Slump in demand helps drag down Indonesian cassia

INDONESIAN cassia prices have weakened of late due to a seasonal decline in demand which has been worsened by the eurozone debt crisis.

European dealers quoted price falls in most types of Indonesian cassia in the week to June 1

One Rotterdam trader remarked: “There is a temporary dip in the price on account of less activity as we see in a whole range of spices and other commodities.”

The trader added that the dire economic situation in Europe was a key part of this lessened demand. In addition, offtake for items such as cassia tend to slow down over the April to July period. One reason for this is that cassia has traditionally been associated with food products that are most popular in the colder months of the year rather than during mild or hot weather.

Reverse seems likely

The trader noted: “Fundamentally and long term it is expected that the price will increase because the farmers are losing interest to cut the trees or plant extra trees, because the prices are not so interesting for them anymore. So they will concentrate on other commodities and we see it as a temporary decline in the price which most probably will change again from August or September onwards because the main season will start and the stocks in Europe and other destinations are not so big.”

Stocks in general are low across Europe as importers and industry users have restricted coverage over the last two years to short term needs only and this caution will inevitably continue in view of the uncertainty in Europe, particularly Greece and Spain, the trader noted.

Marco Van der Does of Rotterdam broker AVS Spice observed that a strengthening of the Indonesian rupiah against the dollar would have helped to drag down the price in dollar terms but the price in euros would have held “more or less the same”.

The trader said that in view of the low inventories position he was expecting buyers to move in again from August to cover the run up to Christmas. It was likely that this buying would remain in sporadic stages of just one to two months ahead as opposed to coverage beyond this, such as the six to 12 months span seen in the past.

The trader also felt that despite the slow buying pattern overall consumption of cassia remained at its usual volumes.

Mr Van der Does observed that importers were also reluctant to purchase at the moment as they were taking into account the fact that many food producers and allied industries would be due to shut down for the summer holiday period.

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