Cashew (Anacardium occidentale L.) a native of Eastern Brazil was introduced to India by the Portuguese nearly five centuries back. Cashew is the third largest edible tree nut in the world. India has been the dominant player in the cashew trade and has also pioneered the cashew processing and exports. In addition, India is the largest producer of cashew kernels and the largest area holder of this crop in the world.

Cultivation of cashew in India is mainly confined to the peninsular areas. It is grown in Kerala, Karnataka, Goa and Maharashtra along the west coast and Tamil Nadu, Andhra Pradesh, Orissa andWest Bengal along the east coast. Now cashew occupies an area of 7.30 lakh hectares in the country as on 2003-2004 with a production of 4.50 lakh MT. However, the yield per hectare is only 630 kg. The industry plays a significant economic role as it generates employment in the processing and agrarian sector for over 3 lakh persons with 95% of them being women. In 2003-04, the size of the cashew market was valued at about Rs.5000 crore .

India is the second largest producer of raw cashew in the world. Vietnam tops global production with 6.37 lakh tonne followed by India (4.6 lakh tonne), Nigeria (1.86 lakh), Brazil (1.78 lakh) and Tanzania (1.23 lakh).

Today, India is the largest producer and exporter of cashew kernels in the world. Nearly 50 per cent of the world export of cashew kernels is from here. India is the third largest consumer in the world next to the US and EU, with over 20 percent of global consumption share. India exports 106,200 tons (68 percent of processed kernels) to over 60 countries, generating Rs. 900 crores equivalent of foreign exchange. United States, the United Kingdom, Japan, Netherlands, Australia, Canada, Germany, Hong Kong, Singapore, New Zealand and the Middle East countries belong to the long list of India's cashew importers. Indian cashew's good quality, taste and appearance are factors that differentiate it from the rest of the world.

India has been a pioneer in cashew processing and has been the first country to hit the world market with cashew kernels. The raw cashew nuts collected from the growing areas are moved to the factories for processing. It is ensured that the raw nuts are thoroughly cleaned and are free from all foreign matter before they are processed.

Based on the shape, size and color of the kernel, cashew kernels are graded into white or scorched wholes, pieces, splits, butts etc. The Government of India Act prescribes 33 different grades of cashew kernels of which only 26 grades are commercially available and exported. W- 320 is the most popular among cashew kernels and also the most available, worldwide. Scorched wholes are another grade of cashew kernels. They are prepared by subjecting the kernels to a longer duration of roasting, where by they attain a slight brown colour. They however have all the other characteristics of white kernels including nutritional qualities. Butts, splits and pieces are priced low and are ideal for cooking, preparation of sweets and savory snacks and so on.

Cashew futures are exchange traded contractual obligations to make or accept delivery of a specified quantity and quality of Cashew during a specified time in the future at a price agreed upon at the time the commitment is made. Through Cashew futures contract, a trader or manufacturer will be able to transact a series of contracts set for a specified period of time in future say 8-10 months ahead in time for a standardized specification of Cashew (as per our contract) for a specified location of delivery but only the prices quoted by the buyers/sellers will vary.

There are three main types of participants in any futures markets. These are:

Hedgers are users who like to reduce the price risk they face from potential price movements. Often, hedgers are willing to sacrifice the potential upside to gain certainty about prices. Speculators are participants who like to take directional view of future price movements and take on the risk that hedgers like to reduce. Arbitrageurs are participants who exploit price differentials on the same commodities or contracts that are traded on two different markets (for e.g. between futures prices in two exchanges).

In order to trade on NCDEX, you can directly become a member of NCDEX or contact one of the members enrolled with NCDEX. The member will execute trades on your behalf in the nation wide online system established by NCDEX. Further details of the same can be obtained from NCDEX website www.ncdex.com.

Contract Specifications for Cashew Futures Contract

Cashew can be delivered on NCDEX in dematerialized (demat) form. The delivery of Cashew is affected by sellers providing delivery information to the Exchange during trading hours on the last day of expiration of the contract through the delivery request window. The Cashew received at the warehouse will be tested and certified by NCDEX appointed assayer before acceptance as good delivery in the warehouse. Likewise, cashew delivered to buyers will be from the accredited warehouse only.

