June 2010 Market Report

8/3/2019 June 2010 Market Report

1/12

SWEET ORANGE

Some processing has already begun in Brazil but

there are few offers being made for oil and other

orange by-products. Those offers being made are

very bullish and only for shipment some 2-3 months

away. Orange Essence oil (Oil Phase) and Orange

Aroma (Water Phase) are both in very tight supply as

the trend towards producing Not From

Concentrate (NFC) orange juice continues upwards.

Brazils crop will be about 15% short, depending on

whom you talk to, but all indicators are there for a

gruelling season.

Consistent with many other materials, fruit prices are

up, availability is down, and production costs have

risen sharply in recent years, all of which are adding

to an already inflated market. Spot availability of

Orange oil remains extremely limited. The unusually

heavy rains during Brazils peak bloom period

(January) have been blamed for the bulk of the cropsreduction. The smaller crop, coupled with very strong

demand, has sent recent prices sharply upward and

we expect we have not seen the last of the climb.

www.treatt.com

[email protected]

[email protected]

Market ReportJuly 2010

MARKET UPDATE

Evolving economic factors continue to play a key part in the industry. The spectre of rising inflation on

a global level is causing much debate around the Treatt group purchasing offices. Could it be thecase that some ingredients approach new market highs in the next few months if the current level ofdemand persists and the more streamlined supply chains fail to cope with the pace of demandchange? Treatt is inclined to believe so. As conveyed in our last report, the bigger question remainsas to the sustainability of current levels of demand coupled with ongoing supply shortages across awide range of product types.

MARKET REPORTS NOW

AVAILABLE ONLINE!

Treatt recently completed its firstcustomer survey and received asignificant number of responses.

In reaction to some of our customerscomments we have made our market

reports available through our website.Please visit www.treatt.com to

register for these reports.

CITRUS OILSCITRUS OILS


2/12

EXPRESSED LIME

On the gulf coast of Mexico, where the majority of the PersianLimes are grown (Citrus latifolia), the heavy rains that were felt inJanuary and February - which brought lovely fruit to the freshmarket in the spring - did not continue into March and April whenthey were needed to help grow the fruit usually picked now forprocessing.

Although there is some production going on now, yields are very

poor and most of the fruit is still too small to run properly throughthe extractors sizers. The bulk of processing has been delayedfor at least another 2-4 weeks. Although the crop is similar to lastyear in size, there will certainly be a reduction in what isprocessed. For now, prices are relatively stable, but we expectthem to climb in the coming weeks.

DISTILLED LIME, MEXICO

The unusual and very heavy rains in January and February alsohampered processing on the opposite coast in Mexico and hasnow put processing of Citrus aurantifolia (Key Lime) behind by

many weeks. Fruit volumes for processing have been hard tocome by as fruit prices are up by about 40% compared to thistime last year. Total production will be reduced for the thirdstraight year which may begin to put some pressure on themarket.

CITRUS OILS continuedCITRUS OILS continued

SWEET ORANGE continued

Almost all of Floridas processing plants have just finished

running for the 2009/10 season. The market is drasticallydifferent from this time last year as there is very little

uncommitted Valencia oil for sale on the spot market. The few

loads that can be found have asking prices triple what they were

a year ago due to relentless demand all season and the news of

the shorter crop in Brazil. Californias processing season for

Valencia began just a few weeks ago and is progressing well.

Their processing season is very short, though, as the majority of

Californias Valencias go to the fresh fruit market.

LEMON OIL

The strange mix of supplier price expectations, exchange rates and crop times which we are currentlyexperiencing are now bringing European sources back into play with prices comparable to those

origins who are US Dollar based. Argentinian processors continue to be bullish on price, citing thecrops reduction by about 1/3 from last year due to the heavy drought, as well as increasedproduction costs including recent union picker increases of close to 40%. Demand remains strong butsupply is able to keep up currently.


3/12

TREATTAROMETREATTAROME

TREATTAROMES

Treatt USA is very busy right now running summer fruits and vegetables for our Treattaromeline of

products. Florida had an incredibly cold winter this year, about a week of spring, and almostimmediately came the hot and humid days of summer.

