Cardamom oil finally coming back down

BETTER-than-expected cardamom oil output in Guatemala this year has finally put an end to the eye-watering price rally which began in May, although with demand remaining strong at the moment the outlook remains murky.

Prices for the spice oil on a spot basis from Guatemala touched highs of $590 per kg in October, having sustained a sharp rally up from prices of around $380 per kg back in the beginning of May.

In June, one UK trader explained the dramatic price climbs, saying: “Cardamom supplies are just really short, extremely expensive and there really isn’t much oil available.”

He had also noted that the main driving force behind the highs was the shortages, adding that last season’s crop had been relatively short with storm and hurricane damage really not helping the output situation.

Cesar Vettorazzi of leading Guatemalan cardamom and other essential oil supplier Extract (part of the Cardex group), said that the price climbs were “something strange” with the rallies seemingly uncontrollable despite the forecasts for a better crop this season.

“A higher amount for this crop was expected. We have checked it and it is true – crop 2010/11 will be higher by around 20% than the last crop,” he told .

Over the past week prices of cardamom oil have finally started to react to the news of the improved crop outlook this season and have started to turn downwards. The latest Guatemalan spot price was quoted at $550 per kg as of November 17, where it remains stable this week.

Rises were inexplicable

However, speaking before the prices turned, Mr Vettorazzi explained the astronomical price climbs. “As a better crop was expected this year, the starting price was lower than the final price of the 2009 crop; a little lower than 50% from the maximum price of the last crop. But suddenly it starts increasing daily until it reaches a price at 85% from higher price last crop. We were expecting more supplies and lower prices due to the second harvest of crop 2010/11 which is starting right now.”

However, whether prices will continue to fall or not remains to be seen. Essential oil prices across the world continue to see bullish tendencies, with demand remaining as strong as ever despite the high cost of buying.

“At this moment demand is high, but once prices become high, demand starts to decrease,” said Mr Vettorazzi.

Few alternatives

Much of the reason for the continued strength in demand for Guatemalan cardamom oil stems from the fact that Guatemala really is the only main supplier of the spice oil.

India is also a large producer but the UK trader noted that the quality and flavour of the oil differed greatly from Guatemala supplies, a factor which often put off many buyers who are accustomed to the Guatemalan consistency.

Furthermore, aside from being a large producer, India is also a massive consumer of the oil and much of its produce remains on the domestic market, unlike in Guatemala from where the majority of the essential oil is exported.

Mr Vettorazzi also noted that India could be a potential source for the oil for cash-strapped buyers, but noted the pitfalls in sourcing from there. “When Guatemalan prices press to the high side, India is also affected as it produce almost exclusively for its own consumption and exports little because there is a consumption culture that we do not have in Guatemala,” he concluded.

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