Functions of Cashew Futures Markets on NCDEX

In any transaction, the two parties to the transaction will trade anonymously on NCDEX. NCDEX provides a mechanism that guarantees that the contract will be honoured. All Cashew trades executed on NCDEX are guaranteed by NCDEX and the counter party credit risk is assumed by the exchange. NCDEX manages this risk by a system of margin collection. Each trade on NCDEX requires the payment of an up front margin (or good faith money). Typically this margin is a very small percentage of the actual transaction value.

In addition the positions on the futures market are marked to market on a daily basis. The client also needs to pay a daily market-to-market margin. NCDEX uses SPAN system for calculation of Value at Risk based margin calculated at 99% confidence interval over a one-day time horizon. In addition NCDEX will levy additional margin to cover for extreme movements or distortions in prices.

NCDEX also has a robust surveillance system in place to track illegal or circular trading. This was done to provide a fair forum for all participants, especially to retail investors. In the rare case of any defaults by members, NCDEX has the largest settlement guarantee fund among all commodity exchanges in the country.

Futures trading markets help transfer risk from one class of participants to the other.

The primary function of NCDEX is to provide an electronic online trading platform wherein the Cashew manufacturers and Cashew users, such as the process food manufacturers can act on their price knowledge and can offer bids and asks. This online placing of bid and ask results in the market clearing prices of the moment. Rather, this price is discovered in this free-flowing interplay among all market participants. Since the futures prices reflect the collective perception of the market participants about the future price level, futures markets provide an important function of price discovery. In fact the spot price generally converges to or is close to the futures price on expiry of the futures contract.

Price spread between months which is called calendar spread gives important information about storage which is very important for Cashew.

The exchange will be disseminating the spot prices for Cashew at Kollam twice a day to its trader workstation, its website and to various data vendors like Telerate.

NCDEX is partnering with consumer goods industry players, rural kiosk network entities, technology companies, news agencies and banks for both spot and futures price dissemination. NCDEX will continue to evaluate and add delivery locations on basis of trade flows so that a fine mix of deficit and production areas are available as delivery locations.

Through a process known as polling, the exchange randomly calls up about 25 market participants from a panel of 40 market participants and asks them for the spot prices thrice a day. After collecting the raw prices, the exchange carries out a process called bootstrapping, a scientific procedure for removing the outliers of raw prices (i.e. prices that too far away) and averaging the remaining prices. The exchange also invites spot market players for participating in the spot price polling process.

The NCDEX homepage http://www.ncdex.com will carry real time price data .In addition the site will regularly provide historical data on settlement prices, daily and historical highs and lows for each contract. It will also provide information on changes in contract specifications, details of members, market timings and exchange holidays. NCDEX will make available historical data for research purposes through different electronic media.The daily quotes will also be disseminated through different information service providers. These details will also be available on the website.

The brochure has been prepared for general information purposes only. While NCDEX has made every effort to assure the accuracy of the information contained, herein, any affirmation or fact in this brochure shall not create an express or implied warranty that any example or description is correct. This brochure is made available on the condition that errors or omissions shall not be made the basis, for any claims, demand as or cause of action.

The Government of India and the Forwards Markets Commission (FMC) - the commodity futures market regulator-have recently eased restrictions on futures trading on 122 commodities (including several agricultural commodities, precious metals and base metals).The National Commodity & Derivatives Exchange Limited (NCDEX) commenced operations on December 15, 2003 and offers trading facilities through its trading and clearing members spread across more than 200 centres in India. NCDEX has eight national level institutional shareholders. These are ICICI Bank Limited, Life Insurance Corporation of India LIC), National Bank for Agriculture and Rural Development (NABARD), National Stock Exchange of India Limited (NSE), CRISIL Limited (earlier known as the Credit Rating Information Services of India Limited), Punjab National Bank (PNB), Indian Farmers Fertilizers Cooperative Limited (IFFCO) and Canara Bank. All these institutions are reputed entities in their respective fields and NCDEX leverages their expertise to realize its potential in the commodity space for the benefit of its trading and clearing members.

NCDEX has established reliable, time tested and transparent trading platform.

Provides reliable spot prices in major commodities. Has developed robust assaying and warehousing facilities: enabled holding of commodity balances and delivery on the exchange in electronic dematerialized form. Is partnering with consumer goods industry players, rural kiosk network entities, technology companies, news agencies and banks for both spot and futures price dissemination. Is working with banks to design specific commodity financing products. Is working with agri extension service providers to help farmers hedge their price risks. Is working with the tax authorities to clarify various sales and service tax issues. Is developing exotic products such as weather derivatives, commodity indices, etc.