with other nuts and sold as a mixture.
13. Margin for middlemen

The margin for middlemen is uniform in this business and is usually at 1% overseas.
In the era of globalisation, a country’s exports will be decided by efficiency of produc-

tion and competitiveness. Bilateral agreement as in the past will not be taken under
the WTO regime.
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Chapter - 10
Fig 10.1 Quarterly price of CK at different markets
The major com-

petitor to India,
Vietnam, has
increased produc-
Source: Mitchel Beck Company, Inc. New York., October ’98 onwards Ludwig Mueller Co., Inc., New
tion of cashew
York, The Public Ledger, London, CEPC, Cochin
and processing
units. There are
The above graph shows the cashew kernel prices at major cashew kernel markets. plans a foot in
All these markets by and large are not integrated. Vietnam to de-
velop this sector
Major Competitor into a revenue
Vietnam spinner
For years, traditionally India’s competition in cashew kernels was from Brazil, which
was the birthplace of the product, but the recent trend shows that Vietnam is emerg-
ing as a major competitor in this sector.
The total production of raw cashew from Vietnam during 2000 is 122,070 tons raw
cashew nut from an area of 250,000 hectares. At present, there are 60 cashew nut
processing units in Vietnam with the total capacity of more than 220,000 tons a year.
The area under cashew cultivation is expected to increase to 280,000-300,000 hec-
tares by 2005. Cashew nut export is forecast to reach 40,000 - 45,000 tons by the
same year. During 1995-98 about 30,000 hectares of cashew trees were cut down
and replaced by mango and longan. However plans are afoot to plant 0.5 million hec-
tares by 2010.
A survey has shown that fertilised orchards yield 698 kg a hectare as against unfertilised
orchards yielding 543 kg a hectare the rather high level in comparison with other
countries including India (500 kg/ha), Brazil (450 kg/ha) or Mozambique (400 kg/ha).
Page 119
Chapter - 10
Most of cashew produced in Vietnam is for export (about 90%). The number of cashew
exporters in Vietnam has increased from 16 in 1997 to 21 in 1998 and 23 in 1999 most
of them are exporting to China, Australia, the USA and Netherlands being greatest
partners of Vietnam. Economic integration will be a driving force for cashew, the product
with high competitiveness able to infiltrate smoothly in the world markets.
Cashew processing industry of Vietnam has made great progress. Although following
technological process of India and Brazil, all equipment have been home made. In
comparison with Indian technology, work stage of Vietnam technology has been fur- The advantages
ther improved, creating consistent high - quality products, matching the world taste. Vietnam have
Cashew processing capacity of Vietnam has been considerably promoted. Number of over other coun-
processing companies increased from 6 in 1986 to 30 in 1994 (with total capacity of tries are; 1)
75,000 tons/year) and to 62 in 1999 (with total capacity of 250,000 tons/year). The Indigenous
development in processing technology has helped Vietnam to change its exporting of technology in
raw cashew strategy to processed product. Recently, due to the reduction of domes- processing, 2)
tic cashew supply, Vietnam has had to import raw cashew from African countries for Availability of
processing. Cover split technology of Vietnam is semi auto, designed by Vietnamese raw nuts and
technicians, adapting Vietnam’s own condition. This kind of technology is cheap, at- fulfilling the
tracting various labourers, generating higher ratio of whole seed than automatic ma- domestic process-
chines of England, Italy or India. ing demand and
3) Increased
In Vietnam, each cashew processing company has its own farm and station to assem- investment to
ble raw cashew for processing. Some of them have put in lots of investment in pro- improve produc-
duction and area of cultivation to encourage farmers planting cashew through such tion of raw
measures as credit support or provision of new and high-yielding seeds. cashew
Page 120
Chapter - 11
Demand Elasticity for Cashew
T
here are several factors influencing the export demand
for cashew. The total output by the producing countries on the supply
side and the price of the processed cashew as well as the per capita income
of the population from the importing countries can have a significant influence on the
export demand for cashew. In addition, the prices of substitutes in the international
market may also have a remarkable influence on the export demand for cashew.
Sometimes, price may not be very crucial in the international trade. Bilateral trade and
trade agreements can overshadow the influence of price, which is a common factor in
the commodity trade. Similarly, tariff and concessional terms are also important in
some markets and may reduce the role of prices. Thus the estimate for export demand
elasticities is confronted with difficulties because of weak and incomplete data on one
hand and incomplete knowledge about the various interrelationships of cashew market Bilateral trade,
system with other subsystem. Difficulties in the measurement and non-availability of trade agreements,
sufficient information have led to consider the simple and direct method. It is tariffs and
hypothesised that the major determinants of export demand for Indian cashew are concessional
income of importing countries, the relative export prices of cashew and international terms can over-
price. Thus the general specification of the demand model consists of the form, shadow the
influence of price
ln X dt = a + b1 ln X1 + b2 ln X2 + b3 ln X3 + e on quantity
demanded
Where, X dt = Quantity of cashew exported to a particular country in period t.
a = Intercept.
X1= GNP of importing market economies.
X2= Ratio of Indian cashew export price to exchange rate.
X3= Cashew price in the importing country (Dollar per Unit).
b1 = Income elasticity of demand.
b2 = Own price elasticity of demand (Indian prices).
b3 = Price elasticity of demand (Importing country prices).
The above function was estimated by Ordinary Least Squares (OLS) method using
linear as well as logarithmic forms. The demand relations were estimated for devel-
oped economies together as a region and for United States, which is the major im-
porter of Indian cashew. Thus separate estimates were made for developed market
economies as a whole and exclusively with respect to US market with the desire to
identify differential patterns, if any, between these two economies.
Page 121
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Chapter - 11
The expansion of Indian cashew exports is the result of a remarkable increase in its
per capita consumption in the importing countries. Despite this, the markets for cashew
kernel have grown considerably competitive. In order to understand the prospects
for expansion and pricing strategies, the export demand elasticities in broad country
group consisting of developed economies together as one group (majority of Indian
cashew kernel goes to developed nations) and US, the major importer (46%) of Indian
cashew were separately considered and the results are presented in the following
sections.
To study the demand elasticities for Indian cashew, annual time series data for a period
of 21 years from 1980 to 2000 were considered. The variables considered were GNP
of developed countries and USA, total cashew kernel export from India (qty), India’s
export to USA, cashew price in India, USA and International Reference Price.
Demand from Developed Economies The quantity of

The estimated log-linear regression equation to study the demand for Indian cashew cashew kernel
from developed economies together as a group is presented below, exported to DE's
from India is
ln Xdt = 3.91 + 4.46 ln X1 + 1.37 ln X2 + 2.02 ln X3 directly depended
(11.56) (1.33) (-3.07) R2 = 0.93 on GNP and CK
D. W. Stat. = 2.09 price in those
Where, countries
Xdt = Quantity of cashew exported to a particular country in period t.
X1 = GNP of importing market economies.
X2 = Ratio of Indian cashew export price to exchange rate.
X3 = Cashew price in the importing country (Dollar per Unit).
The figures in parentheses are calculated ‘t’ values of the coefficients.
All the ‘b’ coefficients except b2 were statistically significant (b1 and b3 are significant at
1% level). The adequacy of the model was indicated by the fairly high R2 value of 0.93.
D. W. (Durbin Watson) Stat. shows that there is no autocorrelation in price series.
As the equation is log-linear, the regression coefficients themselves are the elasticities.
The income elasticity of demand for Indian cashew from developed countries was
4.46 and the own price elasticity was 1.37, while the cross price elasticity was 2.02.
This shows that a 1% increase in the GNP of developed countries will result in 4.46%
increase in Indian cashew exports to these countries. Even though the b2 coefficient is
not significant, we can conclude that the demand from developed countries will not
Page 122
Chapter - 11
reduce if the export price of Indian cashew kernel increases because of its premium
quality and loyalty towards the Indian cashew. However, the overseas market price
does not affect much the demand for Indian cashew kernel and on the other hand,
interestingly, it showed a positive relationship with the price in importing countries,
which means if there is one % increase in cashew kernel price in the developed
country there is two % increase in the quantity of exports to that country.
Demand from USA

For analysing the export demand from USA, the variables considered were, cashew
kernels, Indian export prices, USA cashew kernel prices, GNP of USA and total Indian
cashew kernel exports to USA. The relationship was of the form,
ln X dt = 12.14 + 1.54 ln X1 – 1.02 ln X2 - 0.38 ln X3

