By Drew Hinshaw And Liam Pleven
DAKAR, Senegal-A military revolt in the tiny African nation of Guinea-Bissau is unsettling the market for prized cashew nuts.
Some of the world's tastiest cashews are rotting in roadside piles on rural byways leading to and from the capital of the wetland nation, where a recent military uprising has left farmers stranded with no way to ship their nuts to the Indian factories that steam the cashew out of its poisonous shell.
On April 13, soldiers kidnapped Prime Minister Carlos Gomes, Jr.-for the second time in two years-weeks before he was set to be elected president of Africa's fifth-biggest cashew grower. Generals opposed his plans to slash military spending in a country that depends on aid for more than half its budget. The yearly April to June cashew harvest accounts for 98% of the country's export revenue and employs, according to the World Bank, nearly nine out of every 10 people, including children.
The chaos is bad news for this West African country of 1.7 million, where no president has completed a full term.
It also bodes ill for cashew enthusiasts in the U.S., where consumers-whether they know it or not-have a taste for Guinea-Bissau's nuts.
The cashew-supply disruption underlines West Africa's growing weight as an agricultural producer, as well as the global trade risks that accompany that rise. Western investors have plowed money into West Africa, buying up cheap farmland in the hopes of reaping windfalls as food prices elsewhere soar.
Yet much of that newly-leased land sits in nations trapped in rhythms of coups and mutinies-like Guinea-Bissau, or nearby Mali, a pastoral nation in the throes of a civil war even before junior officers stormed its presidential palace in a March 22 coup.
American companies have pledged to spend more than $3 billion acquiring and improving farmland and food-processing centers throughout Africa over coming months, President Barack Obama said in a summit with four African presidents last week. Companies include agro-behemoths such as Cargill Inc., Monsanto Co., and DuPont Co., as well as smaller firms, like tractor-maker Agco Corp. in Duluth, Georgia.
The troubles in Guinea-Bissau are unlikely to upend the entire cashew industry but they might cause problems for vendors in the U.S. and Europe, who appreciate the high-quality nuts the country produces.
In recent weeks, Guinea-Bissau's coup has helped push up import prices from $3.70 to $4.00 and above per pound for John B. Sanfilippo & Son Inc., an Elgin, Ill.-based firm that sells Fisher brand nuts, said Michael Valentine, chief financial officer.
It is the second time in a year that West African turmoil has interfered with the cashew supply chain. Last year, the president of the world's fourth-biggest cashew grower, Ivory Coast, refused to concede an election, locking his opponent in a hotel and himself in a bunker, as armies trampled through farmland and ultimately killed more than 3,000.
Still, the rush for farmland has continued, with the promise of rising food costs outweighing the concerns over conflict. Chinese and Indian appetites for tree nuts have blossomed. So trail-mix makers turn to West Africa, home to some of the planet's best soil for cashews and peanuts, as well as the chocolate ingredient cacao.
Guinea-Bissau's marshlands farm just 7% of the global cashew supply, but they are some of prettiest, most shatterproof nuts around. The country's Saharan-yet-tropical climate yields flavorful, aromatic cashews, presentable enough to sell in clear plastic pouches in the checkout aisles of suburban American grocery stores.
But the nuts are stuck on the farm. Border shutdowns have disrupted exports, while soldiers on either side have choked road traffic with checkpoints. Last month, the junta decreed that all cashews should leave only through the port, not via roads.
But the boats that carry the crop, almost exclusively to Indian shelling plants, are reluctant to dock here-and not just on fears of conflict. The country's port hasn't been dredged since 1974, according to the World Bank, and the mud is thickening to a viscosity that could beach container vessels.
Banks, meanwhile, are closed to lending, a problem for exporters.
"There is no constitution, there is no government, there is no president," said Adama Sene Cisse, EcobankPlc's managing director for Guinea-Bissau. "So we are very careful."
His nightmare, he said, is a repeat of the country's 1998 civil war, which spoiled a bountiful spring harvest as soldiers marched through cashew orchards planting land mines. Exporters couldn't collect and sell enough nuts to honor their loans.
Prime Minister Gomes, meanwhile, remains exiled in Ivory Coast, where military leaders released him last month.
The crunch is likely to hit hardest in the U.S., which constitutes the principal user of Guinea-Bissau's nuts. By late-May, some gourmet nutsellers are likely to be hit by cashew inflation, said Ecobank's soft commodities analyst Tedd George. Come August, he said, prices for unprocessed cashews might climb from the current $950 per metric ton to $1,600.
In February, Kevin Hunt, CEO of Ralcorp Holdings Inc., which supplies packaged foods to supermarkets, told investors that cashews were among the main drivers of a $100 million rise in raw material costs in the fourth quarter.
Overall, Mr. Hunt said cashews were also one of the "primary" reasons why the cost of goods sold would rise 10% to 12% in the St. Louis-based firm's current fiscal year.
Guinea-Bissau's farmers face their own crunch, because the country's cashew stockpiles are rotting. Few own quality storage containers, and unprocessed cashews go bad within days if not stored in a dry location. Both the nut and the apple-like fruit on which it grows will sour.
So locals are ramping up output of a different product. Fermented over days, cashews apples sour into a pungent and punchy moonshine that leaves workers conked out under palm trees after a hard day's harvest of a nut they can't sell.
"If they can't export," Mr. Cisse, the banker said, "most of the cashews will be processed into wine."
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