Tentative end to Guatemalan cardamom oil price rally

A BETTER than expected cardamom oil harvest in Guatemala this year has finally seen 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 back in October, having sustained a sharp rally up from prices of around $380 per kg back in the beginning of May.

Back in June, one UK traded 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.

One Guatemala-based organic cardamom oil trader said that the price climbs were “something strange” with the rallies seemingly uncontrollable despite the forecasts for a better crop this season.

“It was expected a higher amount for this crop, we have checked it and it is true, crop 2010/11 will be higher in around 20% than last crop,” he told .

Over the past week prices 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.

However, speaking before the prices turned, the Guatemalan trader explained the astronomical price climbs, he said: “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 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,” he said earlier this month.

However, whether the decreasing prices are able to be sustained or not remains to be seen as essential oil prices across the world continue to see bullish tendencies and demand remaining as strong as ever, despite the expensive costs of buying at the moment.

“At this moment demand is high, but once prices become high, demand starts to decrease,” the trader said – but with the first signs of a recovery in prices demand is not likely to suffer too greatly.

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

India is also a large producer of the product; however the UK-trader noted that the quality and flavour of the oil differed greatly from that of Guatemalan origin, a factor which often put of many buyers to who accustomed to the Guatemalan consistency.

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

The Guatemalan trader also noted that India could be a potential source for the oil for cash-strapped buyers, but also noted the pitfalls in sourcing from there.

Another supplier “is India, but when Guatemalan prices become pressing to the high side, India is affected also as they produce almost for its own consumption and it is little amounts what they export, because they have a consumption culture that we do not have in Guatemala,” he concluded.