MARKET REPORTDecember 2018

B L A C K P E P P E R O I L – I N D I AThe small harvest season from November to December has so far been below average with lower yields from berry to oil/oleoresin that is typical. Prices have seen upward movement as stock positions continue to diminish and are expected to remain at this level until the next crop in May.

C A R D A M O N O I L - I N D I AThe harvest season is currently ongoing. Unfortunately, Cardamom was one of the crops severely affected by the heavy rains and subsequent landslides. The nature of the crop has also reportedly changed, with smaller fruit sizes, fewer seeds, poor yields, and lesser quality of oil. With the season almost at a close it is expected to see prices move upward.

C I T R O N E L L A O I L – I N D O N E S I APrices appear to have peaked at current levels and are not expected to go any higher. It is recommended to hold off on any new purchases. Current expectations are for prices to start decreasing as witnessed with the softening of prices for Java and Sumatra material.

G I N G E R O I L - C H I N ARecently, prices for Ginger Oil have been pushing downwards but that trend seems to have reversed. Increased environmental enforcement has forced some producers to reevaluate their production and disposal methods. Producers were able to bury the residuals left over from production in the past. Now they are facing plant closures if they continue. As Ginger Oil production leaves behind a high level of residuals with no commercial value, these factories will have to solve the problem of waster disposal. While trying to solve these issues, many factories are currently unable to produce and have only been able to sell off whatever stock they had available. Coupled with increased energy costs over the winter months, availability is likely to further decrease, and prices are expected to rise.

G A R L I C O I L – C H I N AA plentiful harvest last season allowed prices to drop on this material to a very appealing level. While there were potential quality concerns, that caused tiered pricing depending on quality, material was readily available. Unfortunately, this is not to last as the costs for production are becoming higher than current market price. Increased costs of labor, bulbs, and production have many producers re-evaluating whether current prices are sustainable. Expect prices to start increasing over the coming months.

C L O V E O I L – I N D O N E S I AThe dry season is now over with this year’s rainy season arriving sooner than anticipated. Material output has slowed down over the last few weeks with some plants already fully booked. Expect prices to rise for this material as availability further decreases.

L E M O N O I L – A R G E N T I N AThis year’s harvest was on target at around 1.15 million mt and saw prices begin to stabilize for both the fresh and processing industries. The US Dollar also continues to strengthen against the peso as capital begins to flee the country. In an effort to help their economy, the Argentinian government has imposed an export tax of up to 12% that includes Lemon Oil. This will place added stress on processors trying to sell to international markets. This is somewhat alleviated for those who sell to the US market with the higher dollar value, but many companies are still trying to figure out a best course of action. Many are using the high dollar value as an opportunity to reinvest in their own infrastructure. Market pressure should begin to ease once the European Lemon Oil hits the market, until then availability remains strong.

L I T S E A C U B E B A / C I T R A L – C H I N AOnce again Litsea Cubeba production is down around 20% from the optimal harvest at only around 6-700 MT. Prices remain firm and are not expected to ease as demand remains strong for Natural Citral. Most growers are becoming accustomed to these new higher prices and have no incentive to start lowering costs. Some producers are worried about increased scrutiny from the China’s Environmental Protection Agency. There are demands for each plant to install water treatment equipment on site which would be a huge expense for producers. Those who are either choosing to not comply or are in a position where they are unable to comply have faced having their utilities shut off. Ultimately, these costs will most likely be passed along to the industry.

N U T M E G O I L - I N D I ANutmeg is one of the products most affected by the recent flooding in India. The nutmeg crop was struck with a fungal infection causing many of the trees to dry out. A good percentage of the raw material stocks were also damaged during the floods. Only a limited amount of raw material is making its way to processors thereby causing prices to increase.

L I M E O I L - M E X I C O

Lime processors are in the process of scaling back production as they are seeing diminishing returns from their various revenue streams. This year’s harvest is currently on target but estimated to be 35% less than last season. Industrial fruit prices have leveled off around $100 per mt while production costs continue to rise. The pectin market has become flat with prices remaining around $800 per mt. This has left producers with huge stockpiles of the dried peels, which are used to produce pectin. Demand for Lime Oil seems to be below average which has also led to decreased oil prices. While low prices are currently appealing, there is a concern that a surge in demand could lead to an undersupply issue as less material is being produced than is typical.

L E M O N O I L - U S A

California’s costal growing region was hit by an unusual heat wave in July. This region normally escapes the worst of the summer heat due to the ocean breeze. Unfortunately, low air flow caused this region to get hit this year. There is an estimated 20% reduction in total production with the Lemon crop down by around 15%. Continued demand from the fresh fruit industry continues to eat away at the amount of raw materials available to processors. Lemon Oil from this origin is expected to remain tight with prices being less flexible than from other origins.

O R A N G E O I L - U S AThis year’s harvest is up over 70% compared to last year at 77 million boxes and 45 million boxes respectively. Luckily, there was not any major damage due to weather events even after two major hurricanes. While this is good news and hopefully this trend will continue, it is still far below the peak when Florida saw over 200 million boxes a year. Factories have begun to process this year’s crop but have yet to release any price indication. This year’s material should enter the market come January. While there has been some, albeit slow, progress to combating the Citrus Greening Disease, another threat has begun to emerge. There have been reports of Ambrosia beetles which target trees that have already been weakened. Often, these beetles will kill off any compromised trees and negate any recovery efforts by farmers. The industry is currently looking into this to determine how much impact it will have and the best course forward.

O R A N G E O I L - B R A Z I LThe current Orange Oil market is relatively stable, but supply issues could possibly be on the horizon. The most recent total crop estimates are at 273 million boxes, which would be a 30% decrease compared to last year. While last year saw a surplus and helped realign the juice market, it is expected this year demand for Orange Juice will outpace the available supply. Many consumers on the F&F side are still purchasing Orange Oil in a piecemeal fashion as they wait for large volumes to enter the market, in the hopes of reduced pricing. These large volumes are unlikely to materialize until the price gap between Orange Oil and Orange Terpenes returns to a sustainable level. Many traditional Orange Terpenes customers have switched to the cheaper d’Limonene alternative for industrial uses, forcing producers to reduce pricing on Orange Terpenes. Current prices are relatively low and are expected to remain so for the immediate future. The continued lower demand for Orange Terpenes may help apply even more downward pressure.

P A T C H O U L I O I L - I N D O N E S I APatchouli is currently in between crop seasons and as such there is little to no supply available at origin. While we are now past the dry season into the rainy season, farmers are only just now starting to plant again. The new crop is expected late March to early April. Increased demand has outstripped supply, with prices expected to keep rising in the following weeks.

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