However it does look like that the market is set for a firm undertone in Feb and some even predict , a much steeper rise this month.

The factors impacting this are:

• A latent demand which increases the moment the market drops a little,pointing to the fact that buyers are sitting on the edge waiting to cover at lower prices.
• A depleting supply of 2011 crop , which has to carry on at least till June 2012.
• Extreme cold conditions in the growing areas,which MAY delay sowing and thus delay the arrival of the new crop. It must also be remembered that if it gets too delayed , the standing crop will have to contend with the monsoons,and thereby the recovery will go down.
• A rapidly rising India rupee, which has appreciated nearly 11% in January alone.
• The belief in the Indian farmer that this year , 2012 , the rains will be early, as predicted by the Hindu calender. This will mean that the dry season required by the crop will be short.
• A belief by both the buyers and the sellers that this is perhaps the last year for unpredictability, as the production of synthetic menthol (both old and new producers) will stabilize prices. The sellers are thus trying to maximize their gains and the buyers are not covering their full needs. This hand to mouth situation is only pushing the spot market in Europe and USA and thus adding to the pressure.
• A very low stock situation in both Europe and USA.

In our opinion, the firm undertone will prevail right thru Feb/MARCH, after which the sowing and the weather will determine the sentiment.

The pepper oil is produced in the world from light berries(immature pepper which has less of starches)
In the earlier times ,these berries were available ,as traders routinely rejected them,for whole/ground spice purposes.
India was a leading producer of the world,and the other countries like Indonesia/Brasil much less.
However gradually Vietnam became the major producer and the acreage in India went down.The area vacated was devoted to other crops like cardamom.

The demand for black pepper as a spice continued to rule firm in India and thus export took a back seat.
Today Indian exports are much less and their position has been taken by Vietnam.

The demand has meant that farmers do not want to sell the light berries to the Indian distillers of pepper oil,as the realisation from the spice market is much better.

Thus a majority of the demans for light berries is met from Sri Lanka/Vietnam and Indonesia
Out of these Sri Lanka give the best material

The price for the Sri Lankan material has been very high and goes up by the day(their crop got over in uly and the next one comes in February)

There are no stocks and availability is extremely poor.

The sentiment is very bullish and people are talking of prices of $250/kg.

We do not foresee the prices of PEPPER OIL oil coming down until Februay(Sri Lankan crop).

• The crop estimates stil are at 40,000 mt of oil(about 10,000mt more than last year).
• 75% of the crop is already harvested   -ie 25 % crop still stands.
• The last two days have witnessed heavy rains in the growing area(normal for this time of the year).
• About 7000-8000 mt of oil has come into the market,meaning that about 32000 mt is still to come .
• In other words the amount of material currently being held back with the farmers/stockists  is around  20-22000mt.
• Although the crop is nearly 15-20% more than last year, the almost ZERO carryover (normally about 8-1000mt) makes it an average year. Thus with a zero carryover and with an increased demand we may be looking at just about meeting their needs.
• The danger area is the standing crop,if this gets damaged,even by 10%, and with the intense holding power,and the activity of the speculators,the market will rise dramatically
• On the down side,people are NOT expecting the prices to go below US$30-32 /kg of Menthol through the year.
• The pressure on prices in the last two days is only because the commodity exchange in an effort to curb speculation has increased the margin to be deposited for trading in menthol from 20% to 30%.
• Most expect the prices to bounce back.
• The Mandi Tax(Purchase Tax) of 2.5% which was not being enforced earlier,has now seen a strict enforcement,which will be an added cost.
• The Indian Rupee continues to rule firm against the US Dollar.
• Most Buyers have not still covered their needs ,and thus there is a waiting demand.
• Stocks are almost NIL in New York and European markets,and prices there are already running at levels of US$37-38/kg for spot material ,which in anycase is not available in large  quantities.
• The  manufacturers too are  not wanting to fill up their machines at such high prices,which will only increase the scarcity in Overseas markets as shipments will be delayed.
• To add to the fire, defaults on shipments have already started,causing  stress in buyers.

The variety of Rose grown for oil is DAMASCENA in Turkey and Bulgaria ,whilst the Moroccon and Egyptian variety comes from CENTIFOLIA.

The normal crop of Rose crop inTurkey will yield about 0.8-1.0 of oil and about 10-12 mt of Rose Absolute.

