Developing the Agriculture Value Chain

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Developing the Agriculture Value Chain Cashews -
A Case Study CCA - Baltimore
A Presentation By Olam
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Presentation Outline

• Company Overview
• Our Cashew Business
• Challenges for the African cashew Industry

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Company Overview
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Rapid Growth Expansion
2005 Global Supply Chain Leader 2.1 billion
turnover 14 products 38 countries 3,000
customers 50 end markets 3,000 employees
1989 Start-Up 1 product 1 country
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Expertise Across the Supply Chain
Integrated from farm gate to factory gate
Origin
Customer
Primary Processing
Marketing
Inland Logistics Warehousing
Distribution
Shipping Marine Logistics
Sourcing Origination
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Growth Through Adjacency Our Past
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Leading Global Position
Product segments
Market leadership

• Edible Nuts, Spices Beans
• Cashew nuts
• Other edible nuts
• Sesame

More than 25 market share of global raw cashew
nut trade
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• Spices
• Beans

• Confectionery Beverage Ingredients
• Cocoa
• Coffee

One of three largest suppliers of cocoa robusta
coffee worldwide
2.

• Sheanuts

• Food Staples Packaged Foods
• Rice
• Sugar

3.
One of the top three global rice suppliers

• Dairy products
• Packaged foods

4.

• Fibre Wood Products
• Cotton
• Wood products

One of the leading suppliers of teak in the world
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Present in all key producing countries for the 14
products
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Strong Customer Base
Over 3,000 customers, 50 end markets
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Cashew Industry an overview
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World Cashew Crop (In Shell)
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Demand Overview 2006
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Supply / Demand growth

• Massive supply increase in WA, Vietnam, and
  others (has doubled in last 5 years)
• Demand has caught up in the last 2 years
  probably outstripping supply now
• Further Supply growth anticipated most origins
  can grow even further, with some focus and
  support
• Continued Demand growth for cashews, supported
  by overall growth across all edible nuts
• Lots of opportunities for all players growers,
  processors, roasters and consumers..

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Olams Cashew Business
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Olams Cashew Business

• Direct Procurement from all major growing areas
  we source in excess of 200k Mts of Raw Cashews
  from 15 of the 18 known producers around the
  globe.
• We sell 100k Mts of RCN - out of the existing
  world trade of 450k Mts into the 2 import
  markets, ie - India and Vietnam.
• We Process and export 85k MTs in the 3 major
  processing centers, i.e India, Brazil Vietnam
• Africa processing which began as a pilot in
  2003, contributes currently 15k Mts
• We directly service various end-users and
  importers across most consuming centers through
  our 9 marketing offices in USA, Holland, UK,
  Poland, France, Moscow, Dubai, South Africa, and
  Singapore.
• Only Integrated Industry Participant across all
  parts of the chain

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• Unique Challenges for Cashew in Africa

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Raw Cashew Nuts

• Small holder farmers, very few plantations
• Plantings are disorganized seed varieties as
  per availability and not design
• Not being a cultivated crop, not much care taken.
  Need for better farming practices, Crop
  protection techniques, better pollination, etc.
• Yield / productivity per tree per hectare low
  and varying widely.
• Post harvest care inadequate improper drying
  and packing
• Widely varying Quality of raw cashew nuts
  dependant on weather, crop pattern and handling
  all leading to lower realization for farmers and
  producing countries
• Governmental intervention in a few countries for
  setting Minimum farmer price not in line with
  market and causes unnecessary confusion
• Lack of processing capacity and/or ability to
  process viably - forces all African producers to
  export Raw Cashew Nuts to India Vietnam.

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Cashew Processing in Africa

• History of failed attempts both manual and
  mechanical.
• Need to understand raw Cashew quality and value
  the seed basis differential outturns and prices
  for different grades.
• Ability to buy and store sufficient RCN of good
  quality over 10-12 months
• Quality risk
• Carrying Cost
• Hence high investment outlay
• Lack of financial support / governmental
  legislation to overcome initial gestation period
  losses and lack of consistency in policy.
• Extremely high labor costs and no labor
  regulations to address specific Industry
  requirements ( vis a vis India and Vietnam )
• Long gestation period for worker skill
  development, and initial breakage losses during
  gestation
• Marketing challenge - Developing a market / image
  for African kernels. Need to sell mixed
  containers of different grades, due to low
  production capacity of the processors.

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Areas for Support in promoting value add
Cashews in Africa

• Enable direct financial assistance
  infrastructure support for
• Setting up processing factory
• Storage Space for storing sufficient RCN through
  the year
• Subsidized loans to new entrepreneurs initial
  plant and m/c ( 150-200k for a 1000 Mts p.a.
  capacity ) Working capital of 600k
• Policy formulation in producing countries to
  assist new Processors during their gestation
  period ( 3-4 years )-and consistent policy for a
  period of over 5 yrs.
• Exemption from statutory export levies or
  differential levies between RCN kernel
  exporters during the gestation period
• Duty on exports of RCN to discourage exports and
  encourage local processing / value add.And
  incentive on exports of kernels to help build
  image of African kernels
• Allow Processors to buy RCN first to meet their
  requirements before it is allowed for exports
• Training subsidy to the processors while skill
  development of worker takes place or set up
  training skill development centers
• Separate labor laws for the Industry basis
  productivity linked wages in order to compete
  with India and Vietnam
• Provide for proper spacing of factories near
  growing areas to generate more employment in the
  rural areas with lesser employment opportunities
  , and avoid inefficient migration of skilled
  workers between factories a lesson Africa can
  learn from the majors.

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• Thank You