This quick temperature change has put a great deal of heat stress on some of the summer cropssuch as watermelon, cucumbers, peppers and cantaloupe. TUSAs Treattarome department isrunning 24 hour shifts currently to get in and process as much as possible before the crops begin toshow signs of sunburn.

HABANERO

One of Treatts unique and increasingly popular Treattaromeproducts is Habanero Treattarome..

The Habanero is an unusual pepper in that it has a very long growth cycle. While most peppers takejust 8 weeks in the ground, Habaneros take a minimum of 16 weeks to grow. The first 4-5 weeks arespent in a greenhouse where they are temperature controlled and closely monitored from seedling to4-6 inch plants. Once they are planted it takes around 90 days before we start to see the prominentorange which gives us the optimal level of volatiles which are captured during Treatts specialtydistillation process.

Treatt USA Purchasing recently went out to the Habanero fields to get a first hand look at harvesting.Plant City, Florida, a mere 20 minute drive from Treatt USA, is strawberry country but in the off-season farmers are busy growing cantaloupes, squash, okra, peppers and other summer crops. Suchis the situation with grower Howard Johnson of Howard Johnson Farms, who is currently harvesting

Habaneros for both the fresh market and for Treatt USA. The Habaneros are picked in buckets,graded for quality right in the field, and boxed for immediate shipment. Treatt will soon be processingthese peppers into Habanero Treattarome..


4/12

CHINA 2010CHINA 2010HO WOOD OIL ORIGIN VISIT

In the hope of finding out the current, and perhaps future, production situation of Ho Wood oil (naturallinalool) in two of the most important origins in the world, a member of the Treatt purchasing team

made a trip to Asia in the spring of 2010.

It was discovered that more and more oil is being produced from the leaves of a special short-heighttree (see the two pictures above) being commercially cultivated in the east of mainland China. Bycontrast, the volumes of oil produced from the southern part of mainland China and Taiwan (thehistoric home of Ho/Camphor) are decreasing as trees are more strictly protected by the government.

The conclusion we make is that the market will continue to firm in the short term as production

volumes shrink and demand increases, creating a supply/demand imbalance. In the medium to longterm, as prices continue to rise, more commercial plantations are expected to be created to meetdemand.

A member of the Treatt purchasing team with a commerciallycultivated short-height tree Mature Ho tree leaves

A traditional Ho distillery


5/12

MADAGASCAR 2010MADAGASCAR 2010

YLANG OIL ORIGIN VISIT

Spring 2010 also took Treatt Purchasing to Madagascar to look at Ylang and other essential oilproduction. Ylang grows in a particular area of Madagascar largely because of the near perfectclimate where there is abundant sunshine all year round mixed with sufficient showers. Thecomparative absence of Ylang in other areas of Madagascar is attributed to the multitude of othercrops that grow there. Ylang production has remained the only commercial agriculture on the islandas it is the only crop that can compete economically with tourism. Ylang trees can be 20 metres tallwhen mature but in the plantation they are restricted to 2 metres by attentive pruning and training toease collection of the flowers.

The Ylang flowers can be taken at any time of year, as the trees essentially flower all year round,although the flowers yield less essential oil during the rainy season as they contain morewater. 100kgs of Ylang flowers yields 1kg of essential oil, producing 3 distinct grades. The first hourof distillation yields the densest (highest quality) essential oil, reducing for the other 2 qualities. Thephotograph above shows two Ylang flowers, the one on the right being better for distillation as it hasa richer yellow colour, indicating it to be more mature and containing more essential oil. It wasnt longago that Ylang III offers came only as part of a package requiring the buyer to purchase some Ylang Ior Extra to accompany it for the journey across the water. Now there appears to be a plentiful supplyof this material, one of few oils which is experiencing a comfortable supply/demand relationshipcurrently.


6/12

ESSENTIAL OILSESSENTIAL OILS

EUCALYPTUS OIL/EUCALYPTOL

It was expected that the price of

Eucalyptus would come down andavailability would become easier as therainy season began in May.

However, reports from origin indicatethat the current condition of the leaves ispoor because the trees were so badlydamaged during the drought andtherefore the quantity of raw materialsuitable for further processing hasdecreased.

In the last few days a new problem hasemerged - too much rain - not leastbecause it has led to the suddenemergence of sinkholes in randomlocations throughout previouslydrought-stricken provinces and is nowcausing serious flooding in severalprovinces, but more specifically that toomuch rain leads to low yield rates fromthe distillation process.

