CLOVE UPDATE SEPT.2020
September 10, 2020: Dubai:- What is happening in CLOVE INDUSTRY ? Last two weeks, it is full of news and stories coming out - some attempts [?] to push up prices; a group anticipating sharp increase in prices; whereas other groups highly bearish on Clove; whereas NGOs and other Farmers' Eye Groups and Govts with a down face that farmers loose heavily etc. etc.
So what is actual ? Do we have any AUTHENTIC UPDATE, or AUTHENTIC REPORT WITH RESPONSIBILITY ?
It is Sad , very sad to note, the global clove industry HAS NO AUTHENTIC AND RESPONSIBLE OFFICIAL REPORT on clove crop size; pricing, and stock position, or upcoming demand. That is the very sad side of this industry.
Let us scan the markets:
INDIA - the leader of Clove Industry; the ever green dictator of price for clove; and the single largest buyer of clove after Indonesia [Indonesia cigarette industry is the worlds' largest buyer - but 98% they buy from Indonesia only - hence it is not considered here while saying India is the largest buyer] - as India imports from all origins.
During COVID 19 situation, Indian market was closed down. The normal markets of February-March-April-May was not there because of lock down. Purchase was also NIL. But the purchase India made during December 2019-January 2020, landed in India only in April end - May-June months, because of lock down every where. Therefore, India has almost enough stock in store for few months; as it is expected there may not be much high demand as usual for this product.
When markets opened after corona lock down, Indian local price was around INR 460-480, which came down to INR 400 and even to INR 380-390 level - as reported from Vashi, Khari Baoli, Kanpur and Gwalior markets and also from Jaipur. During this second week of September 2020, Indian local wholesale price moves around INR 400, and still showing a bearish trend.
When local market is in a bearish mode, will India buy new stock at higher levels ??? a Big NO. India would wait for a lower level quote from origin countries.
However, it is Clove - which is unpredictable commodity, and we cannot take anything for granted. Any moment situations can change upside down. History shows many instances of such happening when Clove price moved from USD 650 per Mt to USD 14500 per Mt ! And after 2016, clove price is oscillating in the range of USD 5000 to 7500; and that also further changed to 4000 to 5000 level now happening.
LET US LOOK AT THE CURRENT TRENDS - Indonesia was the latest 2020 new crop arrival in the international market. Its new crop started in July, and from opening level of USD 5000-5200, Indonesia price came down slowly and slowly and reached to USD 4000 per Mt during August 2020 !! A BIG FALL for Clove. When market was doing at 4200-4300 range, Indian buyers jumped up on Indonesia and covered few containers; Europe and Middle East markets also came to Indonesia market to take advantage of the lowering price.
Naturally the ECONOMICS of DEMAND AND SUPPLY started working, and from USD 4000 price jumped to 4400-4500 level in one week time !!! And during first week of September - it is reported "shortage of crop" in Indonesia - as Sulewasi almost sold out - and AMBON crop is delayed because of continuing rain. Normally Indonesia gets raining during June-July till mid August; but this year, in September also rain continuing and stock movement from AMBON to Surabaya and Jakarta is almost stopped. This is the "crop shortage" being reported, that I could see from my research. Actually there is no shortage . Indonesia is having almost a bumper crop this year - somewhere around 128,000 MT as per industry reports available from Surabaya and Jakarta. With such a huge production figure, Indonesian price cannot get a support to move up high - when cigarette factories purchase is less than average normal. And over all demand from rest of the world is also comparatively less.
When situation in Indonesia was as above, what happened in African origin Clove?? COMOROS - where season started, was offering at USD 4300 - but still no buyers ! Because when Indonesia is available at same price, no one will turn to Comoros - even if Indonesia attracts 5% import duty in India. Hence 4300 of Comoros also did not find market. However, when Indonesia price increased recently, Comoros also hiked up their price to USD 4500-4600. Unfortunately , when buyers were not ready at 4300, then how they would react to increased Comoros price at 4500-4600 !!! Let us wait for a break even price formulating matching to all in coming days.