However this year the situation looks very different.Although the acerage has increased,the yields are dramatically down.It is expected that the yields could be down by about 20%. The low yield is factor of the water content on the petals,which in turn is directly proportional to the rain in the area.

The costs go up ,as the distillers in the area pay for petals by weight,and when the petals have more water, the distillers are in effect paying more for the oil they get out of these petals .

It is important to note that when the leaves are brought by the farmers to the factory,they are separated for production of oil and absolute.The factories know by experience the different farms for producing Rose Oil or Absoltue and the leaves are segregated acordingly.

The situation of the Bulgarian Rose appears to be no better.The prices have already moved, up from levels of Euro 5000 /kilo to levels of Euro 5400/kilo,and as the contracts are signed this is only going to worsen

The Rose season lasts from May to end of June and at the time of visiting the fields in Turkey in the middle of June ,it was appearing that the season is almost over.

As has been reported before the crop was planted late this year and this resulted in most of the crop still standing on the fields today.(Noramlly it should have been at the end of season at this time of year).

The markets dynamics are as follows:

- It is true that India will get a crop of atleast 25% more than last year.This should result in a supply of about 28000 mt of menthol crystals.
Conversely ,THERE IS ZERO CARRY OVER FROM LAST YEAR(ABOUT 15 -20%) or about 5-6000 mt of menthol.Thus the surplus is only about 2000 mt.

- The farmers sold every ounce of their stock from old material at very high prices,and are thus loathe to bring the oil to market at lower prices today.The oil coming out from fields is being held by the farmers currently,and they will not bring it out at low price.This is manifested in the arrivals in the terminal markets which should have been around 800-1000 drums and are currently only about 500-600 drums.

- The 50% crop standing is now at the mercy of the rains.If the rains are continous,we may have a crop damage and delays.

- The new enforcement of Mandi Tax(Purchase Tax) by the State of Uttar Pradesh,has only restricted the movement of oil ,as a lot of small traders are not registered with the authorities.This will mean that the oil will only be transported by the larger traders,who will add their margin and also have a larger money power to hold material

- Because the crop is larger,and there is no carryover,the conversion cost being charged by the field distillation units is double that oi llast year(up from Indian Rupees 50/kilo to Indian Rupes 100 /kilo of raw material).The farmer would like to get his crop distilled quickly ,and there is only a limited number of field distilaltion units

- As has been said several times earlier Europe and USA are totally void of material ,and there is a frenzy to cover short term needs,adding to the northward pressure on menthol prices.

- TIll now the stockists and speculators have not entered the fray,biding their time and understanding the crop size.If , inspite of their absence there is this firm undertone , the market can be taken to dizzing heights when speculation starts on the commodity exchange.

- On the flip side ,it can be said that the current prevailing prices of menthol crystals,are only due to a short term shortage of menthol in the markets and the delayed crop.
The prices will settle down to more comfortable levels in the next two weeks, as the first batches of menthol from the new crop hit the market.

- THE CAUTION HERE IS THAT BUYERS WOULD BE ADVISED NOT TO TAKE THE FALL IN PRICES AS A FREE FALL,AS IN OUR ESTIMATES THIS FALL WILL BE SHORT LIVED AND IT WILL RANGE BOUND

(A) CROP IN 2010 :                                          32,000 MT (20000 MT OF MENTHOL)
(B) EXPECTED CROP IN 2011:                     42,000 MT(24000 MT OF MENTHOL)

(C) CARRYOVER STOCK IN 2010:              10,000 MT
(D) CARRYOVER STOCK IN 2011:              3,000MT

TOTAL AVAILABILITY OF OIL IN 2010(A+C):      42,000 MT
TOTAL AVAILABILITY OF OIL IN 2011(B+D):       45,000 MT

ANNUAL DEMAND INCREASE:     7% OR 2500MT

Thus there is not much difference in the availability ,AND IF ONE FACTORS THE INCREASED DEMAND TOO,THEN REALLY THE EQUATION IS IN BALANCE.

