Cloves prices get dragged lower as buyers hold off

INTERNATIONAL cloves prices have slid lower in recent weeks as demand dwindles due to the holiday season and reluctance to cover at the excessively high levels previously in place.

Buyers have also been hesitating until they get a clearer view on the forthcoming crop from Indonesia.

In the week ending August 10 European traders quoted substantial declines in cloves prices from Indonesia and Madagascar.

Emmanuel Nee of French trader Sivanil told: “The market is a bit strange these days. The market in Singapore, India, the US, Europe and almost everywhere is really quiet. The prices are sliding down in the consuming countries, but in the meantime in Madagascar and Comoros, the market keeps on moving up every day.”

Mr Nee explained that importing countries were holding off buying because they viewed prices as too high. The situation was compounded by the fact that this time of year is the peak summer holiday period.

Gregoire Courme, head of the spice trade department at Herbs International Service, said it was to be hoped that activity would pick from the end of August, which was when US and European buyers should return to work from their holidays. In addition, there should be a clearer impression of Indonesia’s new crop and prices by then, he noted.

Delays in Comoros

Comoros normally starts harvesting in mid-June but this year it is only now just under way with harvesting. “Even now, it is not starting in full swing,” Mr Nee observed. He suggested a possible crop size of 2,000 to 2,500 tonnes, noting that Sivanil had so far purchased only 50 tonnes of Comoros cloves compared with around 300 tonnes at the same time a year ago.

“The main problem today is that only one area of the Comoros island is producing and therefore all the exporters are buying in the same place and that is the reason why the market is moving up,” he added.

Mr Nee remarked that as soon as the main producing areas were filling Mutsamudu with cloves, he would expect to see prices declining locally also.

He indicated current Comoros cloves offers at $9,950 a tonne c&f Singapore. Prices from Comoros were being held relatively firm by higher freight costs from this origin and exchange rate factors between the US dollar and euro.

Mr Courme said Comoros sellers were short as they had made some forward contracts only to be hit by a late crop. “They push the price up to get their goods and fulfil their contracts, so the market is bullish in Comoros,” he said.

Mr Courme indicated Comoros offers at $9,500 a tonne fob.

Meanwhile, Madagascar still has some 2011 crop stocks left unsold but these were being offered at very high prices. Mr Nee said: “The people holding the stocks are really not prepared to cut the price down right now and the quality is really bad, so we have to be very careful with that.”

Good crop expected in Madagascar

Trade estimates are pegging the next Madagascar crop to reach between 10,000 to 11,000 tonnes, which although down from last year’s estimated 14,000 to 15,000 tonnes would still be of a decent size. Harvesting is due to start at the end of October or first half of November.

Mr Nee said he would also expect to see prices easing when Madagascar’s new crop starts.

Mr Courme said Madagascar’s 2012 crop looked set to start slightly early as some sources were expecting to be able to ship new crop material from the south of the country by mid-September.

However, he predicted that first shipments would be a mix of remaining 2011 crop material and new crop and containing only 2012 crop cloves would not be seen until the end of November onwards.

In the meantime, Indonesia should finish harvesting its crop at the end of this month and Sivanil believes it will have a good volume of 85,000 to 90,000 tonnes.

Mr Nee said Indonesian cloves prices were easing and it was now possible to obtain certain qualities at $9,200 to $9,300 a tonne c&f Singapore and even for good quality, well sorted cloves, prices were now down at $9,500 a tonne c&f Singapore.

However, Mr Courme said he was seeing Indonesian cloves prices holding firm at $11,000 a tonne fob.

Mr Nee claimed that the Indonesian offers he had seen should be of much more appeal to Singapore traders than the higher priced offers from Comoros or Madagascar, particularly in view of the fact that the transit time from Indonesia to Singapore was one day as opposed to the 30 to 40 days from the other two origins.

In addition, he speculated that the Indonesian kretek manufacturers would not be buyers of African cloves this year as the country should have enough availability from its own crop.

Mr Nee also viewed Zanzibar and Brazil as also being over ambitious with their current pricing, offering at much higher levels than buyers were willing to pay