Clove prices spiral as demand outstrips supply

Clove prices have soared in the domestic market as demand has outstripped supply. According to dealers and growers in the major growing and supply centre, Nagercoil in Tamil Nadu, the price of the good variety has crossed Rs 800 a kg.

“The price has crossed Rs 800 a kg. Some traders have resorted to selling, while some others are holding back, in the anticipation that the price will touch the magic four-digit figure,” Mr Subramani, a major cloves grower in Nagercoil, told Business Line today.

The price has, of late, multiplied nearly four-fold on short supply as the last crop in India was less than half the normal output estimated at 2,500 tonnes. Indian demand is estimated at between 13,000 and 15,000 tonnes, said market sources.

There is a huge shortage of cloves in India as good quantities were exported to Singapore and Indonesia at $12,000 to $17,000 a tonne, following a sharp rise in prices in recent weeks, the trade sources said.

They added there would be a huge vacuum here with the festival season around the corner, they said.

Prices in India for Colombo cloves was Rs 750 a kg and that for Zanzibar Rs 900. “The import costs are very high and given the current trend, we see cloves prices hitting Rs 1,000 to Rs 1,200 a kg.”

Crop failure in Indonesia on account of disease has led to a sharp drop in production. It is expected to take three-four years to return to normal conditions. As a result, “clove prices will remain high till 2014. New crops take nearly four years to grow and fruit, while on the other side, demand from the Indian and world market is growing,” they said. The latest development is that China has also been buying huge cargoes of cloves, pushing prices up further,” trade sources in Bangalore told Business Line .

The annual world cloves crop usually is at 1,41,000 tonnes, with Indonesia accounting for 1,10,000 tonnes. At the same time, it also consumes around 1,20,000 tonnes, they said. “This year, the Indonesian crop is only 10 per cent, i.e., 10,000 tonnes while the output of all others when put together came to 28,000 tonnes. Thus, the total world cloves crop is estimated at 38,000 tonnes. Given this huge deficit, cloves prices are at $21,000 a tonne now and it may climb to $30,000 a tonne soon,” they claimed.

Indonesia cigar companies “must have buffer stocks, so they need one lakh tonnes and hence the Indonesian Government's trade ministry is reported to have issued import permits for 50,000 tonnes, so they have been buying goods from wherever they can at prices ranging from $11,000 and $17,000 a tonne. This phenomenon will reduce stocks in the world market, pushing the prices up further, they said.

The new crops in the Comoros, Zanzibar, Brazil and Madagascar “are also small; all these are getting booked in forward sales. With Indonesian cigar companies buying up crops, the local Indian markets will soon dry up. It will see Rs 1,200 a kg, it is good time for traders to buy cloves and hold them for a while,” the market sources said.

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