Cloves dealers view price falls as short-term move

INTERNATIONAL cloves prices have shown some slight downward pressure of late on expectations of new crops availability, but dealers have cast doubt over the potential for any major price declines ahead.

Harvesting of the Comoros crop has not yet started but a picture of how the current season will unfold from this origin is expected to emerge in the next few weeks. The crop has been pegged to reach at most 3,000 tonnes, which would be down from earlier expectations.

Emmanuel Nee of French trader Sivanil told: “Until then, I prefer to keep away from offering as domestic prices are in my opinion still a bit on the too high side right now.”

Mr Nee said he would expect Comoros cloves prices to ease at some point in the coming weeks.

Gregoire Courme, head of the spice trade department at Herbs International Service, said his contacts in Comoros had indicated that harvesting would start in the second half of July for shipment at the end of August, so about one month later than usual.

Price indications had not been given but local prices at the start of the crop were expected to start from €7,000 ($8,847) a tonne. However, Mr Courme said he envisaged €5,000 as a more realistic proposition. “Above this price, I don’t think the market will react,” he claimed.

One uncertainty to arise was a notification from Maersk Line that it would cease shipping to Matsamudu, Comoros. Mr Courme explained that he was waiting to hear whether Safmarine Container Line would be taking the same measure as this was the company usually used by Herbs International Service. “If this is the case, we will have goods, but we don’t know how to ship from there,” he said.

Mr Nee observed that people in Madagascar were starting to show signs of being ready to open their minds to the current state of the market, “at last”.

There were still goods available to buy in Madagascar. “Some are really good quality, but some others are not,” Mr Nee noted. He therefore advised that buyers should take care to select the best qualities and avoid the cheap priced, mixed, wet or blackish cloves.

Madagascar’s 2012 crop, which is due to be harvested in October/November will be of a decent size of around 10,000 tonnes, Mr Nee said.

Mr Courme said if offering Madagascar cloves to traders in Singapore his current price would be around $10,400 a tonne cif, but they were looking for prices as low as $9,000 a tonne cif.

Scared off by Indonesia

Mr Nee suggested that the market was currently too scared by the idea of good volumes to come through from Indonesia and potential price falls from this origin. As a result, very little business was being done.

“On the other hand, and in spite of the Indonesian volumes, we all know that kretek (cigarette) manufacturers are in a buying mood and that farmers in Indonesia cannot let the market dive when both the domestic market and other consuming areas everywhere from East to West need to buy and that crops are not as big as said,” he added.

Mr Courme agreed that the kretek manufacturers would have to come back on the market to purchase – probably by August – at which point prices would start rising again. In addition, India would need to replenish stocks over the coming months.

In the meantime, buyers were hesitating until they got a clearer picture on the Indonesian crop, which most trade sources in the country had projected at around 80,000 tonnes.

“The market in Indonesia is decreasing every week, because the cigarette manufacturers do not take positions,” he added. Some of the kretek producers had been purchasing slowly. “They are waiting for the main crop and they expect to see the market continue to decrease,” he said.

Mr Courme explained that certain grades from Indonesian could be obtained for $10,500 a tonne fob while other, better quality material was around $13,000 a tonne fob.

He cautioned that most of the price falls being cited across the market were not for prompt shipment.

Harvesting started in some parts of Indonesia back in January and it is said that the whole process will not finish until November. This means there is a major shift from the usual pattern of seeing the bulk of the main crop arriving around the same time, putting collective downward pressure on prices at this point. “This year you don’t have the rush on the crop. The crop is really long, so the Indonesian farmers are able to take their time to sell their stocks. So even if the crop is good, the price is relatively firm,” he said.