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Ever wonder what drives essential oil prices?
November 27, 2016
Essential oil prices are much like most agriculture and market prices are dictated by crop yield, weather, and demand.
MARKET REPORT NOVEMBER 2016
The following report contains updates on the current trends in production and availability of the most in-demand Essential Oils and Raw Materials sourced from around the globe.
Frankincense is collected in the wild and abundance of frankincense trees are in rapid decline due to over tapping for resin, which decreases the germination success of the next generation of seeds. Frankincense is not a plantation crop as of yet and until harvest takes place, information on market status is limited. Due to decline in tree populations, it can be expected that prices for Frankincense Oil will be firm and rising.
China dominates the eucalyptus market exporting 80% of Eucalyptus globulus. Prices are firm as growing conditions are not favorable in the main growing part of China, Yunnan. New Eucalyptus Oil should be hitting the market in late November/early December which may change the pricing dynamics.
Prices have been increasing for Geranium Oil from Egypt. Planting of geranium has begun now, for harvest in June. Stock availability is good and reasons for the price increases are unclear at this time. It may be related to the exchange rate between Egyptian and US currency. Prices will likely remain firm until the next harvest in 2017. After this point prices could lower and stabilise depending on decisions regarding floating the Egyptian currency. Geranium production in China is expected to be low, similar to 2015's production. This will likely be keeping Chinese Geranium Oil prices firm and increasing.
The vanilla market is an extremely volatile one. Currently, Madagascar and Indonesia produce the vast majority of vanilla. In 2015 Madagascar had experienced poor yield. With limited supply and high demand, prices for vanilla had jumped drastically. Other countries that produce vanilla have mirrored the high prices put forth by Madagascar. This has caused unsustainably high market prices. It takes 4 years to produce a commercial vanilla crop, and fluctuations in pricing and availability are influenced by the abundance of growers who step into and pull out of the vanilla market, along with weather conditions. It is unclear how long the high Vanilla Oil prices will continue but the crop for 2016 is more abundant which will hopefully lessen the pricing despite efforts by middlemen and investors to hoard beans from the market to keep pricing high. Unfortunately, it is not the farmers who directly benefit from increased pricing. Increasing demand for un-ripened vanilla bean is causing faster sell out of resources to make up for the scarcity in the market caused by the low 2015 supply. Quality of much of the vanilla suffers in times of sky-rocketing prices. This is because beans are picked before maturity; when they are green rather than yellow, to bring the vanilla to market for buyers who are in a hurry to secure the inventory. This hinders the flavour development of the beans, producing a lesser quality and quantity of cured vanilla. Curers of vanilla beans are taking short cuts with new equipment to partially cure the beans rapidly. The partially cured beans are then vacuum packed in order to make vanilla available when the time is right to frantic buyers who need to fulfill contracts. Overall, prices remain high; however the market is predicted to collapse in the near future. The extreme high prices may suddenly fall or at least start to decline with increasing supply being made available in the market or with some buyers opting for artificial flavouring to supplement in the meantime.