It seems it should be neither too dry nor

too wet for Eucalyptus to provide us withwhat we need! It is expected that theprice of Eucalyptus oil will be firm for aperiod of time due to this.

CASSIA OIL

The availability of Cassia oil in the market has been short this year and the lack of labour to pick theleaves for distillation has pushed the price up even further. The higher prices we are all paying for theoil is obviously not filtering sufficiently far enough down the chain to draw the pickers back from thecities.

CHINA

There are three hot topics in China right now, the after effects of drought, increasing labour costs andthe rate of inflation, which are all having a direct impact on the essential oils below (amongst others).

The once-in-a-century drought in southwest China has finally finished with the rains having started inGuangxi, Yunnan, Hunan and Guizhou provinces. We are now concerned about the ability of the landand plant life to recover and (strangely) the potential effect of too much rain. This month the capital ofChina, Beijing, has said it will be raising its minimum wage by 20%, to 960 Yuan (USD140) a month,and its lead is expected to be followed by other cities. The increasing of minimum wage levels inChina is certain to increase the prices of the essential oils produced there as a majority of the cost ofan oil is the labour to harvest the raw material. The inflation rate has surpassed the government's 3%target, which has pushed up the selling price expectations of essential oil stockholders andspeculators alike.


7/12

ESSENTIAL OILS continuedESSENTIAL OILS continued

ANISEED OIL

Pricing is unstable at present as stockholdersat origin are attempting to maintain the higherprices we have seen in recent months.

GARLIC OIL

As explained in the previous market report, because of a decrease of the Garlic fruit cropat origin the market is continuing to firm gradually. There are rumours that as the pricepaid for fresh bulbs is so high at the moment, were fresh oil to be processed using it, thecost would be more than USD100/kg and as such no factory is willing to process. Theprice only gradually firms as speculators work their way through carryover stocksincreasing the price incrementally after each sale to avoid driving off buyers.

GINGER OIL

The market has softened a little since newcrop material became available in recentweeks.

GERANIUM OIL

This oil remains firm due to the extremelylimited supply out of origin.

INDIAN MINT

Reports continue to emerge that the 2010 cropsof Arvensis and Piperita are expected to be wellbelow that required to meet demand. In thecase of Piperita it is expected that the carryoverstock is sufficiently plentiful to cover the

shortfall but for Arvensis the carryover is lowerand a shortage is expected. Prices have firmedalready and any increase in demand will onlycause the market to tighten further.

ROSEWOOD OIL

CITES and IBAMA interventions are heavilyrestricting current available volumes andsupply has been slowly drying up for the lastfew months. Occasional small parcelsmanage to find their way out and thesustainabil i ty question that theseorganisations pose is currently beingchallenged by the industry. We will keep youinformed.


8/12

FAIR FOR LIFE MINT OIL

Did you know that Earthoil Plantations can provide a turnkey solution to your Corporate SocialResponsibility (CSR) needs? Via our mint project in India, run and managed by Earthoil India,Earthoil Plantations can offer a range of ethically traded mint oils that are certified Fair For Life. TheFair for Life status reflects Earthoils strong values and commitment to ethical trade. Fair for Life is abrand neutral, third party certification programme for social accountability and fair trade in agricultural,manufacturing and trading operations.

Earthoils Fair for Life status was achieved by guaranteeing good working conditions, respecting corelabour rights and ensuring the two smallholder groups have a fair relationship with Earthoil. Earthoilalso established a non-governmental organisation (NGO), The Earthoil Foundation, to ensure thatpremium fair trade payments are made to the community. Farmers democratically decide how these

funds will be spent within their community - whether for health, education or cultural enhancement.

Earthoil has two small-scale clusters totalling 616 farmers, 259 of which are organically certified. Allthe farmers are registered under the Fair for Life certification. By shortening the supply chain, Earthoilhas managed to achieve increased prices to the farmers without affecting the actual market price ofthe product.

Buy your Piperita, Spearmint, Corn Mint, DMO or Menthol Crystals from Earthoil Plantations and notonly will you be supporting thousands of families linked to this project, you will also be fulfilling vitalCSR criteria.