FACTS
-The continous rains in the growing areas ,might delay the crop slightly ,but at this stage are actually good for the crop
-However if the monsoon hits the growing belt early as the Met office predicts ,then there is every likelyhood of lower yields or damage to the crop.
-Stocks in Europe and USA are very low,an everyone is waiting for the new crop in the hope of lower prices.This will mean that ,atleast in the short run, prices in consumption markets will not go down
-Since the crop is slightly delayed shipments from the new crop will really only start end of July for arrivals early September .
-All stake holders in the business ie the farmer,sotckists,chillers are not likely to let the oil slide in prices too much ,as they now have sufficient holding capacity,and as is normal the next year (2012) will see a smaller crop and thus higher prices.
-A MAJOR DETERMINANT WIL BE THE IMPENDING BAN ON CHEWING TOBACCO IN INDIA BY THE FEDERAL COURT.THE JUDGEMENT IS EXPECTED MID JULY.

If that happens it wil release almost 7000 mt of menthol in the market.
However if it does not happen ,this industry which has been running in a state of animated suspension will bounce back with renewed vigour,and actually the demand my go up.

• The Rupee dollar parity is not going to be an issue as we see the Rupee range bound between US$ =Rs 44.75-45.25 for the second half of 2011.
• As we have repeated often ,with this being the threshhold year for Natural Menthol (1200 mt of Synthetic menthol will be released in the market in 2012),there is a possibility of large users contracting for more than 12 month,and thus inflating the demand.
• There are efforts already to shore up the prices by large operators,in an bid to cover at lower prices in season.This speculation is again spurring artificial demand .
• This coupled ,along with the demand will mean that July /August might see the prices spiking up once ,only to cool down in September.

In conclusion, it does seem that the bumper crop will bring in a low price regimen in 2011.
However, a slight variation in weather can spoil the party,and more importantly ,eventhough the crop is expeced to be big ,but when the numbers are added together the increase is only marginal.

Although Piperita is a derived demand, (most of it goes for blending with American Peppermint and thus the pricing in India is dependant on the US crop),farmers wil not bring it out below a minimum threshold. Indian Piperita has also been widely accepted as is in Europe ,and thus is now making a niche for itself.

The crop is a little delayed due to sporadic rains in the growing areas. This has delayed the distillation. So far there is no damage to the crop,with these rains,but if the rains do become incessant then the yields will go down.

It must also be remembered that there is still a significant gap in price between the Yakima and the Indian, and although the Americans may find higher prices difficult to absorb for blening ,the European market (where the Indian material is getting more and more acceptability ) may still prefer the Indian.

We foresee a firm price trend for the Indian Piperita. And this is only bound to get more acute .Already Piperita with a 5% furan level is selling at levels of US$34/kg and this prices has increased by about 3% in the last 7 days.
A slight damage in the crop MAY HAVE exponential impact on the prices.

1. Roman (Anthemis nobilis)
2. German (Matricaria recutita)

These are closely related species.

German chamomile,  is the kind normally used in herbal tea, or for its benefits on skin and soothing properties and tissue regeneration.

Roman chamomile,  is for stress control and in menstrual problems.

The Roman chamomile essential oil has a sweet, apple-like fragrance and is very light clear blue in color with a watery viscosity.

The German chamomile oil has a sweet, straw-like fragrance, is dark blue in color and its viscosity is medium.

On the significant differences in the Chemical properties
The Roman Chamomile has a high Chamazulen (above 4%) content, whilst this is almost absent (0.5-2%) in the German chamomile.

The foothills of Himalayas in India and Nepal, see an abundance of German Chamomile being produced. The annual production of this crop has been rising particularly in Nepal, where because of its proximity to the Himalayas, the quality of oil produced is better than India. The color tends to be deep bluish from Nepal compared to bluish green from India.

The growing season for this is April to June.

2010 saw a slight dip in production of about 800 kilos,but this year(2011), the crop is higher and is expected to be around 1000 kilos.

Availability of this oil is very good ,and the only factor keeping the price up, is the sustained demand.
A lot of buyers are buying the Roman Chamomile so switch to a cheaper alternative (German) due to its high prices of Roman Chamomile.

Its production has remained stagnant and erratic. Massoia Bark oil is produced from the wood collected by the locals from the island of Papua in Indonesia. The locals earlier just collected the wood,and gave it to collectors, who exported this to the distillers in Jakarta and around.

However recently, the state of Papua,has made laws that makes it more difficult to export the wood in its raw form, and thus supplies have been hit . Sustainability of this product is low, as there is almost no replanting.

Not more than about 4mt of Massoia bark oil is currently being produced.