(4.21) (-1.09) (0.37) R2 = 0.53 The quantity of
D. W. Stat. = 1. 89 cashew kernel
Where, exported to USA
X dt = Quantity of cashew exported to USA in period t from India is
X1 = GNP of USA directly related to
X2 = Indian cashew kernel prices in US$/kg. the GNP of USA
X3 = USA cashew kernel prices in $/kg. and indirectly
The figures in parentheses are calculated ‘t’ values. related to Indian
export price
Here, all the ‘b’ coefficients except ‘b1’ were statistically insignificant and a higher R2
value of 0.53 indicates the adequacy of the model. The D. W. Stat. value indicates that
there is no autocorrelation in price series.
The positive sign for income in USA indicates that there is a direct relationship be-
tween the exports from India and the income level in USA. Its own price elasticity was
negative indicating that exports to USA dampen with the rise in Indian export price.
The income elasticity of demand for USA market was very low i.e., 1.54 and the own
price elasticity was –1.02, while the cross price elasticity was -0.38. This result indi-
cates that one % increase in GNP of USA would result in only 1.54% increase in
Indian cashew kernel export to USA. The negative own price elasticity indicates a
decrease of 1.02% in the quantity exported to USA for one % increase in Indian
cashew export price (adjusted to exchange rate). The b3 coefficient is not significant.
Only when the exchange rate per dollar is on the increasing side the domestically
produced raw nuts are given higher rate of value by the industry.
In general, the quantity exported from India is very sensitive to its price and income
Page 123
Chapter - 11
levels of importing country because it is a supplementary food and is not an essential

diet. In addition to this, cashew has many substitutes and hence is replaceable.
Reference
Durbin J. and Watson G.S., “Testing for Serial Correlation in Least Squares Regres-
sion I”, Biometrika, Vol. 37, 1950, pp. 409-428.
Durbin J. and Watson G.S., “Testing for Serial Correlation in Least Squares Regres-
sion II”, Biometrika, Vol. 38, 1951, pp. 159-178.
Harvey A.C., The Econometric Analysis of Time Series, Second Edition, MIT Press,
1990.
Savin N.E. and White K.J., “The Durbin-Watson Test for Serial Correlation with
Extreme Sample Sizes or Many Regressors”, Econometrica, Vol. 45, 1977, pp. 1989-
1996.
Theil H., Principles of Econometrics, Wiley, 1971.
Page 124
Appendix
Appendix
I. Specifications for Cashew Kernels
AFI Nut & Agricultural Products Section
General Requirements
A. Each shipment to the USA, inspected or released by FDA and cleared by customs, shall be of good
quality and be stored in accordance with good commercial practice.
B. The cashews shall be packed in new, clean, dry, leak proof, lead-free containers with an airtight
(hermetic) seal and without internal paper liners. Packaging shall be of sufficient strength to assure the
integrity of the product during normal shipment and storage. The outer container shall be constructed of
a new cardboard, free of infestation and visual mould and sealed without staples, unless otherwise
specified by the end user.
C. Only pesticides approved for use on cashews may be used and residues must be within the tolerance
set by the government of the importing country. No detectable residue is permitted for any pesticide that
is not approved for use on cashews in the importing country.
D. All cartons shall be clearly marked on each end with the following:
1. Name of the product and trade name or brand name, if any
2. Name and address of producer or packer
3. Grade
4. Net weight
5. Country of origin
6. Buyer’s name or marks
7. Destination
8. Other marks agreed to by buyer and seller
E. Bill of Loading must list the number of cartons, source of origin and the marks that are on the cartons.
F. Excessive breakage is avoided by the control of moisture and proper storage - packing - handling - and
transportation. Fluctuations in temperature and humidity should be avoided also to protect the integrity
of the product. At time of pack, breakage should not exceed 5% so that at time of delivery it does not
exceed 10%.
G. All shipments should be inspected prior to loading and shall be carried on conveyance suitable for
transporting food products in good condition, i.e. free of odours, insect or mould damage, rodent activity,
and all other foreign materials.
H. The moisture level of the cashews should be 3-5%.
I. If a roast test is required in a contract, it should be conducted in accordance with Appendix Ib.
Quality and Grading

Whole (W) (An excessive number 7/8th kernels or splits that detract from the appearance of the
sampled lot may be the basis for claim.) Page 125
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Appendix
Cashew kernels are classified as: First Quality Fancy; Second Quality Scorched/Colour Variation; Third
Quality Special Scorched/Colour Variation; Fourth Quality; and Dessert.
First Quality Fancy cashew kernels have a uniform colour, which may be white, light yellow, pale
ivory or light ash-grey.
Second Quality Scorched/Colour Variation cashew kernels may be yellow, light brown, light
ivory, light ash-grey or deep ivory.
Third Quality Special Scorched/Colour Variation cashew kernels may be deep yellow, brown,
amber and light to deep blue. They may be slightly shriveled, immature, speckled, blemished or
otherwise discoloured.
Fourth Quality cashew kernels would qualify as First or Second Quality, except that they have
pitted spots.
Dessert cashew kernels may be scraped, shriveled, blemished or otherwise discoloured.
Sizing
Sizing is compulsory in first quality/fancy cashew kernels but is optional for other whole grades.
The quantity of broken kernels or pieces in whole kernels shall not exceed 10% by weight.
The quantity of pieces present in butts and splits shall not exceed 10% by weight.
The quantity of the next lower size grade in pieces shall not exceed 5% by weight.
Table I Sizing of cashew kernal

Size Designation Count per Kg Count per Pound
180 (or SLW) 266-395 120-180
210 (or LW) 395-465 180-210
240 485-530 220-240
320 660-706 300-320
450 880-990 400-450
Shape of a cashew kernel is classified as whole if it has the characteristic shape of a cashew kernel and not more
than 1/8th of the kernel has been broken off. This grade may also be designated as W.
Butts (B)
Kernels which have been broken crosswise, are less than 7/8th but not less than 3/8th of a whole kernel
and the cotyledons are still naturally attached. This grade may be designated as B.
Splits (S)
One half of a cashew kernel that has been split lengthwise provided not more than 1/8th of this cotyledon
has been broken off. This grade may be designated as S.
Pieces- See Table 6
Definitions
Serious Damage - includes but is not limited to insect, rodent or bird damage, visible mould - rancidity
- decay or adhering dirt - solder - shell or mesocarp.
Adhering Matter- cashew meal or extraneous matter on the surface of the kernel causing permanent
discolouration.
Insect Damage- is a visible damage to the kernel from live or dead insects, mites in any stage of
development, insect excreta or fragments - frass - webbing - boring - powdery residue - cast larval casings
and/or the evidence of insects or insect activity in the container.
Rodent Damage - evidence of rodent activity.
Bird Damage - pieces of feather and bird excreta.
Visible Mould - mould filaments detectable with the naked eye.
Page 126
Rancidity - is a breakdown of the oils in the kernel giving it an off-flavour or odour.
Appendix
Foreign Matter - includes but is not limited to shell, mesocarp, stones, dirt, glass, metal, solder, straw,
twigs, sticks, plastic, hair, industrial fibers, paper and threads.
Defects - include superficial and intrinsic damage, which adversely affects the appearance of the lot such
as scorching, blemishes, discolouration, immature or shriveled kernels, kernels with pitted black or
brown spots, adhering testa, scrapes, flux marks and speckles. Defects vary by grade. The presence of
kernels of a lower grade is scored as defects.
Scorching - a discolouration due to over heating during shelling or blanching.
Blemishes or Discolouration - spots in aggregate in excess of 3 mm on the kernels from causes other
than shelling or blanching.
Immature - kernels are underdeveloped and do not have the characteristic shape of a cashew kernel.
Slightly Shriveled - a slight withering of the outer surface of the kernel.
Shriveled - a complete withering of the kernel that distorts its characteristic shape.
Pitted Spots - black, brown or other coloured spots in aggregate in excess of 1 mm caused by pre-
harvest attack on the kernel.
Adhering Testa - skin on the surface of the kernel measuring greater than 2 mm in diameter in aggregate.
Superficial Damage - deep knife cuts on the surface of the kernel that changes the characteristic shape
of the nut.
Flux Marks - black or brown marks on the surface of the kernels caused by flux dripping onto them when
a tin container is sealed.
Speckled - a brown stain, which appears after removal of the testa on some kernels.
APPENDIX - Ia
Table- 2 Sampling Plan for Cashews
Lot size Inspection level
Cartons Routine Intensive
Less than 50 3 7
51 - 100 6 10
101 - 200 6 14
201 - 350 6 18
351 - 400 13 20
401 - 500 13 22
501- 700 13 26
The value of a sampling plan is to encourage uniformity in the number of samples to be collected for
examination to determine compliance with product specification.
Samples weighing approximately 500 gms each shall be chosen at random from the lot. The sub samples
may be consisted of a 1000 gm sample for analysis. However, they should be analyzed separately in the
case of a claim.
The routine sampling plan is used for initial inspection of lots upon arrival and for claims other than those
for insect damage or infestation.
The intensive sampling plan may also be used for initial inspection of lots upon arrival, but is recom-
mended for use when claims are made relative to insect damage or infestation.
Analysis of sub samples must be conducted under full spectrum lighting with a Colour Rendering Index
(CRI) of not less than CRI 91.
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Appendix
APPENDIX - Ib
Test for Roasted Kernels
Almost all cashew kernels are sold to the consumer in the US after roasting. The appearance of the
roasted kernel is critical for consumer acceptance. An uneven roast is never appealing to the consumer.
It is therefore recommended that shippers roast cashew samples prior to packing to determine the
appearance that a lot will have after roasting. This is simply good manufacturing practices.
The roast test also confirms the proper classification of a lot, as to whether it should be sold as first,
second or third quality.
Roasting Procedure: The kernels should be roasted in a clear vegetable oil, e.g. peanut oil, which
should be replaced as soon as it starts to deteriorate (when free fatty acids exceed 1%). The oil is brought
to a temperature of 300°F - 310°F (152°C) and is kept on the heat source while cashews are immersed
in the hot oil for a period of 3 minutes. Any lowering of the temperature of the oil by immersion of the
cashews will not require any lengthening of the 3-minute roasting period. Adjustments in temperature are
recommended when roasting butts, splits and small kernels.
Defects
Spotted - brown spots that appear on the surface of the kernel after roasting, but which are not visible
in the raw.
Scorched tip - a tip that is significantly darker than the remainder of the kernel due to a scorching during
shelling or blanching.
Colour variation - any discolouration, other than a scorch mark, which detracts from the uniform
appearance of the kernel.
Dark roast - a light to medium brown colour in some kernels that detracts from the uniform appearance
of kernels that are significantly lighter.
Deep roast - a deep brown colour in some kernels that detracts from the uniform appearance of kernels
that are significantly lighter.
Scrapes - knife scratches greater than 5 mm in diameter that show up as light spots on the surface of the
kernel.
Uneven roast - a roast with more than 7% total of the following defects: spotted, scorched tips/colour
variations, deeply scorched tips, dark roast, and deep roast.
Table 3 Maximum Tolerances for Defects in First and Second Quality Roasted Cashew Kernels
First Quality Second Quality
Spotted 1.0% 2.5%
Scorched Tips/Color Variations 2.0% No limit
Deeply Scorched Tips 1.0% 2.5%
Dark Roast 5.0% No limit
Deep Roast 2.0% 10.0%
Scrapes 5.0% No limit
The Total Defect Level for First Quality cannot exceed 7% for defects other than scrapes.
On Second Quality there are only limits for spotted, deeply scorched tips and deep roast. No total defect
level is necessary for second quality.
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Appendix
Table 4. Tolerances for Defects and Damage in Raw Cashew Kernels