Oils are available in both organic Fair for Life and conventional Fair for Life. Earthoil welcomes

visitors to its projects and to meet the communities. For more information please visithttp://www.fairforlife.net (Please click on the certified operators tab, then scroll down to see EarthoilIndia).

ESSENTIAL OILS continuedESSENTIAL OILS continued

CARDAMON OIL

As anticipated, prices for Guatamalan origin material firmed quickly after news of a crop reduction buthave since hit a plateau. Strangely, prices from other origins have increased faster and appear tohave settled above these levels. The possibility exists that should a normal crop come through later inthe year prices may fall just as quickly but there is no news yet regarding potential crop size.

LEMONGRASS OIL

Suppliers in Guatamala are already warning of the need to book well in advance for the upcomingcrop. The first material of the 2010 crop is due onto the market shortly but is already sold out withbookings now being taken for shipments from the second offering in August.

ETHICAL AND FAIR TRADE FORMULATION

Why not market your finished products from an ethical trade angle? As well as mint oils from ourproject in India, Earthoil can also supply other Fair For Life certified vegetable oils (such as Sesame,Coconut and Avocado) thus helping you formulate top-quality products that really stand out to agrowingly fair trade-conscious public.


9/12

AROMA CHEMICALSAROMA CHEMICALS

TURPENTINE DERIVATIVES

The degree to which the problems associatedwith Turpentine and its availability areaffecting the industry continues to deepen withthe latest supply interruptions being felt as fardownstream as Neryl and Geranyl Acetate.Those manufacturing these materials aredeclaring, in certain cases, a complete lack ofavailability with no end date given. I am surethat by now many savvy buyers are switchingaway from pine derivatives where possible asprices become comparable to, and evensurpass, that of some other natural

alternatives.

ALDEHYDES

Various market reports abound withinformation on shortages of Gamma Lactonesas a result of lack of raw material availability.At first it was Heptanol and now Octanol,Acetophenone and Acrylic Acid have beenadded to that list. They are short and rising inprice and this is leading some to default on

their obligations at origin such is the pace andextent of the increases we are seeing.

ESTERS

The unusually strong and consistent demandbeing felt across the industry is having agreater and greater affect on the supply chainand a major supplier of Esters is feeling theheat trying to keep up as they run to

capacity. This then generates problems of itsown, such as increased downtime, which justadds to the problem. This is affecting severalEsters in the Benzyl and Hexyl series.

BUTYRIC ACID

Another raw material shortage causing furtherprice increases. Ethyl Butyrate is just onewhose price has increased as a direct result

of this intermediates price fluctuations.Further price rises are anticipated.


10/12

AROMA CHEMICALS continuedAROMA CHEMICALS continued

MUSK KETONE

We are preparing for the impending 45th amendment to the IFRA standard which limits the MuskXylene content in Musk Ketone to the level of an impurity - from 1% to 0.1%. This is primarily forenvironmental reasons (it is known to be very persistent and very bioaccumulative or vPvB). Althoughthis amendment is not scheduled to take effect until June 2012, as this is such a substantial changethat Treatt is taking steps to ensure a smooth transition.

Treatt continues to offer a wide range of aroma chemicals but due to changes in the prevailingmarket situation we are currently well placed to offer:

Allyl Heptanoate Pine Oil 85%

Muskmeran OTBCHA

FREIGHT

The stock increases in freight rates have temporarily come to a halt and some equilibrium is returningbetween supply and demand. What may upset the balance to the detriment of shipping lines could bethe introduction of those vessels requested pre-crisis that are due to be commissioned.

SPECIALTY CHEMICALSSPECIALTY CHEMICALS

In a climate of heavy demand and some shortages, it is worthy of note that there are no delays toplanned business for the high-impact speciality chemicals, but spot business is sometimes moredifficult to service in current market circumstances.

Another selection of synthetic high-impact flavour top-notes for which specifications are set at theJECFA standard, or better, the latest IOFI product data (International Organisation of the FlavorIndustry) gives the clearest indications yet of the approval status of synthetic flavour ingredients inworld markets, for example:

Isopropyl thio-methylcrotonate; S-Isopropyl 3-methylbut-2-enethioate; S-Isopropyl senecioate. CAS 34365-79-2; FEMA 4260;EINECS 251-996-7; EC-Flavis 12.134. Artificial: not reported found infood. Description: sulphurous, green-vegetative notes; galbanum;cheese and tropical fruit. Used in vegetable/savoury, and in tropical/

pineapple flavours.Listed in the INCI Inventory of fragrance ingredients;and used in synthetic galbanum fragrance compounds.

