Global Cashew Market Faces Rising Bearish Crop Threat as El Nino Strengthens

El Nino Development Reaches Critical Threshold

Global cashew market participants are confronting a rapidly shifting climate outlook. Every major forecasting agency has converged on the same signal: a strong El Nino is now imminent.

NOAA's Climate Prediction Center issued an El Nino Watch on May 14, assigning an 82% probability of El Nino conditions emerging between May and July 2026. That figure rises to 96% by December 2026. ECMWF and Australia's Bureau of Meteorology project sea surface temperature anomalies reaching as high as +3 degrees Celsius in the Nino 3.4 region by late 2026, which would place this event among the strongest on record.

The World Meteorological Organization has confirmed the shift with high confidence. Wilfran Moufouma Okia, Chief of Climate Prediction at WMO, stated that climate models are now strongly aligned and that this may be a strong event. Some ensemble models indicate a 50% chance of super El Nino status, up from 25% just weeks earlier. For the global cashew market, the implications are structural.

Why Cashew Trees Are Acutely Vulnerable

Cashew trees (Anacardium occidentale) are perennial crops with specific climatic requirements during their flowering and fruiting windows. Unseasonal rainfall during flowering causes flower drop. Prolonged drought during fruiting reduces nut size and outturn quality. Temperature spikes above 38 degrees Celsius during panicle development can sterilize pollen and suppress fruit set.

El Nino disrupts all three variables simultaneously across different producing regions. Unlike annual crops that can be replanted the following season, cashew yield losses from a severe El Nino carry forward: stressed trees produce smaller, lower-quality crops for one to two seasons after the initial shock.

West Africa Cashew Production Under Pressure

West Africa accounts for over 60% of global raw cashew nut production and remains the primary source of RCN exports to processing hubs in Vietnam and India. The region's exposure to El Nino is both direct and consequential for global supply.

Cote d'Ivoire, the world's largest producer, harvested approximately 1.5 million tonnes in 2025 and is forecast to produce a similar volume in 2026 under current conditions. However, climate models indicate that parts of West Africa could experience drier-than-average conditions in the second half of 2026. An early or intensified harmattan season would desiccate cashew apples and reduce kernel sizes, lowering outturn quality. APEDA's October 2025 dashboard flagged a projected 5 to 10% output decline from previous estimates for Cote d'Ivoire, with Benin and Ghana also reporting weather-induced crop stress.

West Africa cashew production is further complicated by policy shifts. Cote d'Ivoire lowered its minimum farmgate price to 400 CFA francs per kilogram for the 2026 season, a 6% decline from the prior year, reflecting weaker international prices and lingering demand disruption from U.S. tariff measures imposed in 2025. Ghana reduced its minimum farmgate price by 20%. While lower farmgate prices may support processor margins in the near term, they reduce farmer incentives to invest in crop maintenance at exactly the moment when El Nino demands greater agronomic care.

India's Monsoon Deficit Compounds Domestic Supply Risk

El Nino crop risk extends directly into India, the world's second-largest cashew processor and a significant domestic producer. IMD has projected 2026 southwest monsoon rainfall at 92% of the long-period average, placing it in the below-normal category for the first time in three years.

IMD has also indicated a 35% probability of deficient rainfall, defined as below 90% of LPA. During the last super El Nino in 2015-16, actual monsoon rainfall came in at 86% of LPA, triggering widespread drought conditions. India's domestic RCN output, estimated at approximately 780,000 tonnes for the current marketing year, could face further decline if drought stress affects key growing states in Kerala, Goa, Maharashtra, and Karnataka.

The timing is critical. Indian cashew trees flower during the winter months, from November through February. If El Nino is at or near peak intensity during this window, extreme heat and moisture deficits could cause significant flower drop, reducing the early 2027 harvest before it begins. India imported approximately 280,000 to 300,000 tonnes of RCN in late 2025 and early 2026, according to industry estimates. A weaker domestic crop would intensify import competition with Vietnam for African RCN supply in the second half of 2026.

Vietnam Cashew Processing Faces a Tightening Procurement Window

Vietnam processes nearly 70% of the world's raw cashew nuts and remains the dominant global kernel exporter. According to VINACAS data, Vietnam imported approximately 2.95 million tonnes of RCN on a year-to-date basis through late 2025, with over 85% sourced from West and East African origins.

Vietnam cashew processing capacity is concentrated in the southern provinces of Binh Phuoc, Dong Nai, and Binh Duong. These facilities require continuous RCN throughput to maintain utilization rates and defend increasingly compressed margins. Average RCN import prices held at approximately $1,444 per tonne in late 2025, well above historical norms, even as average kernel export prices declined, squeezing processor profitability.