The following tolerances establish the maximum limits for damage and defects in raw cashew kernels. To
determine compliance with these tolerances, one should follow the Sampling Plan found in Appendix - Ia,
and use established analytical procedures. Tolerances for a lower grade include the kernels defined by
the lower grade but not the defects that are specific to the lower grade. Percentages are determined by
weight.
First Second Quality Third Quality Fourth Dessert

Quality Scorched Colour Special Scorched Quality
variation Colour
variation
Serious Damage
Insect damage 0.5% 1.0% 1.0% 1.0% 1.0%
Mould rancidity, decay, adhering matter 0.5% 1.0% 1.0% 1.0% 1.0%
Foreign matter1 0.05% 0.05% 0.05% 0.05% 0.05%
Maximum Serious Damage 1.0% 2.0% 2.0% 2.0% 2.0%
Defects
2nd Quality Scorched Colour Variation 5.0% B B 5.0% B(Butts)
3rd Quality Special Scorched Colour Variation 1.5% 5.0% B 2.0% B
Fourth Quality 0.5% 1.0%2 2.0%2 B B3
Dessert 0.5% 2.5% 7.5% B4 B5
Superficial Damage (scrapes) 1.0% 2.0% 5.0% 1.0% B
Adhering Testa 6 1.5% 1.5% 1.5% 1.5% 1.5%
Maximum Defect Level 8.0% 10.0% 10.0% 10.0% 10.0%
1. The tolerance for foreign matter is in addition to the tolerance for maximum serious damage.
2. The combined tolerance for fourth quality and dessert shall not exceed the tolerance for dessert.
3. Dessert Quality in Africa and Vietnam do not have pitted spots.
4. For kernels with more than one black spot, there is a tolerance of 2.5%.
5. Dessert quality is the lowest grade but the defects cannot be so severe that the product is not
merchantable. A delivery is acceptable provided it is equal or better than the approved pre-shipment
sample. Two sealed pre-shipment samples are to be sent to the buyer for approval, one of which shall
remain sealed for possible use in settling a dispute on quality at arbitration.
6. A kernel with adhering testa greater than 3 mm in diameter is scored twice in determining the
percentage of testa.
Table 5. Tolerances for Defects and Damages in Small Pieces

SP1-SSP1G1 SP2-SSP2G2 SP3-SSP3G3
Serious Damage
Insect Damage 0.5% 1.0% 1.0%
Mould, rancidity, decay 0.5% 1.0% 1.0%
Foreign Matter1* 0.05% 0.05% 0.05%
Maximum Serious Damage 1.0% 1.0% 1.0%
Defects
Second Quality Scorched Colour Variation 5.0% B B
Third Quality Special Scorched Colour Variation 2.0% 5.0% B
Fourth Quality 0.5% 1.0% B
Dessert 0.5% 2.5% 10.0%
Superficial Damage (scrapes) B B B
Adhering Testa 3.0% 3.0% 5.0%
Maximum Defect Level 10.0% 10.0% 12.0%
*The tolerance for foreign matter is in addition to the tolerance for maximum serious damage.
Page 129
Appendix
Table 6. Cashew Pieces B Size Descriptions

Grade Name Passing through Sieve No Retained on Sieve No
LWP, SP, SPS, DP, P1, P2, P3 Large pieces Tyler No. 22" (USA 5/16) Tyler No. 4 (USA No.4)
Opening = 8.0 mm Opening = 4.75 mm
SWP, SSP, DSP, SP1, SP2, SP3 Small pieces Tyler No. 4 (USA No. 4) Tyler No. 7 (USA No. 7)
Opening = 4.75 mm Opening = 2.80 mm
CHIPS, or SSP1, SSP2, Chips or Special Tyler No. 7 (USA No. 7) Tyler No. 8 (USA No.8)
SSP3 small pieces Opening = 2.80 mm Opening =2.36 mm
BB or G1, G2, G3 Grains, granules Tyler No. 8 (USA No. 8) Tyler No.10 (USA No.12)
or baby bits Opening = 2.36 mm Opening =1.70 mm
X Fine grains Tyler No. 10 (USA No. 12) Tyler No. 14 (USA No.16)
Opening = 1.70 mm Opening =1.18 mm
FE Fines Tyler No. 14 (USA No. 16) N/A
Opening = 1.18
P1M, P2M, P3M Mixed pieces To be determined by the buyer and seller
Tolerance B for lower grade pieces - 5.0% without more than 1.0% from the next lower grade size.
Further, the grades SWP/SP1, SSP1/Chips, G1/BB and X must also be reasonably uniform in appearance,
that is, with more than 5.0% from the grade size above.
NB. The grade SSP as used above is a Brazilian grade designation for special small pieces, not to be
confused with the Indian grade SSP, small scorched pieces.
II. Specifications for Cashew Kernels

(Indian cashew nut grade specification chart)
1. General Characteristics: Cashew Kernels shall be obtained through roasting, shelling and peeling
cashew nuts (Anacardium occidentale L.)
2. Special Characteristics
A. Cashew Kernels - White Wholes
Grade Trade Colour / Count / Max. Broken NLSGNLG
Designation Name Characteristics 454 gm Size Moisture % Max % Max %
Description
W – 180 White White / pale ivory 170 – 180 5 5 5(NLSG & SW
Wholes / light ash. together)
Characteristic shape.
W – 210 do 200 – 210 5 5 do
W - 240 do do 220 – 240 5 5 do
W – 320 do do 300 – 320 5 5 do
W – 450 do do 400 – 450 5 5 do
W – 500 do do 450 – 500 5 5 5(SW)
Remarks: Kernels shall be completely free from infestation, insect damage, mould, rancidity, adhering testa
and objectionable extraneous matter. Scraped and partially shriveled kernels also permitted provided such
scraping / shriveling does not affect the characteristic shape of the kernel.
Page 130
Appendix
B. Cashew Kernels - Scorched Wholes

Grade Trade Colour / Count/454 gm Max. Broken NLSG NLG
Designation Name Characteristics Size Moisture Max % Max %
Description
SW Scorch Kernels may be N.A. 5 5 7.5(SSW)
Wholes scorched / slightly
darkened due to over
heating while roasting
or drying in drier/borma
SW – 180 do do 170 – 180 5 5 7.5(NLSG &
SW together)
SW – 210 do do 200 – 210 5 5 do
SW – 240 do do 220 – 240 5 5 do
SW - 320 do do 300 – 320 5 5 do
SW – 450 do do 400 – 450 5 5 do
SW – 500 do do 450 – 500 5 5 7.5 (SSW)
Remarks: Kernels shall be completely free from infestation, insect damage, mould, rancidity, adhering
testa and objectionable extraneous matter. Scraped and partially shriveled kernels also permitted pro-
vided such scraping / shriveling does not affect the characteristic shape of the kernel.
C. Cashew Kernels - Dessert Wholes

