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Spices: The first quarter of 1999 has been extremely dull in these usually interesting markets. We've seen the predictable results of weather phenomena like last fall's Hurricane Mitch on Central American crops like All-spice and Cardamom, with prices doubling and shortages manifest. This year's crop is certainly right but the real question is whether the trees will recover to produce a crop next fall at all. Less predictable are the human elements of market movement.

The Black Pepper market continues counter-intuitive with a reasonably large crop in India holding on to, and even adding to, last year's high prices. One would think a large crop and stable, if not slightly decreased, demand (from Asian countries hurt by the economic and currency collapse) would lead to lower prices. But Indian farmers, who sold their pepper early last year only to see exporters reap the benefits of higher prices later, are holding right to their produce this time around. Exporters who sold short based on their assessment of a large crop leading inevitably to lower prices are left scrambling for supply from the farmers as their delivery period comes around and farmers are holding firm for high prices. Every month this little economic war between the exporters and the farmers is replayed as the last date for the exporter to declare his pepper shipment comes inexorably around and the exporter is forced to pay up or default. There is an old saying in spice trading that the only thing an Indian trader likes better than making money is watching his competitor lose money, so there are lots of happy folks in Cochin nowadays.

White Pepper continues to be genuinely rather right with most stocks by now out of Indonesia and tightly held in Singapore by people with real money so prices remain high. The collapse of the Indonesian Rupiah really had little or no effect on this market. Intuitively, looking at no other factors, one would think that a situation in which a country's currency is worth about a third of what it was a while ago would lead to prices about two-thirds lower for a commodity produced almost exclusively in that country -- but this is not the case. (Please refer to your leather-bound copies of previous Market Report On Herbs & Spices (particularly last January) for a full discussion of the vagaries of white pepper trading, currencies, and the Indonesian political and economic scene.)

Other Indonesian products from the exotic and always-mysterious Spice Islands remain equally inexplicable. Nutmeg and Mace continue very scarce and expensive with the very recent harvesting reported fairly bad and Cassia (cinnamon) continues to sell at prices that haven't been this low in (probably) centuries (literally.)

Mediterranean spices like Laurel, Basil, Marjoram, and Oregano seem to be climbing out of the doldrums. We only had to wait for the too-cheap-for-too-long syndrome to manifest itself yet again and for farmers and gatherers to finally say (for instance), "What? Basil? Fennel? Marjoram? For that price? The hell with it -- I'll grow something else." Now the inevitable shortages and commensurate higher prices will prevail and there will be money in growing basil again -- and then the overproduction phase will come again. Around it goes....

Botanicals: Very interesting markets this quarter. Warehouses veritably overstocked with St. John's wort, Kava, Gingko, Echinacea and empty of almost anything else. Store shelves groaning under the weight of laxativediuretic anti-depressive memory-enhancing immune-system-boosting muscle-building prostate-shrinking weight-loss products with labels from major, minor and minuscule pharmaceutical and pseudo-pharmaceutical houses. Magazines, newspapers and TV boosting herbal products; magazines, newspapers and TV slamming herbal products. FDA in a tizzy. Consumers confused -- even more than usual. Your faithful correspondent confused too -- also even more than usual. Will the industry actually make it this time?

The glut of raw materials and finished product in U.S. warehouses is easily explained: over-projection and irrational exuberance. Over-projection of sales was easy and obvious just a few months ago; companies that saw a 30 or 40 or 50 percent increase in sales over a couple of months simply projected a continuation of that happy trend, forgetting that every consumer in America would have to buy their second bottle of St. John's wort or kava to make the projection prove out. This didn't happen that quickly and companies that have made commitments for property, merchandise, equipment, etc., and planned to finance that expansion from projected sales increases and profits may find problems instead if sales (and collections) don't pick up soon. These problems will trickle down from the stores to the manufacturers to the distributors to the importers to the growers (in the same proportions, probably, that profits trickle down in the good times.)

Supply will remain a long-term problem. Manufacturers should not be lulled by current oversupply of a few trendy items. There is a war in Europe as this is written that could threaten traditional supply lines for the herbs of classical European herbal medicine. The southern area of the Balkans has always been a low-cost supplier of almost all temperate- and Mediterranean-climate plants and the widespread availability of cheap peasant labor and familiarity of those rural laborers with the plants desired was unique. There has been, over the years, little competition for labor from industrialization in the southern Balkans, as there has been in the north and in other traditional supplying countries like Hungary, Czechoslovakia and Poland. Years ago, even while the Bosnian conflict raged, while Sarajevo was shelled daily and even while Croatia and Bosnia were "ethnically cleansed" through displacements, destruction, rape, torture and murder, out correspondents in the region told us that that little unpleasantness was nothing; the real war was coming and it was coming in Kosovo. If the war spreads, as is possible, maybe even likely, there could be a more widespread threat to supply of product from Albania, Greece, Bulgaria and even Turkey, as well as parts of former Yugoslavia like Kosovo, Montenegro, Bosnia and Macedonia.

Even without the war supply was becoming problematic as peasants turned to the cities for better-paying (or at least paying) occupations in countries that suddenly abandoned Communism for the unknowns of capitalism. While most of these plants are not truly unique to the region, the history of wildcrafting and widespread knowledge among the peasantry may be. Certainly, supply will be reduced and prices will probably rise. Care and patience will be required in these markets -- care in purchasing quality botanicals from reputable producers, exporters, and importers and patience in letting market forces work.

The industry could not have had better press and exposure a few months ago. Has something gone wrong?

One thing struck your correspondent as I wandered through the recent Anaheim extravaganza (anonymously, with my usual phony badge, of course, so that all the folks who would probably like to strike your correspondent couldn't.): This staff is being marketed like Excedrin(R). Now if a consumer has a headache and takes two Excedrins and a hall hour later still has a headache only two thoughts occur to him:

1." Oh my God, I have a brain tumor!"...or

2. "This damn stuff doesn't work -- I'll try a Tylenol(R) instead."

Well, herbal products don't work that way, nor should they be sold as if they do. They generally require more of a long-term commitment from a consumer than downing two pills with a glass of water, but it doesn't seem to me that the industry is making this clear to consumers and the disappointment of those consumers could devastate the industry. Americans are an impatient people, not given to leniency with products they find unfulfilling of an implied promise. Education is required -- and quickly. St. John's Wort is not Prozac. You may still catch a cold even if you take a pound of Echinacea. Eating less is still a better way to lose weight than ingesting silly quantities of ephedra and garlic may actually lower lipid levels in your bloodstream but a steady diet of caffeine, cholesterol and Camels(R) will probably still lead to vascular problems.

The industry is at stage two in its relationship with America -- we've got their attention through some extremely fortuitous press coverage (and lots of hard work by Blumenthal, McCaleb, et al.) but lots of serious education, research, public relations and a dollop of political clout is needed to place a system of herbal medicine firmly in the health care system of the United States. The industry has products with several thousand years' history of safe and efficacious usage and manufacturing and delivery systems to insure clean, uniform production. There is a good chance this time but responsible marketing and responsible products are paramount in the near (and far) future to take advantage of this opportunity.

Potpourri Items: Same as last -- qualities good, prices cheap, exporters desperate to sell. Will this worm turn? Probably. And probably soon. If anyone cares they should buy now or I'll be forced to remove this section from the Market Report forever! Remember, you've been warned!

Article copyright American Botanical Council.


By Peter Landes