El Nino introduces a dual risk for Vietnamese processors. On the supply side, tighter African harvests and potential export restrictions would constrain RCN availability during the peak procurement period from January through June. On the domestic side, extreme heat during the 2026-27 flowering period could reduce output from Vietnam's own cashew orchards, which contribute roughly 300,000 to 350,000 tonnes annually. Cambodia, which has emerged as a significant supplementary source at a projected 800,000 tonnes by 2026, faces similar heat and drought exposure under El Nino conditions.

East African Supply Risks Cut Both Ways

El Nino's impact on East Africa is distinct from the drought pattern expected in West Africa and South Asia. Historical precedent indicates that El Nino typically brings heavier and more erratic rainfall to East Africa, particularly during the October to December short rains season.

Tanzania, the largest East African cashew producer with output around 425,000 tonnes, harvests its crop from September through January. Heavy unseasonal rains during this window could rot raw cashew nuts on the ground, degrading quality and reducing exportable volumes. Tanzania's crop is strategically important because it fills the supply gap between West African harvest cycles, providing RCN to Asian processors during the second half of the calendar year. Disruption to Tanzanian supply would amplify the tightening effect of any West African production shortfall.

Conversely, APEDA's dashboard noted that Tanzania was one of the few major producers expected to record a strong production year in 2026 under baseline conditions. The question is whether El Nino-driven rainfall anomalies will erode that advantage.

Freight Volatility and Geopolitical Overlay

El Nino crop risk does not operate in isolation. The 2026-27 cashew supply chain faces concurrent stress from elevated freight costs and geopolitical disruption to shipping corridors.

Ongoing rerouting of container traffic around the Cape of Good Hope, driven by Red Sea security concerns, has extended transit times for RCN shipments from West Africa to Asian processing hubs. Freight rates on the Africa-to-Asia corridor remain volatile and above pre-2024 levels. Past El Nino events have also constrained maritime trade through reduced water levels in the Panama Canal, adding further risk to transoceanic shipping routes.

Elevated fertilizer costs, driven by Middle East supply disruptions and higher energy prices, are compounding the challenge for cashew farmers. Nitrogenous and phosphorus fertilizers critical for post-stress crop recovery have become more expensive, reducing the capacity of smallholder producers in West Africa and India to mitigate yield losses from adverse weather.

Raw Cashew Nut Prices and Kernel Market Outlook

Raw cashew nut prices for 2026 are forecast in the range of $1,700 to $1,900 per tonne CNF globally, with CNF prices to Vietnam potentially reaching $1,800 to $2,000 per tonne according to industry projections. RCN prices historically peak between July and October during the lean season when harvest activity is minimal. With anticipated supply tightening from El Nino, this seasonal peak could prove more pronounced in 2026.

The current market sits in a period of relative consolidation. Record inventories from the strong 2025 Cote d'Ivoire crop, which saw processing volumes surge 51% to 732,000 tonnes across West Africa, have provided a buffer. However, this buffer is eroding. Vietnamese processors ran at high utilization through 2025 to defend margins, drawing down inventory rather than building it.

Kernel prices, particularly for the benchmark WW320 grade, are projected to move from stable to firm through mid-2026 and into a more pronounced upward trajectory by the fourth quarter if El Nino materializes as forecast. Forward procurement activity from Vietnamese and Indian processors is likely to accelerate in anticipation, adding demand-side pressure to an already tightening RCN market.

Strategic Considerations for Downstream Buyers

Roasters, snack manufacturers, and kernel importers face a narrowing window to secure coverage for late 2026 and early 2027 delivery. The convergence of El Nino crop risk, tighter African supply, compressed processor margins, and freight volatility creates conditions for sustained price firmness rather than the seasonal corrections the market has seen in recent years.

Forward contracting for Q4 2026 and Q1 2027 positions offers a hedge against weather-driven crop losses before the next Southern Hemisphere harvest cycle, beginning with Tanzania in September, quantifies the actual damage. Diversification across origins, including Cambodian and Mozambican supply, may also provide partial insulation against concentrated West African production risk.

Conclusion

The global cashew market enters the second half of 2026 with a clear and quantifiable weather threat. A potentially record-breaking El Nino is developing at a pace that has outstripped both the 1997 and 2015 super events at the same stage. From weakened West African harvests to a deficit Indian monsoon and heat-stressed Vietnamese orchards, the production outlook across every major origin faces downside risk. The current period of relative price stability in the cashew market may not persist once the full scope of El Nino's impact on the 2026-27 crop cycle becomes evident.