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Market Report.
ISSUE:
Page:
69
SPICES: We've seen lots of action in Spices during this period, following several dull, featureless quarters of relative inactivity in these usually volatile markets. Faithful readers will recall our discussion some time ago of the governing principle ruling these unsophisticated markets throughout their modern history: a commodity that is too cheap for too long inevitably will become short in supply and rise enough in price to make production once again worthwhile. It will then rise too far leading to overproduction and the whole cycle will start again. This is precisely demonstrated once again by huge price increases in many spices, due only to shortages in supply and not increased demand, which still remains fairly stable. We have seen White Pepper increase about 80 percent in price this year and Black Pepper has moved up very sharply recently.

Coriander is tight and relatively expensive this year, too, and makes a good example to demonstrate our thesis. Coriander is a fairly easy crop to grow and is a worldwide crop. The U.S. imports Coriander from Canada, Morocco, Bulgaria, Romania, Russia, India, and Egypt -- widely diverse locations with vastly different climates, both physical and economic -- yet this commodity is in short supply from everywhere this year. The main factor leading to this shortage is the "too cheap for too long" syndrome. Farmers this year, almost universally, decided that Coriander had become unprofitable and were tired of losing money cultivating it. Moreover, Wheat, a crop that can be grown in the same climatic conditions as Coriander, ran up in price quite nicely during the past year and so, apparently, almost every farmer decided to plant Wheat instead. One doesn't need an economics degree to calculate the consequences of this action: Coriander rises in price due to shortage;Wheat sinks in pri ce due to increased supply. One further effect: as buyers of Coriander (a relatively cheap but necessary ingredient in various prepared foods, tobacco, and liquor flavorings) get word of an imminent shortage, they rush to cover their annual requirements. The worst thing that can happen to a purchasing agent for a manufacturing concern is to go to his/her boss with the news that he/she cannot obtain an ingredient necessary for manufacturing a (theoretically lucrative) product. Probably the second worst is to overpay for that ingredient, but that evil certainly pales in comparison to not being able to manufacture a product at all for lack of a simple ingredient. Therefore, buyers bid up prices for diminishingly available supplies, prices rise to unheard-of heights, farmers once again plant too much of the crop and the cycle begins once again. And these are in markets with relatively inelastic demand -- people tend not to use less Coriander when prices are high, nor do they use more when prices are cheap. One need only follow the supply situation to predict price fluctuations.

BOTANICALS: In these markets both supply and demand play important roles in price and availability calculations and one must also throw considerations of vastly differing quality into the equation. Spices, at least, are more-or-less commodity items, i.e., one 15-ton lot of Malabar Black Pepper is fairly interchangeable with another. This is certainly not true of Echinacea, Goldenseal, Cat's Claw, or Burdock Root.

Prices for almost all botanicals are rising due to increased demand and decreased availability of decent quality product. As botanical buyers in the U.S. become more sophisticated in their quality control and as botanical medicine becomes more available, more popular, and, inevitably, more scrutinized in this country, quality considerations must become paramount or this new groundswell in demand will grind to a halt as consumers (and FDA) become disillusioned with both the inactivity of their products and the lack of ability of the industry to police itself. We are presented with a new climate and vast new opportunities to finally put botanical medicine on the health-care map but quality of product must be paramount. Given these parameters it must be stated that quality botanicals are scarce and likely to remain so for the foreseeable future. Supply lines are tenuous since the collapse of the Communist botanical infrastructure in the Eastern European countries and cases of bad, dirty, and sometimes wrong material being shipped or outright defaults on contracts by shippers are increasing. This situation will improve but vigilance as to identification, activity, cleanliness, origin, timely harvesting, proper drying, appropriate storage, etc., is important.

An illustrative (and, to me, fascinating) story: a 10-year-old investigation of a particular plant native to a tropical country which has shown ability to kill the hepatitis-B virus continues. This plant in native form conclusively demonstrated this activity but was thought by a large American corporation to be too uncontrolled in its native habitat to deal with; consequently a supply of seed was brought to an area of South Florida with a comparable climate and the plant was carefully cultivated under controlled conditions. It was monitored throughout its growth and lovingly harvested for pharmaceutical use, whereupon it showed absolutely no activity whatever. It is now postulated that the plant in its native tropical environment is subjected to some natural stress (i.e., insect attack, trauma from a plant disease) that causes it, in self defense, to produce some compound with the desired activity, that is, the ability to kill the hepatitis-B virus. No such affront to the plant existed in South Florida and consequently the plant as produced under such horticulturally controlled conditions was completely useless. Every plant is an extremely complex living organism, as integral to and as much a product of its environment as any other organism, maybe more so. So origin may be as important as any other quality consideration.

This is also an infant industry in many respects -- "hot" botanicals come and go with rapidity. It is important to provide consumers with good material, especially in the early stages of an upswing in demand, to demonstrate the industry's ability to bring responsible, safe, and efficacious product to market.

POTPOURRI INGREDIENTS: Very dull markets. Lots of good material available at very advantageous prices. Will the "too cheap for too long" rule prevail here? Let's wait and see!

Article copyright American Botanical Council.

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By Peter Landes