Description
SSW Scorch Kernel may be over N.A 5 5 7.5 (DW)
Wholes -scorched, immature,
Seconds shriveled (pirival),
speckled (Karaniram),
discoloured and
light blue
DW Dessert Kernels may be N.A 5 5 --
Wholes deeply scorched, deep
brown, deep blue,
speckled, discolored
and black spotted
testa and objectionable extraneous matter.
Page 131
Appendix
D. Cashew Kernels – White Pieces

Description
FB Butts White / pale ivory N.A. 5 5 5(SB)
or light ash.
Kernels broken
cross-wise (evenly
or unevenly)
naturally attached
FS Splits White/pale ivory N.A. 5 5 5(SS)
Kernels split
naturally lengthwise
LWP Large White/pale ivory Kernels broken 5 Nil 5 (SW
White or light ash into Pieces & SP
Pieces or light ash. together)
more than two
pieces and not
passing through 4
mesh 16 SWG
sieve/4.75 mm.
I.S.Sieve
SWP Small White/pale ivory Broken Kernels 5 Nil 5(BB &
White or light ash smaller than & SSP
Pieces those described together)
on LWP but not
passing through
6 mesh 20 SWG
sieve / 2.80 mm
1.S. Sieve
BB Baby Do Plemules and 5 Nil 1% (Cashew
Bits broken kernels powder)
smaller than
those described
as SWP but not
passing through
a 10 mesh 24 SWG
sieve/1.70 mm
I.S. Sieve
Page 132
Appendix
E. CASHEW KERNELS - SCORCHED PIECES

Description
SB Scorch Kernels broken N.A 5 5 7.5
Butts crosswise (evenly or (DB)
unevenly) and
naturally attached.
Kernels may be
scorched / slightly
darkened due to over
heating while
roasting or drying in
the drier / borma.
SS Scorch Kernels split N.A 5 5 7.5
Splits naturally length wise. (DS)
Kernels may be
scorched / slightly
darkened due to
over-heating while
roasting or drying
in drier / borma
SP Scorch Kernels may be Pieces not 5 Nil 7.5
Pieces scorched / slightly passing through (SSP & SPS
darkened due to a 4 mesh 16 together)
over - heating while SWG sieve
roasting or drying / 4.75 mm
in drier / borma I.S. Sieve
SSP Scorch Kernels may be Pieces smaller 5 Nil 5
Small scorched / slightly than SP but (DSP)
Pieces darkened due to not passing
over - heating while through a 6
roasting or drying mesh 20 SWG
in drier / borma Sieve / 2.80 mm
I.S. Sieve
testa and objectionable extraneous matter. Scraped and partially shriveled kernels also permitted pro-
vided such scraping / shriveling does not affect the characteristic shape of the kernel.
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F. Cashew Kernels - Dessert Pieces

Description
SPS Scorched Kernel may be Kernels broken 5 Nil 7.5
Pieces over -scorched, into pieces but (DP & DSP
Seconds immature, shriveled not passing togeather)
(pirival), speckled through a 4
(Karaniram), discolored mesh 16 SWG
and light blue. sieve/ 4.75 mm
I.S. Sieve
DP Dessert Kernels may be Kernels broken 5 Nil 7.5
Pieces deep scorched, into pieces but (DSP)
deep brown, deep blue, not passing
speckled, discoloured through a 4
and black spotted mesh 16 SWG
sieve/ 4.75 mm
I.S. Sieve
NLSG denotes: Next Lower Size Grade. NLG denotes: Next Lower Grade. N.A: Not Available
(Source: CEPC, Cochin)
III. Export of Cashew Kernels (Quality Control and Inspection) Rules, 1986 (Notification )
S.O. 783 - In exercise of the powers conferred by Section 17 of the Export (Quality Control and Inspec-
tion) Act, 1963 (22 of 1963) and in super session of the notifications of the Government of India in the
Ministry of Commerce Nos. S.O. 1023, dated the 26th March, 1966 and S.O. 276 dated the 28th January,
1978 excepts as respects things done or omitted to have been done before such super session, the
Central Government hereby makes the following rules, namely:-
1. Short title and commencement -

1. These rules may be called the Export of Cashew Kernels (Quality Control and Inspection) Rules, 1986.
2. They shall come into force on the date of their publication in the Official Gazette.
2. Definitions - In these rules, unless the context otherwise requires,

a. “Act” means the Export (Quality Control and Inspection) Act, 1963 (22 of 1963);
b. “Council” means the Export Inspection Council established under Section 3 of the Act;
c. “Agency” means any one of the agencies established under Section 7 of the Act at Bombay, Calcutta,
Cochin, Delhi and Madras;
d. “Cashew Kernels” means all type of Cashew Kernels scorched, unescorted, wholes, pieces, roasted
and salted kernels.
3. Quality Control and Inspection - The inspection of Cashew Kernels intended for export shall be carried
out with a view to ensure that Cashew Kernels conform to the standard specifications recognised under
Section 6 of the Act and specified in the schedule appended to these rules, either,
a. On the basis of inspection and testing of finished products as per specifications recognised for this
purpose by adopting the procedure specified in Annexure-1. Page 134
Appendix
OR
b. By ensuring that the product has been processed by exercising the controls at different stages of
processing by following the levels of controls as specified in Annexure-II.
4. Appeal
a. Any person aggrieved by the refusal of the Agency to accord approval for his unit under sub-paras (4)
and (5) of para 2.7 of Annexure-II or to issue a certificate of export worthiness under sub-para (4) of para
5 of Annexure-II or sub-para (5) of para 2 of Annexure-I may within 15 days of receipt of the communica-
tion of such refusal by it, prefer an appeal to the convener of the concerned panel of experts consisting of
not less than three, but not more than seven members, appointed for the purpose by the Central Govern-
ment.
b. At least two-thirds of the total membership of the Panel of Experts shall consist of trade members:
c. The quorum of the Panel shall be three:
d. The appeal shall be disposed of within 15 days of its receipt.
IV APPENDIX
1. Procedure for estimation of peroxide value in Roasted and Salted Cashew Kernels. Weigh 50 gm of
Cashew Kernels and Powder in Grinder.
Take the powdered material in 250 ml stopper conical flask and add 150 ml of chloroform, keep the flask
in shaker over night. Next day the slurry is filtered in a Buchner flask under suction. The residue is then
mixed with 100 ml of chloroform and kept in a shaker for two hours and filtered. The volume of the
combined chloroform extracts is than made upto 250 ml.
A 10 ml each of the extract or suitable aliquot portion containing about 0.5 gm. fat is pipetted out into two
previously dried and weighed smaller beakers (25 ml capacity). Chloroform is then evaporated by
keeping the dishes on water bath. Then the dishes are transferred to a vacuum oven maintained at 70°C.
Evaporation under vacuum is carried out for one hour. Dishes are taken out, cooled in a desicator and
weighed. The dishes are again kept in the oven for 30 minutes, then taken out, cooled and weighed. This
process is repeated until the difference between the two consecutive weighings is not more than 5mg.
Aliquot of the chloroform extract containing about 4 gm. of fat is taken in a 500 ml stoppered conical flask
and required quantity of glacial acetic acid 0.5 ml of saturated potassium iodide solution is pipetted out
into this and the solution is allowed to stand with occasional shaking for exactly one minute and then 50
ml distilled water is added. Titrate this with 0.1N Sodium thiosulphate adding it gradually and with
constant and vigorous shaking, titration is continued until the yellow colour has almost disappeared 0.5
ml of 1% starch indicator is added and the titration continued until the blue colour just disappears.
NOTE
1. Conduct blank determination of the reagent daily. Blank titration should not exceed 0.1 ml or
0.1N Sodium thiosulphate.
2. If the colour of the solution is light yellow before the start of titration, starch indicator may be
added at that stage.
3. If the titration is less than 0.5 ml of 0.1 N. Sodium thiosulphate solution repeat the determina
tion using 0.01N Sodium thiosulphate solution.
Page 135
Appendix
The peroxide value may be calculated as under

Peroxide value as milli equivalent of peroxide per 1000 gm.
fat (A-B) x N x 1000
w
Where: A = Titration of samples
B = Blank
N = Normality of thiosulphate
w = Weight of fat taken for test
Procedure for estimation of Free Fatty Acid. - An aliquot of the chloroform containing about 5 gm. of fat
is taken in a weighed conical flask. Chloroform is evaporated-off on a water bath. Traces of chloroform
are removed under vacuum in the vacuum oven. Flask is weighed with chloroform free fat.
Absolute alcohol (Distilled) is neutralised with dilute Sodium hydroxide solution using phenolpthalein as
indicator. To the fat 50 ml of hot neutralised alcohol is added and the flask is shaken well. Titrate with 0.1
N Sodium hydroxide till a pink colour, which is stable for 30 seconds, appeared.
NOTE
If the titration is less than 0.5 ml of 0.1 N Sodium hydroxide solution, repeat the determination using 0.02
N Sodium hydroxide solution.
The free fatty acid may be calculated as under:

