Falling Rupee Fuelled Forward Contract Competition

This entry was posted on Saturday, January 7th, 2012 and is filed under Cashew.

Despite improving activity in the Indian domestic cashew kernel,  the Q4 (Last Quarter) phenomena is still continuing in the export market. A few exporters are said to be not interested in price increase because of their over-selling. During the bearish phase of the Q4, significant re-negotiations were worked out between some buyers and the sellers. To bring down the buyers cost of purchase, sellers made a ‘much below market price sale’. By such extra commitments buyers average cost came down but the sellers committed over-selling. Over-selling created shortage of kernel, thus sellers lost interest in the market improvement. Bearish news planters succeeded in terming these contracts as the real market and therefore the market kept reducing. Then the falling Rupee added fuel to the forward contract competition. Many wrongly thought that the Indian currency depreciation would continue till the Rupee crosses 57/Dollar. If the market rises, such sellers may have to struggle hard to fulfill their forward commitments as well as their requirements from local small factories.

Filed Under: Cashew