CLOVE MARKET UPDATE MARCH 2022

Dubai, March 4, 2022:- CLOVE MARKET CURRENT HARVEST SEASON IS OVER. Madagascar harvest over, [only harvest over - stock still available plenty]; Zanzibar crop and stock finished; Comor crop finished and sold out; Sri Lanka not much quantity to claim any influence in the global market; Now all are eyeing to the next immediate harvest which is in Indonesia, during June, July period.

Madagascar - season harvest which started in September 2021 finished or at the last plucking levels in some of the North villages; But normally March plucking is only limited areas, and gets only limited quantity, which is negligible while considering the total output of the Country. Hence, no harm in saying by February the Clove harvest is finished in Madagascar.

However, stocks still with the farmers and collectors and some giant stockist. Meaning thereby, not fully transferred to exporters; nor full cargo reached to the terminal market of Tamatave. Because of the three consecutive cyclone affected Madagascar in January-February 2022, harvest was interupted, transport of clove from plantations and villages to the terminal market was totally blocked. But no crop damage. These created a totally temporary panic situation which made the exporters to hike up the price. From a level of USD 7700-7800 per Mt on CNF basis, the cyclone caused the price moving to USD 8200-8300 and thereafter a high jump of exporters quoting USD 8600 to USD 8800 per Mt on CNF basis. ! Even though few trade happened at 8600 level; many importers and buyers refrained from responding to the price levels of 8700-8800 etc. This was because the domestic price level in the final consuming countries were not supportive to such hiked up price.

The domestic market of India - the largest buyer of any origin Clove [after Indonesia, which consumes its own production], was not supporting the high jump of origin price. In North and Western Indian markets which are the main importers and consumers of Clove, while the price moved to INR 720 a kg, but it was only for a short period, and it corrected to INR 670-680 level. However in South India, local market showed a better view at INR 750 to 770 but with more demand for Indian origin Clove or Indonesian Lalpari Clove. Especially in South India, the crop from Kanyakumari District - Nagercoil Forest Area which is bordering with Kerala State, has got major demand and clove from this area gets a better price also. Therefore, the increased price in South India did not make any impact in the North Indian market, and thereby import demand at higher price level of USD 8600 to 8800 was not encouraging, but was on a slopping road. And North India is the major import market for African origin Cloves.

Without support from local market, Indian demand for import of clove at increased price was not good enough for the price levels of USD 8700-8800 to sustain or further growth. Importers a\were on a wait and watch situation, while exporters were holding higher price levels from the origin.

Meanwhile, the weather situations in Madagascar has come to normal, and local logistic support was good for clove movement, and stock arrival to terminal market re-started. While writing this blog, I am hearing, even though isolated, few exporters in Tamatave offering USD 8500--8400 levels on CNF basis, and also heard even USD 8200 on FOB levels. This signals to a possible correction in the existing price tunes.

Finally, while summing up, my view is that, considering the local price in Ariary terms for raw material price in Madagascar, the net CNF cost could be workable at around USD 7500 or slightly plus or minus [I repeat, it is NET CNF COST and Not Sale Offer]. Viewing at this, and looking at the cool response of importers, and non-support of Indian domestic market, it seems, aggressive increase in clove price is only a speculative thought; and not a real market; and all possibilities are for a correction down side.

However, the normal econometrics of commodity market - which is speculation and manipulation with circular trading which creates abnormal fluctuations in the price chart is very common in Clove also, as Clove is now more an industrial commodity than a kitchen item. This can temporarily makes price line to be zig-zag. And over and above, there is a psychological feel and thought to make clove price trade above USD 9000 , which speculators may try to to bring in without fundamental support.

FUNDAMENTAL FACTORS - A good harvest is in the pipeline expected from Indonesia after 3 months. And many shipments from Madagascar are yet to reach destinations; and arrival of those sailing quantities would ensure enough availability in the consuming markets; and that can also ease down new purchase at higher price. Hence the overall trend, except for the speculative nature of commodity market, is bearish. QUANTITY AVAILABILITY - it is reported and estimated that Madagascar still have almost 9000 Mt in stock with farmers, collectors and stockist and exporters; Dubai market is holding roughly about 800 to 1200 Mt; and India also have an inventory of almost 4000 + Mt plus incoming stock which is now sailing. This makes almost sure that there wont be any supply constraints and while supply situation is smooth, then price cannot move north by default; but only because of speculation. Trust the point is clear.

Wishing you happy reading. For any personalised reports, please feel free to reach me on whatsapp +261336196095 or +971508150595 or email me at [email protected] or [email protected] / GIRISH KUMAR K S .