A x N x 28.2
Free fatty acid as oleic, percentage = W
Where: A = ml. of the sodium hydroxide solution
N = Normality of the sodium hydroxide solution;
and W = Weight in gm. of fat taken for test.
V . Procedure For Consignment Wise Inspection

1. Basis of inspection
a. Inspection of Cashew Kernels shall be carried out with a view to seeing that the same conforms to the
specifications recognised by the Central Government under Section 6 of the Export (Quality Control and
Inspection) Act, 1963 (22 of 1963) and that the proper grade designation label has been affixed.
b. Any person desiring to export Cashew Kernels shall prepare a consignment of Cashew Kernels by
roasting; peeling, drying and grading in hygienic premises so as to make the consignment conform to any
one of the recognised grade specifications.
c. After preparing the cashew kernels in the manner specified in sub-rule (2) above, the exporter shall
pack the same in new, clean, dry and leak-proof tin container conforming to IS : 916 (latest version). Each
tin shall be securely closed and sealed in such manner as may be specified by the Agency from time to
time.
d. The tin shall thereafter be marked with grade designation lable and packed in corrugated fibre board
cartons. The corrugated fibreboard used for packing sealed tins shall be of double wall-corrugated
fibreboard suitable for a mass content of 25 kg as per IS : 2771 Part-1 (latest version)
e. Exporters intending to use grade designation labels shall contain their requirements of such labels from
nearest office of the Agency.
f. Cashew Kernels of only one grade shall be packed in a carton.
2. Procedure for inspection. Page 136
Appendix
a. Any exporter intending to export Cashew Kernels shall submit an application to the Agency or an
officer of the Agency authorised on this behalf by the Agency, giving particulars of the consignment
intended to be exported.
b. An application shall be made out not less than seven days (15 days in the case of roasted and salted
Cashew Kernels) before the date of commencement of loading for export.
c. On receipt of the application the Agency shall inspect the consignment of Cashew Kernels as per the
instructions issued by the Export Inspection Council in this behalf from time to time, with a view to
satisfying itself that the consignment has been graded, labelled and packed in accordance with the
specified rules. The exporter shall provide all necessary facilities to the Agency to enable it to carry out
such inspection.
d. If after inspection, the Agency is satisfied that the consignment of Cashew Kernels to be exported
complies with the requirements of the specifications, it shall, within seven days (15 days in the case of
roasted and salted cashew kernels) of the receipt of intimation, issue a certificate declaring the consign-
ment as export worthy.
e. When the Agency is not so satisfied, it shall within the said period of seven days (15 days in the case
of roasted and salted Cashew Kernels) refuse to issue such certificate and communicate such refusal to
the exporter in writing along with the reasons thereof.
f. Subsequent to certification, the Agency shall have the right to reassess the quality of the consignment
at any place of storage, in transit, or at the ports before its actual shipment.
g. In the event of the consignment being found not conforming to the standard specifications at any of
these stages, the certificate of inspection originally issued shall be withdrawn.
3. Place of Inspection
Inspection for the purpose of these rules shall be carried out at the premises of the exporter where the
goods are offered for inspection, provided adequate facilities exist therein for inspection.
VI Quality Control
Only processing units approved by the Agency shall be eligible for processing Cashew Kernels
for export and submit to qualify for such approval, shall have the following minimum facilities:
1. Feeder Units:- General - Only feeder units approved by the Agency shall process raw cashew nuts for
export. In order to adjudge the sanitary and hygienic conditions with special reference to entomological
aspects prevailing in the unit and assess the adequacy of the minimum facilities available to process
Cashew Kernels for export, the feeder units’ branch factories shall be subjected to an evaluation by the
Agency. A feeder unit shall have the minimum facilities as specified below:-
1.1 Surroundings and Construction.

(1) The surroundings of units, which are under the physical control of the processor, shall be such as not
to pose any sanitary problems.
(2) The building shed shall be maintained satisfactorily.
(3) The working rooms shall be maintained in good repair to prevent any risk of infestation.
1.2 Processing Areas.

(1) The raw nut godowns and the processing rooms shall be such as to permit effective anti-infestation,
and dis-infestation operation.
(2) Arrangements shall be available to prevent entry of rodents, birds and the like into the processing
room. All the working areas shall be well lighted. Page 137
Appendix
(3) Areas of compartments and the containers used for the storage of edible products shall be separated
and distinct from those used for inedible materials.
(4) All the utensils, trays and table surface, which come into contact with material, shall be cleaned
before, after and during intervals of use as often as necessary.
1.3 Toilet Facility

(1) Adequate toilet facilities as required under the law shall be provided in the unit. Soap and plentiful
supply of water shall be provided at the toilet.
1.4 Personnel Health and Hygiene.

(1) Plant management shall take care to ensure that no person while known to be affected with a commu-
nicable disease is permitted to work in any area of the unit.
(2) All persons working in the processing areas shall maintain a high degree of personal cleanliness while
on duty.
(3) The workers shall wash their hands before entering the processing room after each absence.
(4) Chewing, spilling and use of tobacco in any form shall be prohibited in the processing rooms.
1.5 Transportation Facilities.

(1) It shall be ensured that pre-processed and finished products are transported to the packing centres
only in polythene laminated/non-rusting metallic container.
1.6 Procedure of Inspection.

(1) For the purpose of assessment of feeder units, the exporter shall inform the Agency in writing, in the
proforma prescribed by the Council, the details of the feeder units.
(2) On receipt of such information, the Agency officers, shall visit the feeder units in order to adjudge the
sanitary and hygienic conditions and facilities for processing available in the unit.
(3) If the unit is found to have the minimum facilities as specified in these rules and the hygienic and sanitary
conditions are satisfactory and no infestation problems noticed, the Agency shall approve the unit and
permit it to carry out processing of Cashew Kernels for export.
(4) If the unit is found not to have the minimum sanitary and hygienic conditions, the processor shall not
be allowed to process Cashew Kernels for export in that unit.
(5) A unit which is not approved or whose approval has been withdrawn may after rectifying the defects
make fresh application to the Agency for getting fresh approval.
(6) If, at any time, there is any difficulty in maintaining the conformity of the product to the specification for
any reason or if so directed by the Agency, production for export shall be suspended under intimation to
the Agency.
(7) The processing for export shall be resumed only after the same is approved by the Agency in writing.
(8) The processing operations such as roasting, drying, peeling, grading, storage etc. shall be carried out
in hygienic conditions under the supervision of experienced personnel of the unit.
(9) The processing operations such as roasting shall be subjected to check by the Agency officers as often
as found necessary.
1.7 Processing.
(1) It shall be ensured that necessary anti-infestation and dis-infestation measures are carried out periodi-
cally and, as and when suggested by the Agency officers.
2. Packing Centre:- General - Only packing centres approved by the Agency shall be eligible for
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Appendix
packing Cashew Kernels for export.
2.1 Such approved packing centres shall obtain kernels for packing for export from approved feeder
units only. A packing centre to qualify for approval shall have minimum facilities as specified below:
2.2 Surroundings, Construction and Layout

(1) The building shall be of permanent/semi-permanent construction and kept in good repair.
(2) The surroundings, which are under the physical control of the processor, shall not have any swamps,
dumps or animal housing nearby which might pose any sanitary problems.
(3) The working premises shall be kept in good repair to prevent any risk of infestation.
2.3 Processing areas.

(1) Measures shall be adopted to protect against entry of insects, rodents, birds and the like into the
processing rooms.
(2) All the working areas shall be well lighted.
(3) Areas or compartments used for the storage of edible products shall be separate and distinct from
those used for inedible materials.
(4) Waste material shall be frequently removed from the working areas during processing operations.
(5) All the utensils, trays and table surface which come in contact with Cashew Kernels shall be cleaned
before, after and during intervals of use as often as necessary.
(6) All small receptacles like trays, bowls, and utensils used in filing areas shall be of non-corrodible
materials other than wood, and shall also have smooth surface from crevices.
(7) Rejected materials shall be frequently removed from the working areas during processing operation.
(8) Hand washing facility such as wash basin and soap shall be provided at the entrance to the packing/
filling section.
2.4 Machinery.
(1) The packing centre shall have a vitapack equipment in good working condition capable of drawing
a vacuum of 26" Hg. The vitapack shall be fitted with a gauge to indicate the vacuum drawn from the tins
during vacuumisation.
(2) The packing centre shall be provided with a Pneumatic Foreign Matter Segregator (PFMS) in the
filling section to segregate any foreign matter that may be present with the kernels. The entire filling
operations of Cashew Kernels shall be done only through PFMS.
(3) The packing centre shall have necessary cooling facilities for conditioning the kernels, maintained
under hygienic conditions.
2.5 Toilet Facility. -

(1) Adequate toilet facilities of sanitary type shall be provided. Soap and plentiful supply of water shall be
provided at the toilets.
2.6 Personnel Health and Hygiene.

(1) Plant management shall take care to ensure that no person while known to be affected with a
communicable disease is permitted to work in any area of the unit.
(2) All persons working in the processing area shall maintain a high degree of personal cleanliness while
on duty.
(3) The workers shall wash their hands before entering the processing rooms after each absence.
(4) Chewing spitting and use of tobacco in any form shall be prohibited in the processing rooms. Page 139
Appendix
(5) Lunch boxes shall not be kept in the processing rooms.

