Short supplies due to a steep fall of 40 per cent in domestic production this year coupled with the spurt in demand due to the ongoing festive season, were the main reasons for the price appreciation, merchants at the APMC market said.

They said that the rate of appreciation was higher in the premium quality, large nuts, due to higher demand from retailers in view of the coming Diwali festive season, that begins on 19th of this month.

The W-240 premium quality raw cashew are quoted in the range of Rs 4,200-4,300 per ten kilogram.

The smaller variety, W-210 is quoted at Rs 3,600-Rs 3,700 per 10 kg tin against last year's Rs 3,100-Rs 3,200. In all likelihood the prices will rise further if the demand from sweetmakers and biscuit manufacturers sustain. Even afterDiwali the prices are not likely to reduce as demand from northern states usually picks up during winter. Consumer demand in Christmas will also fuel the rise. The new cashew crop is expected to trickle in from March.

The rise may be arrested at high levels, expected around December, on profit-taking by exporters.

Global production of cashew has also slumped by 40-50 per cent leading to a tight supply position in the markets. The recent devaluation of rupee encouraged exporters to pick up the remaining stock from the local market adding further to the tight position, traders said.

According to traders, most of the processing units of raw nuts have run out of stocks completely and resulted in their closures. The stocks have virtually disappeared from the cashew-growing areas of Goa and Ratnagiri.

There are reports of some stocks lying with the processing units in Kerala and Banglore as they mainly depend upon the imported raw nuts.

Normally these units have sufficient stocks to last till Decemberevery year, but due to non-availability of timely bank finance they were unable to stock raw nuts in required quantities this time, said Bharat Shah, a leading cashew trader.

Presently there are a few processing units which are still working at 30-35 per cent capacity utilisation. If they were to utilise their capacities in full, the stocks would be over within a month and this would raise the overhead costs arising out of the wages to be paid to the workers.

The cashew processing units are labour intensive and hence the excess overhead expenses.

The exporters are also attracted towards cashew nut exports as the unit-value realisation in export oriented containers is far more than the goods sold in the domestic market.

Internationally, a moisture content of three-four per cent in the nuts is readily accepted which leads to increase in weight and thus realises more value while the domestic market requires dry nuts.

Moreover, exporters get the benefit of duty drawback as against the negative impactof sales tax in the local market.

India mainly imports raw nuts from African countries. Though the major supplier Nigeria may not cater to Indian demand as international trading by the country is virtually at a standstill due the prevalent political instability. Unlike almonds, cashews are not allowed under open general licence, hence the imported supply will remain restricted. The supply and price position will ease only after the new crop arrivals in domestic market after Diwali, traders said.