O

S


11/12

SPECIALTY CHEMICALS continuedSPECIALTY CHEMICALS continued

Ethyl 2-mercaptopropionate; 2-Mercaptopropionic acid, ethyl ester;Ethyl thiolactate. CAS 19788-49-9; FEMA 3279; EINECS 243-314-5;EC-Flavis 14.023; JECFA 552; Japanese-listed 760; and also approvedin China, Mexico, Korea, and Russia. Nature-identical: in grape andmelon. Description: alliaceous, vegetable, meaty notes; and tropical indilution. Useful in tropical fruit flavours such as durian and mango; andas a ripe fruit note in pineapple, peach and grape; also as a vegetablenuance in meat/onion, savoury and coffee, at 0.005 to 0.2ppm.

2-Acetoxybutan-3-one; Acetyl methyl carbinyl acetate; AMCacetate; Acetoin acetate; sec-Butan-3-onyl acetate. CAS 4906-24-5;FEMA 3526; CoE 608; EC-Flavis 09.186; JECFA 406; also approved in

Japan, Korea, Mexico, and Russia. Nature-identical: in wine.Description; sweet creamy buttery odour; with a sweet fruit, grape, winetaste. Used in fruit and dairy flavours, at up to 10ppm.

O

SH

O

OO

O

O

S H

O

2,6-Dimethylpyrazine; 2,6-Dimethyl-1,4-diazine has just beenadded to the range of pyrazines offered. CAS 108-50-9; FEMA 3273;EINECS 203-589-4; CoE 2211; EC-Flavis 14.021; JECFA 767; andapproved for use in China, Japan, Korea, Mexico, and Russia. Widely

reported nature-identical: in baked potato, cocoa, coffee, corn (maize),krill, liquorice, mushroom, roast hazelnut, tamarind, tea, whiskey. Nuttycoffee, fried potato odour; roast nut, chocolate flavour. Used inchocolate, coffee, meat, roast nut flavours, at 0.05-10ppm.

N

N

Methyl mercaptan; Methanethiol - is a gas, transported in pressurised cylinders or tanks. Smallquantities are best supplied as solutions, in PG, Triethyl citrate, and Triacetin, to facilitate in thehandling of such an intensely odorous material. CAS 74-93-1; FEMA 2716; EINECS 200-822-1; JECFA508; EC-Flavis 12.003; and also approved in China, Japan, Korea, Mexico, Russia. Nature-identical:widely reported, in beer, Brussels sprouts, cabbage, cheddar cheese, coffee, cooked cauliflower,durian, fish, garlic, onion, potato, strawberry, wheat bread. Intense odour of "rotting cabbage; cheesy,vegetative, meaty, coffee notes, on great dilution. Used at 0.005-1ppm.

Propyl 2-mercaptopropionate; propyl 2-sulfanylpropanoate. CAS19788-50-2; FEMA 4207; JECFA 1667; EC-Flavis 12.267; and alsoapproved in Korea and Mexico. Artificial: not reported found in nature.

Description: ripe-fruity, tropical; strawberry in dilution. A ripe tropicalfruit note for soft fruit flavours, used at 1ppm.


12/12

Treatt is a world-leading, independent ingredients supplier to the flavour

and fragrance industries. It also supplies products to food, beverage,

soap, perfumery, cosmetic and pharmaceutical companies.

Treatt manufactures and supplies a vast range of products, from

essential oils and natural fractions to high impact specialty aroma

chemicals, including nitrogen and sulphur chemicals.

Earthoil, a subsidiary of Treatt, supplies organically-certified fixed, seed

and vegetable oils and essential oils and other natural extracts.

We look forward to your enquiries on the specific items covered in this

report as well to our extensive range of flavor, fragrance and cosmeticingredients. We hope to serve your needs soon.

www.treatt.com

www.earthoil.co.uk

June 2010 Market Report

Documents