NUTMEG oil has stood out as one of the few essential oils to show a sharp increase in price over the last 12 months when most other oils have been declining in price, UK supplier RC Treatt & Earthoil Plantations noted in a market report this week.
The company observed that the market for Indonesian nutmeg oil with a typical 8% myristicin content recently surpassed $120 a kg for four to six drum lots – for shipment from origin. This represented a significant jump from the $70 a kg prices in the second quarter of 2011.
Indonesian nutmeg oil accounts for about 80% of the annual global production volume of 500 tonnes.
Sri Lanka and India are the other primary producers.
The report noted that Grenada was still suffering from the destruction caused by Hurricane Ivan in 2004, although the bulk of the island’s nutmeg was destined for the spice market.
In Indonesia, the Maluka and Banda islands – commonly referred to as the “Spice Islands” – primarily cultivate nutmegs for the spice industry while regions including Java, Sumatra and Aceh mainly grow nutmegs for essential oil distillation.
“There is little varietal difference but spice nutmegs are usually harvested after 10 months when they carry most weight. The more immature nutmegs are favoured for distillation as their essential content is higher (up to 14%). They are usually harvested when the seed is five to six months old,” Treatt explained.
In 2011, driven by a speculation fuelled market, the price of spice grade nutmeg rocketed to over $17 a kg, up from $11 per kg. The market for the essential oils grade remained at around $6 a kg. “Consequently, many farmers refrained from harvesting the immature nutmegs, opting for the greater rewards to be achieved from selling spice grade. The shortage of immature nutmegs for oil distillation was the key catalyst in driving up the price,” the report observed.
In late June this year spice grade nutmeg fell sharply, returning to around $11 per kg.
“It is anticipated that this fall could lead to an increase in the availability of immature nutmegs for oil distillation and a subsequent softening of the Indonesian nutmeg oil price,” Treatt claimed.
The company noted that although there was year round distillation in Indonesia, there was a notable reduction in activity for the duration of the rainy season from September to February. “Taking this into account, it may not be until early 2013 that the market sees some downward correction from the current historical highs. Until then, it may prove to be prudent to cover requirements on a hand to mouth basis,” it concluded.