Tanzania is the seventh-largest producer of the nut, but a stand-off between farmers and buyers has prompted the president to act.
Tanzania has an outsized influence on global cashew prices, owing its market influence to seasonality.
Magufuli's intervention has come at a critical time. Tanzania is one of the few growers that harvests the crop between October and January, which is before leading growers of Vietnam, India and Nigeria start exporting the harvests in February and March.
Prices for processed kernels have jumped 10 per cent to $3.8 per pound since the start of November amid concerns about Tanzanian exports, according to Freeworld Trading, a UK nut trader.
“Inventories are very very tight,” said Michael Stevens at Freeworld Trading.
Magufuli’s actions have been criticised by some as political grandstanding, but his orders follow tension among Tanzania’s cashew farmers and private traders, who had been refusing to buy the in-shell nuts produced in the country because of high prices.
The bulk of the raw nuts which have yet to be shelled are shipped from Tanzania and other African countries to be processed, mainly in Vietnam and India. A falling price for processed kernels — after a bumper west Africa crop — has meant that cashew nut buyers importing for the processors have been reluctant to pay high prices.
The Tanzanian president, who claimed the nut traders had been trying to squeeze the country’s farmers, doubled local raw cashew prices to 3,300 shillings per kilo and then called in the military to purchase the tree nuts when the international companies refused to pay the higher amount.
Magufuli also ordered the government to shut down cashew auctions for foreign buyers.
The cashew market is likely to soften as the tree nuts from Nigeria, Vietnam and India start flowing into the market from February. However, “in the time being, things could get difficult before they get better,” said Stevens.