(6) The management shall provide clean aprons and head gears to the employee working in the filling and
packing section.
2.7 Approval of Packing Centre.

(1) A processor intending to pack Cashew Kernels for export shall inform his intention to do so in writing,
in the proforma prescribed by the Agency in this behalf.
(2) On receipt of such information, the Agency officers shall visit the packing unit in order to adjudge the
facilities for processing available in the unit.
(3) If the unit is found to have the minimum prescribed facilities, the unit shall be approved to pack
Cashew Kernels for export.
(4) If the unit is found not to have the minimum prescribed facilities, the unit shall not be approved to pack
Cashew Kernels for export.
(5) The approval so accorded shall be withdrawn in respect of unit for the following reasons, after giving
a notice of minimum period of two months.
(i) If the equipments and machinery are not in good working condition;
(ii) If the sanitary and hygienic conditions of the unit are not satisfactory;
(iii) If the sanitary and hygienic conditions of the feeder unit are not satisfactory and cases of infestation
have been reported in the entomological survey by the Agency officers;
(iv) If the processor has violated or deliberately attempted to violate the provision of the rules issued by
the Council.
(6) Such withdrawal of approval shall be intimated in writing to the processor.
(7) No vitapacking work shall be undertaken in the unit, when the vitapack machine is not in the pre-
scribed working condition.
(8) A unit, whose approval has been withdrawn, may, after rectifying the defects, take a fresh application
to the Agency for obtaining fresh approval.
(9) If at any time, there is any difficulty for unit in maintaining the conformity to the requirements for any
reason or if directed by the Agency, production for export shall be suspended under intimation to the
Agency.
(10) The processing for export shall be resumed only after the same is approved by the Agency in writing.
2.8 Filling and Packing of Cashew Kernels.

(1) An exporter intending to pack Cashew Kernels for export shall after preparing the Cashew Kernels in
this behalf specified in these rules exercising the levels of in process quality control measures shall pack
the same in new, clean, dry and leak proof tin containers conforming to IS : 916 (Latest version). Each tin
shall be securely closed and sealed in such manners as may be specified by the Agency from time to time.
(2) The tins shall, thereafter, be marked with grade designation labels and packed in corrugated fibre-
board cartons. The corrugated fibreboard used for packing sealed tins shall be double wall-corrugated
fibreboard suitable for mass content of 25 kg as per IS: 2771-Part-1 (Latest Version).
(3) Exporters intending to use grade designation labels shall obtain their requirements of such labels from
the nearest office of the Agency.
(4) Cashew Kernels of only one grade shall be packed in a carton.
3. Composite Unit
A composite Cashew factory having facilities for both processing and parking of Cashew Kernels for
export shall have the prescribed facilities of the feeder units and the packing centre to be eligible for
approval. For such units, a composite approval will be sufficient. Page 140
Appendix
4. Maintenance of Records
(l) Necessary records/registers shall be maintained by the processor at the respective premises in order
to ensure effective control of the processing of Cashew Kernels and these shall be made available to the
Agency officers for inspection as and when required.
5. Procedure of Inspection
(1) An exporter intending to export a consignment of Cashew Kernels shall give intimation to the Agency
in writing in the proforma prescribed in this behalf and submit along with such intimation a declaration
to the effect that the consignment of Cashew Kernels has been processed adopting the levels of in-
process quality control measures as prescribed by the Agency in this regard.
(2) Such intimation shall reach the Agency office not less than three working days prior to the required
date of receipt of certificate for shipments in the case of Cashew Kernels involving no laboratory tests and
five working days when laboratory tests are involved. In the case of roasted/salted Cashew Kernels such
notice period shall be ten working days.
(3) On receipt of such intimation, if the Agency is satisfied that the consignment to be exported complies
with the specified standards, it shall issue a certificate to the exporter declaring the consignment export
worthy.
(4) When the Agency is not so satisfied, it shall refuse to issue such certificate and communicate such
refusal in writing to the exporter along with the reasons thereof.
(5) For the purpose of inspection, the Agency officer shall have access to relevant records and ‘premises
where processing, packing and storage of Cashew Kernels are carried out’.
(6) Subsequent to certification, the Agency shall have the right to reassess the quality of the consignment
at any place of storage, while in transit or at the ports before its actual shipment.
(7) In the event of the consignment being found not conforming to the standard specifications at any of
these stages, the certificate of inspection originally issued shall be withdrawn.
VII. Methodology of Markov Chain

Definition of Markov Analysis
The changes in the exports of cashew kernel to different countries were analysed by developing a model
with first order finite Markov chain property which captures the net effect in change in the exports of
cashew kernel over a period of time.
We are often interested in characterising or summarising how economic parameters concerning cashew
kernel exports have changed over time and predicting their behaviour in future. It is common feature and
meaningful too to associate occurrence of present to being related to occurrence in the recent past,
which infact is the essence of Markov chain analysis.
Markov chain analysis is a method of analysing the current behaviour of some variable in an effort to
predict its future behaviour. This procedure was developed by Russian mathematician Andrei A.
Markov in 1912. He first used it to describe and predict the behaviour of particles of a gas in a closed
container.
Different orders of Markov analysis
The Markov process can be of different order. The ‘first order’ Markov process is based on the assump-
tion that the probability of the next event depends upon the outcomes of the last event and not at all on
any earlier buying behaviour.
A ‘second order’ Markov process assumes that the probability of the next event depends upon the
outcomes of the past two events.
Similarly, a ‘third order’ process is based upon the assumption that future behaviour is best predicted by Page 141
Appendix
observing its past three events.

In second and third order processes, however, the computation become more cumbersome and difficult.
Studies suggest that using first order assumption for prediction purposes is not invalid, particularly if data
appear to indicate that it fallow a fairly stable pattern, that is, if the matrix of transition probabilities
remains stable. Because they have proceed to be reliable predictors of future behaviour.
Theoretical framework
There is growing awareness of the usefulness of this technique for analysis and forecasting in many fields
such as export sector particularly in the process of constant but gradual change (Power and Harris, 1971
and Prasad et al., 1997).
The ‘first order’ finite Markov model is a stochastic process (X i) which describes the finite number of
possible outcomes S i (i = 1, 2, 3… r) and is a discrete random variable X t (t = 1, 2, 3…t). This is said
to have the ‘first order’ Markovien property if the conditional probability distribution of X i, is dependent
only on the state the system is in at step ‘i’ and not in steps 0, 1, 2, 3, i-1 (Dent, 1967, Lee et al., 1970).
Mathematically the stochastic process (X i) has Markovien property if,
P (X i+1 = S/X – t 0, X t = T1… X i-1 = t i-1, X i = r) =
P (X i+1 = S/X i = r)
Where, P (X i+1 = S/X i = r) is the one step transitional probabilities of going from state ‘r’ at step ‘i’ to
state ‘s’ at step i+1. Thus, these represents the conditional probability of X i+1 given X i. If for each ‘r’ and
‘s’, P (X i+1 = S/X 1 = r) = P (X i = S/X 0 = r) = Prs for all ‘i’, then the one step transitional probabilities
remain stationary.
One-step stationary transition probabilities takes into consideration one and only one state at each point
of time i.e., this will be useful for estimating the share of market for one step (year) now only. As the
present study uses annual export data for analysis for predicting the future exports of cashew kernel to
different countries from n-step (year) now, the n-step stationary transitional probability property will be
appropriate.
The n-step transitional probabilities are defined as,

Prs (n) = P (X i+ n = S/X i = r) = P (X n = S/X 0 = r)
Where,
Prs (n) > 0 for all states r and s; n = 1,2…
∑ ns=0 Prs (n) = 1 for all states r ; n = 1,2…
The above equation assumes that there are n+1 possible states. Note that if the system is currently in
state ‘r’, it must be in some state ‘n’ steps from now. In general, the ‘n’ step stationary transition probabilities
can be calculated as follows.
Prs (n) = ∑ nj=0 Pr j Pj s (n-1)
Where the possible states are 0, 1, 2, 3…N. That is, probability of going from state ‘r’ to state ‘s’ in ‘n’
steps is the probability of going from state ‘r’ to state ‘s’ in one step times the probability of going from
state ‘j’ to state ‘s’ in n-1 steps, summed over all j = 0, 1, 2, 3…n.
Specification of the Markov chain model
The share of export of cashew kernel from India (X i t) to a particular country (j th) at time ‘t’ was
considered as a random variable and this depends on only on its past export with that country. Following
Page 142
Appendix
the first order stationary Markovien property as discussed above, the model can be specified as follows:
X j t = ∑ n I=0 X i t -1 . Pi j + e j t
Where,
X j t is the export of cashew kernel from India to j th country during the year ‘t’.
X i t -1 is the export to i th country during the year t-1.
Pi j is the probability that exports will shift from ith country to jth country.
e j t is the error term independent of X i t -1.
n is the number of importing countries.
The transitional probability (Pij) is the central to the Markov chain model analysis and will have the
following properties.
0<Pij <1
Pi j = 1, for all ‘i’.
The transitional probability Pi j indicates the possibility that exports will switch over from country ‘i’ to
country ‘j’ with the passage of time. The probabilities Pi j for i ≠ j indicate the gains or losses in exports
of each of the importing country. The probability Pi j for i = j (diagonal probabilities) indicate probability
of retention of an importing country (Atkin and Blanford, 1972).
Estimation of Markov chain model

