Spices: Faithful readers will recall last issue's discussion of a White Pepper/Black Pepper commodity straddle, wherein the trader plays for the differential between two prices of two related commodities that are seemingly out of sync with each other. It matters little whether the overall market for these related commodities rises or falls: the play is only for the price difference between the two. As discussed, the difference in price between White Pepper and Black Pepper has narrowed somewhat, earning a small profit for our hypothetical trader who sold White Pepper short at $1.70/lb. and bought Black Pepper at $0.85/lb. Currently, White can be purchased for about $1.25/lb. and Black can be sold for about $.80/lb., so the $0.85 differential has narrowed to about $0.45, earning a profit of $0.40/lb. on the total position (less commissions, of course).

Really faithful readers will remember our prior recommendation of a position in Nutmeg and Mace, which in classic third-world commodity pricing structure were too cheap for too long. This condition almost inevitably leads (eventually) to a violent price rise as producers stop producing and stocks (often too-large stocks) are slowly but surely depleted. In the case or' Nutmeg and Mace collusion between Dutch traders and Indonesian producers seems to have helped the situation along, too. At any rate, the prices of these items currently have almost doubled with no relief in sight. But, fear not, the corollary to the above-mentioned situation is inevitable: eventually prices will be too expensive for too long, leading to overproduction and a corresponding violent price fall.

Other spices remain rather featureless. As mentioned last, Basil and Marjoram have increased in price. Cardamom has fallen from last year's lofty levels and Cloves remain incredibly cheap. Oregano has risen with one large U.S. spice company buying most of the Turkish crop. Cassia seems poised for a move upward and early coverage of requirements for fall demand would probably be prudent. Cumin Seed has leveled off, but market manipulation in this commodity makes the situation uncallable.

Botanicals: Inventories continue at very low levels. Eastern European crops of leaves and herbs were normal but roots remain scarce. Hibiscus is creeping upward after the very low prices of last year and shortages are probably imminent. Chamomile, too, is up, as is Calendula. We are also expecting price rises in Mints from Egypt and Europe this year. Coverage should definitely be extended.

Potpourri Ingredients: This market has matured greatly in the past few seasons. Suppliers are more reliable and have a better idea of qualities required here and cutthroat competition has slackened somewhat, with slight price rises accompanying that slackening. As some items become more-or-less "standard" in this business, they are more reliably obtained from a variety of sources and prices approach "normal" levels, i.e., the cost of production and transportation plus a reasonable profit to keep the producer and shipper interested and performing well. These items should be well-supplied this year. Still, nature can play tricks on agricultural markets; this year's crop of Red Roses, a standard item in potpourri, is very late and very small in spite of best efforts of shippers to supply the market. A sizable price rise is inevitable.

Article copyright American Botanical Council.

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By Peter Landes