Zanzibar - not yet season started; and hence no price and no cargo available. Normally Zanzibar starts in July -August. But this time, Zanzibar got delayed - and said to be for many many un-authenticated reasons - that Zanzibar farmers incure loss if sold at the prevailing international price; and ZSTC not commencing purchase from farmers as selling in international market at lower levels not feasible etc. Finally Zanzibar season still on hold, and expected during 2nd half of September, they MIGHT OPEN SEASON AND SHIPMENT. We need to wait and see.
And Madagascar origin. The star in the clove horizon. There are 2 clove production areas from Madagascar. The first is in the North East, north of Tamatave; and the second is in the South East of the Island. Clove production represents the significant economic activity for the country and for the rural areas concerned.
The area makes up large parts of the Toamasina province, including Tamatave, Sainte-Marie Island, Mananara, Fenoarivo Atsinanana (Fénérive) and Soanierana Ivongo.
Madagascar Clove is the STAR in the clove industry - especially Gulf and India looks at Madagascar because of more quantity available and quality as well. Because of COVID 19 lock down, all Govt procedural works delayed to issue Clove Export Agreement. Normal Clove season in Madagascar to start in September with South Crop, Followed by Mid North crop from Fenirive in October-November and extreme North Mananara crop in December-January.
Madagascar cloves are graded into three classifications depending on harvest, processing and intended use:
CG1 - "Handpick", brown-reddish clove buds with less than 10% moisture, with minimum headless cloves and free from admixture and baby cloves.
CG2 - "Prima", brown-reddish with less than 11% moisture and 0.5% admixture and few headless and baby cloves.
CG3 - "Courant" (ordinary), brown-reddish, with less than 13% moisture and less than 3% admixture and baby cloves. CG3 is the common and widely demanded and exported.
Coming to price scenario of Madagascar - we need to wait new season opening to have a judgement of price. However, currently, some stockists and exporters have stock with them [which they procured last harvest season at higher prices]; and it is now offered at higher price only. Therefore, no serious buying interest because of higher price levels.
Interestingly, in 2020, Madagascar Clove production is estimated at a bumper crop ranging to 16,000 to 18,000 Mt plus carrying over stock with exporters and stockists which is reported to be more than 6000 Mt [based on views and experience of farmers and traders who go around plantation fields, ] These production figure estimates gives no room for expecting increased price.
WHAT WE CAN ESTIMATE: 2020-2021 might be a "tarbulent" period for CLOVE industry. Because, buyers pressing for lower levels; and buyers are hand tied with their local markets low price levels; on the other hand, farmers and dealers shouting for higher prices; and amidst this, exporters trying to profit more to compensate lost business during COVID lock down; and above all FOREX factors pressing down export prices.
USD 4000-4500 range would be an ideal level that would get some what acceptance in the market; whereas buyers preference would be at the lower side; but the equations of market sentiments pushed and pulled by exporters and speculators can change the price fixing formula. When I spoke to few importers in India, I could get their feel that they expect clove price below 4000 this time !! We have such expectations also in the market.
It is timely to mention, from Indonesia, people already bought at USD 3600 to 3800 level [especially importers in Kolkatta, Jaipur, and Punjab] - and what they received at those price is WILD CLOVE OR FOREST CLOVE of Indonesia. Forest Clove is not the pure original clove. But some exporters from Indonesia offer ""much lower price for clove, and ship out Forest Clove " - and those importers who ONLY LOOK AT LOWER PRICE get into this trap. Most unfortunate !! Those importers would realise what material they are getting only after they make full payment, and container reach them.
If Indonesia price sustains above USD 4800-5000 level in September, then all African origins would become strong, and one cannot expect lower levels. On the contrary, if Indonesia further goes down to USD 4300--4000 level, then we need to wait for a crash in clove price internationally.
If any one need individual advice or purchasing plan, please contact with your requirements personally on whatsapp +261336196095 and/ or +971508150595 or email at [email protected] .
Wish you happy trading / Best Regards/GIRISH