There are several approaches to estimate the transitional probabilities of the Markov chain model such
as unweighted restricted least squares, weighted restricted least squares, Bayesian, Maximum likeli-
hood, unrestricted least squares etc. In the present study, minimum absolute deviations (MAD) estima-
tion procedure was employed to estimate the transitional probabilities, which minimises the sum of
absolute deviations (Fisher 1961, Wagner 1959). The conventional linear programming (LP) technique
was used as this satisfies the properties of transitional probabilities of non-negativity restrictions and row
sum constraints in estimation.
The linear formulation is
Min OP* + I e
Subject to,
XP* + V = Y
GP* = 1
P*>0
Where,
O is the vector of zeroes.
P* is the vector of the probability Pi j.
I is an appropriately demonstrated identity matrix.
e is a vector of absolute errors, I V I.
Y is the vector of exports of each country.
X is the block diagonal matrix of lagged values of Y.
V is the vector of errors.
G is the grouping matrix to add row elements of P arranged in P* to
unity.
Goodness of fit
Page 143
Appendix
To test whether the observed shares of exports to different countries and the predicted shares from the
Markov chain model follow similar distributions, the chi square statistics of the following type was used
(Kendall and Stuart, 1961).
c2 ( r-1) = STt Sri N (t) {Y t (t) – y t (t) }2 / y t (t)
Where,
Y i (t) observed proportions of ith country’s share at time t.
y i (t) predicted proportions of ith country’s share at time t.
N (t) total number of countries at time t.
R countries. T year.
Determination of equilibrium condition
Regular stochastic matrices, such as the one have the property that when raised in power, all rows tend
to converge to a unique vector, which may be called K. Since K represents the final probabilities of being
in each commodity category. It gives the equilibrium value of export of commodity at time t1.
VIII. Methodology of Cointegration

The starting point of testing the Law of One Price is the determination of the order of integration of the
price series. If the series is stationary, it means that the series has basic statistical properties implying that
it is invariant with respect to time. Such series will have a constant mean, a constant finite variance and
covariance between observations that depend only upon their distance apart in time.
Pt = P + e t
Where, Pt is the observed value of the series at time ‘t’ and et, a random disturbance term. The series Pt
is said to be stationary, expressed as I (0). But, often price series tend to display increase or a decrease,
which violates the above condition. Successive differencing reduces the series to stationarity, thus,
Pt – P t-1 = e t
Pt = P t-1 + e t
A series, which becomes stationary after first differencing is said to be integrated of order one and it is
expressed as I (1). Generally, a series may have to be differenced ‘d’ times to become stationary. In this
case it is termed as I (d). A major difference between I (0) and I (d) series is that the I (0) series has a finite
mean and variance, while in I (d) series, these magnitudes do not exist.
Given the prices of cashew in India (P1t) and the cashew prices in the overseas markets, USA (P2t)
Netherlands (P3t) and international reference price (P4t) in time ‘t’. The following three situations can be
identified.
i) Both the price series are having the order of stationarity equal to zero.
P1t ~ I (0) and P2t ~ I (0). In this case, the means and variances exist. This intern implies that the LOP
holds on a long run relationship as both prices fluctuate around their mean. Differences in their mean are
possible reflecting the fixed components such a middlemen’s profits and other factors. In such a situation,
it is valid to regress P1t on P2t and test the restriction that the slope coefficient equals one and the intercept
term equals zero.
ii) Both the price series having the same order of integration, but greater than zero.
P1t ~ I (d), P2t ~ I(d), where, d > 0. In this case both the price series have the same order of
integration which is greater than zero. Hence, additional information is needed to examine the validity of
LOP. Such information is obtained from the theory of cointegration, which states that even though the
same explosive pattern characterises both prices, yet there must exist a parameter which brings them
together in the long run so that their linear combination is of a lower order of integration than the original
series. In such a case P1t and P2t form a cointegrated system.
iii) Both the price series having different order of integration. Page 144
Appendix
P1t ~ I (d), P2t ~ I (b) where, d ¹ b. In this case, prices have different order of integration and the LOP
does not hold because atleast one of either P1t or P2t will exhibit explosiveness. This can be understood
if, P1t is I (0) and P2t contains an explosive component, which cannot be explained by P1t alone.
In general, to determine whether P1t and P2t are cointegrated, the following regression is employed.
P1t = a + b P2t + e t
Where, ‘a’ and ‘b’ are the parameters to be estimated. If et is integrated by the order b (b < d), P1t and
P2t are said to be cointegrated. When b = 0, the LOP holds since both the prices move together in the
long run. In particular, the LOP postulates that the cointegration parameter b = 1. Thus, cointegration
test is transformed into a stationarity test of difference between the two price series. This has been
illustrated hereunder.
Let P1t and P2t denote (non-stationary) prices of domestic and overseas markets respectively. Central to
LOP, P1t and P2t which form a cointegration system.
Let P1t = b P2t + e t be the cointegration regression where, b represents the cointegration parameter. If
‘b’ is unity, it is interpreted as the long run counter part of the association between the own price series.
Expressing P2t in terms of P1t as,
P*2t = b P2t
And substituting it in the cointegration regression yields,
P1t = P*2t + e t
This has the cointegration parameter of one. Thus a stationarity test of et itself is a sufficient test of
cointegration which can be expressed as
e t = P1t – b P 2t
To determine the order of integration, the following procedure referred as the Dickey-Fuller test was
employed which was based on the regression.
Pt = a + b P t-1
Subtracting P t-1 from both sides, we get
Pt – P t-1 = a + b P t-1 - P t-1
Thus, DPt = a + ( b-1) P t-1
DPt = a + c P t-1
Where, c = (b-1)
The regression coefficient should be negative and significantly different from zero for ‘b’ in equation Pt =
a + b P t-1 to be zero. If not ‘b’ assumes a value, hence the series is not stationary.
The hypothesis to be tested is,

