Buying frenzy by importers in Delhi, Mumbai from the local markets, of late, lifted cloves prices in the country while its prices in all producing countries shot up as the demand outweighed supply.

The prices in the domestic market have almost doubled in less than two months, according to the trade.

Prices in the world market surged to $10,000-11,000 a tonne “making it wise to cover currently from the domestic market,” a dealer told Business Line .

Also, many cargoes have been defaulted while uncertainty hovers over shipments. The customs said to have fixed the valuation at $8,000 a tonne at all ports and at this rate the price in the domestic market would come to around Rs 600 a kg, the trade claimed.

Prices, at present, in the domestic market for good quality cloves of India and Colombo ranged between Rs 525 and Rs 600 a kg. Given the current trend and as the peak demand is to begin from next month the prices are likely to rise to somewhere between Rs 600 and Rs 800 a kg, they claimed.

Erratic weather conditions had reduced the Indian crop to around 20 per cent of the previous crop and a similar situation is reportedly prevalent in other origins such as Indonesia, Sri Lanka, Zanzibar and Madagascar, traders said.

According to them, cigar companies were buying for buffer stocks which in turn will squeeze supply further. At the same time, the 2011 and 2012 crop is also likely to be less, they claimed.

Dealers in Kochi told Business Line today that indigenous cloves were traded here at Rs 550-570 a kg. They said that cloves in India were grown only in few pockets in Kerala and Tamil Nadu and the production is negligible compared with the country's huge annual demand. Hence a good chunk of our requirement is met by imports, they said.

Squeeze in availability had pushed up the prices by around Rs 250 a kg in about a couple of months, they said adding inventories are very thin due to poor Indian crop this year.

The traders here deal mainly in the indigenous produce, they said.

Meanwhile, growers in Nagercoil of Tamil Nadu said as the prices started moving up the traders there alleged to have formed cartel so as to dictate a uniform price to the growers.

Traders quoting overseas reports said cloves prices are going up daily as there is acute shortages in world markets. Prices quoted in different origins per tonne were $11,000 (Colombo) and $9,000 (Zanzibar, Indonesia and Madagascar).

Indian requirement for the coming four months is estimated at 4,000 tonnes and as against this the stock held is very small, trade sources claimed.

Usually, they said, “there is a crop failure or short crops in every 5-6 year cycle and then it used to take two years to get the normal crop as gestation period is high in cloves trees”, they said.

Import duty on Colombo cloves is at 4 per cent while that on other origins is at 25-35 per and this has stopped fraud imports, they claimed.

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