CLOVE MARKET 2024 !! Bearish or Bullish ??!!

Toamasina, Madagascar; January 9, 2024:-- Yes, this is the current question all are deliberating. What would be the trend of Clove price in 2024 ? What time to enter the market ? What time is good to buy stock ? Is it good to keep stock and wait for good time to sell ? Million dollar questions to answer.

Those who already covered stock, and those who are waiting to cover stock - all are concerned with these questions. Can any one give a proper answer to these questions ? Can any one give a complete answer to these questions ? Practically not possible. What is possible is to give indications, projections, possible estimates and outlook based on fundamental and technical factors and reasons. I am also not trying to give an answer to this questions - but giving an analysis on fundamental factors and technical aspects to point out possible tracks and road map of price line possibilities.

Clove now a days has become an industrial commodity rather than a consumer commodity. Because of its nature as industrial commodity, - speculation is much more on it; and even market making and circular trading and price manipulation etc all very common in Clove market now a days. Fundamental factors, basic economic factors, like Supply and Demand and FOREX levels only cannot guide the price line, nor dictate the price line. From 2018-2019 onwards, we have seen it. Sometimes, speculation surpasses fundamental factors.

So, in 2024, what could happen in clove market ? Let us examine the basic fundamental and economic factors and try to make an analysis:

First, Supply and Demand - the basic concept that could determine price. Is Clove supply in short ? Is Demand for Clove surpasses the supply channel ? or Vice versa ? 2023-2024 Clove season started in July from Indonesia - with a bad crop, meaning crop shortage - we had seen price moving up from USD 8000 range to USD 9800 and even upto 10,500 per Mt during 2nd half of 2023. After August, all were eyeing at African origins - starting with Zanzibar and Comor and Tanzania mainland and then Madagascar. All trade participants believed when new crop season of 2023-2024 starts in Africa, price might cool down. And it happened; in end August and September 2023 Madagascar exporters sold futures at 8150 level to 8500 level ! Indonesia price came down from 10,500 to 9200 level !! Drastic fall happened. Comor and Zanzibar fully sold out below 9150 [8800 to 9150] !! And people expected further fall when Madagascar starts. And yes, in August and September, again came down to 8500 and then to 8300 and then to 8150 from Madagascar !! This is exactly the basic SUPPLY - DEMAND they working in the economic system.

What happened in Indonesia? When Indonesia price moved to 10500, all cigarette factories stopped their purchase. At high price, it is not worth even for the cigarette industry to buy clove, and use profitably in making cigarettes !! Instead they covered almost 4000 Mt from Africa at 8700 to 9150 levels ! So Indonesia sellers were stuck with 10,500 level ! What to do? Only option for them to reduce price. Then Indonesia price dipped to 9300 level. Today, while writing this blog, Indonesia LALPARI best quality is in offer at USD 9100.

When Indonesia LALPARI price at 9100-9300 level, what best Africa origin, or specifically Madagascar origin can trade ?? It cannot go above 8700. Now Indonesian Cigarette factories still out of clove market. They have enough stock with them; and many of their vendors are carrying stock for them. Even in Singapore and in Dubai people carrying stock for the cigarette factories. When they start buying, there will not be any shortage for them. Enough stock carrying by traders and stockists for them.

Indonesia 2nd harvest is in February [the first one in 2024] which is said to be delayed, and now harvest would start only in April and stock available by end April and May 2024 as per reports from Indonesia. And Cigarette companies have enough carry over stock for next 4-5 months. Thereby, it means, Indonesia may not keep any pressure on clove price. No rally possible because of Indonesia. Then what next ??

India and Arab countries buying. After Indonesia, India is the next single largest importer of Clove. During 2023, India bought till 9800 level from Africa. When Africa origins quoted 9900-10,000, India stopped buying, Dubai also exit from the market. From that level, African clove price also started decline because of no demand, no buying. Even when Indian local price increased to INR 980 in the wholesale market, India was not ready to buy above 9800 USD ! From there African price started decline because of no buying support. USD 9800 came down to USD 9100 but still could not find any market. Because India and Dubai opted to wait for new season. But Comor and Zanzibar opened at high; and had limited crop. Both origins sold out at 8850 to 9150 level in a weeks time.