H0: Pt is not I (0) against
H1: Pt is I (0)
H0 is rejected if the estimate of ‘b’ is negative and significantly different from zero.
The analysis of stationarity is carried out for the price series of domestic and overseas markets. Further,
the order of stationarity within each market was examined by differencing the respective price series as
follows,
DP1t = P1t – P 1t-1
Page 145
List of Tables
No Title Page No
I Introduction to Indian Cashew Industry 1-15
1.1 Cashew growing states and processing areas in India 5
II Past, Present and Future of Cashew Area and Production in India 17-24
2.1 World cashew production in 2000-01 17
2.2 Statewise growth in cashew area in India 19
2.3 Statewise growth in cashew production in India 19
2.4 Compound Annual Growth Rate (CAGR) of cashew
area and production and productivity in India 21
III Cashew Plantation In India - Establishment, Management and Economic Viability 25-42
3.1 High yielding varieties of cashew released by different State Agricultural Universities/
ICAR and its yield potential (kg/tree) 26
3.2 Fertiliser recommendation for cashew, for different states of India 27
3.3 Fertiliser recommendation in relation to tree age 27
3.4 The normal spacing recommended for cashew in Kerala 28
3.5 The spacing and plant population in square and triangular system of planting 29
3.6 Cost of establishment and maintenance of one hectare of cashew plantation
(200 trees) based on current prices (Rs.) year after planting 32
3.7 Cost and income of cashew cultivation (Rs.) per tree basis based on current prices
(200 trees per ha) year after planting 33
3.8 Input requirement for 1 hectare of cashew plantation (200 trees) based on current
recommendations year after planting 33
3.9 Input cost (Rs) for 1 hectare of cashew plantation (200 trees) 34
3.10 Labour requirement (no. of man days) for 1 hectare of cashew plantation (200 trees)
based on current rates of work output at CRS, Madakkathara year after planting 35
3.11 Cash flow statement for 100 hectares of cashew plantation (200 trees) Rs. In Lakh, for 20 years 38
3.12 B/C ratio at 10% income‘ reductions (200 trees per ha) yield kg/tree 40
IV Study of Cashew Processing Industry in Different States 43-74
4.1 Indian cashew processing industry during 1999 48
4.2 Comparison of processing cost by different methods (Rs/kg) 48
4.3 Investment pattern of the processing units 51
4.4 Cost of processing 36 tons/month at DR method 51
4.5 Outturn of kernels and sales realisation at DR method 52
4.6 Proportion of different grades of cashew kernel at packing 52
4.7 Cost Benefit analysis- DR method 52
4.8 Assumptions- DR method 53
4.9 Income (Rs)- DR method 53
4.10 Expenditure (Rs)- DR method 53
4.11 Cost benefit analysis under DR method 53
4.12 Details of cashew processing industries in Kerala 58
4.13 Cashew kernels grades and its proportion (Nigeria origin) 58
4.14 Total processing cost of one-kg cashew under oil bath roasting method 59
V Performance of Indian Cashew Kernel Exports 75-80
5.1 Direction of Indian cashew exports 76
5.2 Compound Annual Growth Rate of Indian cashew export 77
VI Instability in Raw Cashew Nut Imports 81-87
6.1 Demand for raw cashew nut in India 82
6.2 Imports of raw cashew in India (1995-96 to 2000-01) 83
6.3 Direction of India raw cashew Imports 83
6.4 The Compound Annual Growth Rate for raw cashew imports 84
VII Indian Cashew Nut Shell Liquid (CNSL)Exports 89-97
7.1 The major destinations of CNSL 89
7.2 Directionwise exports of cashew nut shell liquid from India 96
7.3 CAGR of CNSL export from India 97
VIII Direction and Changing Pattern of Cashew Trade - A Markov Analysis 99-108
8.1 Direction of Indian cashew kernel exports (2000-01) 99
8.2 India’s exports to major destinations (in term of value) from 1989-2001 100
Page 146
8.3 One step transitional probability for exports of cashew kernel 101
8.4 Observed and predicted shares (%) of cashew kernel exports from India 103
8.5 Transitional probabilities for exports of cashew kernel to different countries 104
8.6 Predicted shares of exports of Indian cashew by different importing countries (%) 104
IX Price Behaviour of Indian Cashew Kernel 111-114
9.1 ADF test for stationarity of the price series for cashew kernel 112
9.2 ADF test for stationarity of the price series after 1st difference 112
9.3 ADF test for cointegration of domestic prices with USA,
Netherlands and International Reference price for cashew kernel 113
X Export Competitiveness of Indian cashew 115-120
10.1 FOB price of cashew kernel at Tuticorin/Cochin port 117
List of Graphs
No Title Page No
I Introduction to Indian Cashew Industry
1.1 Cashew Distribution in India 5
1.2 Exports earnings from CK and allied products (1990-91 to 2001-02) 6
II Past, Present and Future of Cashew Area and Production in India
2.1 Estimated world raw cashew production during 2001-02 17
2.2 Area and production under cashew in India: (1955-56 to 2001-2002) 18
2.3 Actual and estimated area under cashew in India 22
2.4 Actual and estimated cashew production in India 23
IV Study of Cashew Processing Industry in Different States
4.1 Diagram showing extraction of fenny from cashew apple 64
4.2 Flow chart of cashew processing 71
4.3 Cashewnut steaming unit 72
4.4 Shelling of roasted nuts 72
4.5 Separation of testa from kernel 73
4.6 Manual grading of peeled kernels 73
4.7 Cashew sealed tins filled with nitrogen 74
4.8 Packaged cashew ready for market 74
V Performance of Indian Cashew Kernel Exports
5.1 India v/s World Cashew kernel exports 75
5.2 Actual and estimated exports of CK from India (Qty) 77
5.3 Actual and estimated exports of CK from India (Value) 78
VI Instability in Raw Cashew Nut Imports
6.1 Imports of RCN in India 84
6.2 Actual and estimated imports of RCN from India (Qty) 85
6.3 Actual and estimated imports of RCN from India (Value) 85
VII Indian Cashew Nut Shell Liquid (CNSL)Exports
7.1 Actual and estimated exports of CNSL from India (Qty) 96
7.2 Actual and estimated exports of CNSL from India (Value) 97
IX Price Behaviour of Indian Cashew Kernel
9.1 Price movement of W320 cashew nut FOT Rotterdam 108
9.2 Average value of RCN imported into India 109
9.3 Average unit value of CK exported from India 110
X Export Competitiveness of Indian cashew
10.1 Quarterly price of CK at Different markets 119
Page 147
List of Acronyms
$ Dollar lb Pound
% Percentage LP linear programming
@ at LWP Large White Pieces
A/c Alternative current m metre
AD After Death MAD minimum absolute deviations
AICS&CDP All India Co-ordinated Spices and Cashew Development Project Mg milligram
APMC Agricultural Produce Marketing Committee mln Million
B/C Benefit Cost mm Millimetre
BEP Break Even Point MT Metric ton
C Celsius N/m2
CAGR Compound Annual Growth Rate NaOH Sodium hydroxide
CAPEX The Kerala State Cashew Workers Apex Industrial Co-operative Society Ltd. No Number
CEPC Cashew Export Promotion Council NO2 Nitrogen Dioxide
CIF Cost Insurance Freight NPV Net Present Value
CK Cashew kernel NR Natural
cm centimetre NR Net Return
CNSL Cashew Nut Shell Liquid NRC Non Recurring Cost
CO2 Carbon Dioxide Obs Observed
CRS Cashew Research Station OGL Open General Licence
DA Daily allowance P Phosphorous
DEPB Duty Entitlement Pass Book pdt products
DGCIS Director General of Commerce and Indian Statistics P2O5 Phosphate fertiliser
DSIR Directorate of Scientific Industrial Research PVP Polyvinyl Pyrolidone
E.g. Example Qty Quantity
ECGC Export Credit Guarantee Corporation RBI Reserve Bank of India
Exp Expected Rep Republic
FB Fancy Butts rpm Rotation per minute
FR Flame Retardant Rs Rupee
FS Fancy Splits SP Small Piece
ft foot Sq.km Square Kilo meter
G/gm gram SS Scorched Splits
GNP Gross National Product SSW Scorched Wholes Seconds
H2 SO 4 Sulphuric acid SW Scorched Wholes
HP Horse Power TA Travel allowance
i.e., That is TCI Total Capital Investment
IRR Internal Rate of Return TRA Transfer Release Advices
ISO International Organisation for Standardisation UAE United Arab Emirates
K Potassium UK United Kingdom
K2O Potash fertiliser USA United States of America
kg Kilo Gram V Volt
Kg/ha Kilo gram per hectare WTO Linneus
KSDC Kerala State Development Corporation
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I am glad to learn that www.CommodityIndia.com

Even though a large number of publications are avail-

II) Past, Present and Future of Status of cashew in India 17

III) Cashew Plantation in India- Site selection 25

V) Performance of Indian Direction of cashew kernel exports 75

VII) Indian Cashew Nut Shell Liquid

VIII) Direction and Changing Pattern of Transitional probability matrix 99

X) Export Competitiveness of Indian Cashew

XII) Appendix 127

Introduction to Indian Cashew Industry

The crop now has spread to the East coast

Table 1.1- Cashew growing states and processing areas in India

Cashew is a unique combination of fat, proteins, carbohydrates, minerals and vita-

Strength, Weakness, Opportunity and Threats of Indian Cashew In-

imports and unpredictable domestic production.

The premium payable to Export Credit Guarantee Corporation (ECGC) is

The database on cashew is weak and in order to strengthen it there should be

Exports in value added form

The main competition for cashew in the international market is other

The cashew processors should promote cashew cultivation on their own

The Marketing Development Assistance would help the exporting companies

duty on import of cashew kernels where as there is a provision to levy up to 80%

In addition to the supplementary income to the producers, the government excheq-

Increasing demand: It must be borne in mind that desirability of cashew in food

The Department of Wastelands Development, Government of India has included

Organic Cashew Export

Augustine, A. (1996) Problems and prospects of cashew apple processing. In na-

Prabhu, G.(1996) Cashew in international trade- Problems and prospects. In national

Walter D’souza, (2002), a paper presented in a Seminar on ‘State Government’s

How to HACCP- Mike Dillon & Chris Griffith.

An Introduction to HSCCP- Sara Mortimore & Carol Wallace.

Food Quality and Safety System Training manual- FAO.

Requirements of the laws and regulations enforced by US FDA.

Past, Present and Future of Cashew

Present Status of Cashew in India

Cashew Plantation Status:

Fig 2.2 Area and production of raw cashew in India

Table 2.2 Statewise growth in cashew area in India (area in Ha)

Table 2.3 Statewise growth in cashew production in India (output in tons)

Trends in Cashew Area

The logarithmic form of the equation

Results and Discussion

Table 2.4 Compound Annual Growth Rate (CAGR) of

Description Intercept Slope R2 Compound

1. Growth in cashew area

Source: CEPC, Cochin

2. Growth in cashew production

Source: CEPC, Cochin

There was an increase in productivity after the implementation of AICS&CDP. During

Sandhu H K , 1982, An econometric analysis of Indian export share of cashew ker-

Cashew Plantation In India

ii) Soil factors

iii) Variety selection

Table 3.1 High yielding varieties of cashew released by different State

ment of 30 high yielding varieties of cashew suitable for different regions.

B. Critical input in cashew plantation

State Fertiliser dose for adult tree (gm)

Table 3.3 Fertiliser recommendation in relation to tree age

State % of fertiliser dose recommended for adult trees

C. Critical management practices in cashew

4. High density planting

5. Weed control through chemicals