Indonesian cassia unmoved by rainy season in Sumatra

INDONESIAN cassia prices are expected to hold a stable pattern for the foreseeable future as supply and demand look to be in balance despite some adverse growing conditions at origin.

The rainy season is in full flow in Sumatra and there has been flooding all around Sunghai Penuh, the capital of Kerinci.

Cassia Co-op of Amsterdam, which is the majority shareholder of the Indonesian producer of the same name, said there had been only a few hours of sunshine a day to dry the cassia barks. Trees were in the growing phase in which red foliage forms so it was not a preferred time for farmers to harvest.

There had been a slight cost increase on location but this was expected to be short-lived as offers against demand were in balance. Cassia Co-op said export prices had gained by around 7% over the last few weeks.

Patrick Barthelemy, founding member of Cassia Co-op, said that as soon as the sun emerged Indonesian producers had managed to get their cassia dried for export markets. As a result, the overall availability should still be favourable.

Nevertheless, importers were warned to avoid discounted offers on cassia barks with a high moisture content – of more than 17%. Unfortunately, some shipments containing the mould styrene had reached European buyers.

One Rotterdam trader said he had not experienced these quality issues on Indonesian cassia. In addition, he recalled that after a modest gain in export prices about two months ago, prices had held mostly stable.

Mr Barthelemy added that he was anticipating a stable pricing trend into 2013. “I am signing contracts for June already, which are at today’s price level,” he explained. However, further ahead prices looked set to move higher as Indonesian farmers were not very motivated to replant cassia, switching instead to planting tea or coffee. Luckily, about 50% of existing trees regrow naturally, Mr Barthelemy noted.

The Rotterdam trader said: “Eventually the prices will move up because there are less people interested in the production of cassia because it is quite labour intensive. The younger generation in particular are more interested in other business and want to educate themselves or move to the cities and do other jobs rather than cutting and scraping cassia. So that in the long run will lead to price increases.”

Demand was mostly steady. “It all comes in stages for nearby deliveries but not so much forward,” the Rotterdam trader observed.

Mr Barthelemy commented: “There is some business. Most exporters are booking for January shipments but this is still not the heavier season for exports. The big export time for us is June to September.”