In August 2024, South Madagascar started. September 2023 futures sale started, and many importers from India and Dubai signed futures contract with leading exporters in Madagascar in a range of USD 8150 to 8500 during September and October 2023 for shipment in November December 2023. And by end October and November, price moved to 8600 to 8800 and in December again rose to 8900. Today, while writing this blog, Madagascar has offers from 8800 to 9000 in normal trading terms.

So what is next ? Where these price line can move in January 2024 and further ?

After the first list of Clove Agreement which was released on November 15, the so called big exporters of clove in Tamatave started shipment. Last week November vessels had Clove container for Dubai and India. And in December, all the vessels had Clove container to Dubai and India. Till 22nd December Vessel, almost 70 containers sailed to India alone - all which would land in India during last week of January to 2nd half February. November last week shipped cargo already reached in Chennai and Nhava Sheva - which brought Indian local price downside from INR 860 to INR 840 - 830 and to 820. INR 820 traded in Chennai and INR 830 and 840 traded in Mumbai. November last week shipped cargos were all sold at 8150 to 8300 level.

However, take note of the fact many containers bought at USD 8700 to 8900 were already sold out in India and payment made also ! These containers would reach India only by end January or mid February. These containers sale proceeds already completed and payment settled in all aspects - will not make any impact on price levels. Because importers already sold it and collected payment, and many of the whole sellers also re-sold the same cargo. Therefore, all these have nothing to do on the price further.

Now the question arising is - while current price levels are ruling at 8700 to 8950 - 9000, will those exporters who sold futures at 8150, 8200, 8300 etc. will ship all containers or default ?? This is a big question to wait and see . If defaults happens by shippers, then those buyers would definitely come to the market to cover their stock further, which can pressure the market. This is one scenario for a possible price rally in February and March in India and also in International level. Currently, as on date, if some one want to cover stock by purchase from Exporter, will have to pay minimum 8800. May be subject to certain payment conditions, lower price could be available- but that is exceptional and not normal trade. Buyers who come to the market with 100% advance payment terms might get much lower price which would be highly attractive.

Has India covered its full requirement ? Has Dubai and other Arab countries and some of African countries covered their full requirement ? What about Europe, America and Latin American buying ?

India not yet covered fully. India needs minimum 23000 Mt in 2023-2024 clove season. From Zanzibar, and Comor covered only less than 2000 Mt. From Madagascar, during September October futures, India and Dubai covered about 5000 Mt in total. Balance to cover. All these purchase would happen only after 15th January. Europe and America and Latin America would normally buy only after New Year Holidays. Meaning thereby, all these market would come to the market in January and February 2024. India alone has to cover at least another 17000 Mt. Out of this, at least 12000 to 14000 from Madagascar alone. Balance would be from Sri Lanka and Indonesia.

March may be a sluggish market in India because of Financial year ending. But starting from April - it is festive season through out India. And demand for Clove, Cardamom, black pepper, dried fruits etc would be at the highest during festive season. This is the period when there is possibility of a price rally for Clove in Indian local market. The present INR 820 to 840, even if falls further down, will be on fire in April and once again would move to 950 or higher levels. A price rally for Clove is in the womb, just wait for the timing to burst out. Fundamental factors as well as technical factors would possibly take Clove market to another rally in 2024 - only the question to debate is, when?

What is local scenario in Madagascar ? The devaluation of local currency ARIARY against USD is in favour of buyers - and exporters can offer lower based on exchange rate. Harvest in Madagascar is at the last leg. by end of January or maximum first week of February, farmers will become stock out. Thereafter, stock available with only Collectors, Stockists, Traders and Exporters. So in February, those who want to buy, will have to buy from Stockists and Exporters. Can any one expect lower price from Stockists ?? That points where the market can move. It gives the road map of price.

To sum up, Market is on ashes now. Will it get Fire ? or Cool down? Indian importers attitude will decide this ! Indian buying in Janaury and February will decide this. After March, Indonesia will also join this to decide market trend. If Indonesia decides to import further quantity from Madagascar, and India also buy continuously - then April and May might repeat 2023 trend once again.

Wish you all my readers a Happy New Year and Profitable Trading Year !

GIRISH KUMAR KS Whatsapp: +261331096095. Email: [email protected] / [email protected]