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Indonesian Clove Market Board Axed.
In January of this year, the International Monetary Fund (IMF), in a move to restore confidence in the economy of Indonesia by deregulation of domestic trade in all agricultural products, called for the elimination of the Clove Bufferstock and Marketing Board (known as BPPC) by June 1998.

Much of Indonesia's clove (Syzygium aromaticum (L.) Merr. & Perry, Myrtaceae) crop is used to flavor kretek, the popular clove cigarettes. For years, clove farmers in Java were poor, selling directly to local cooperatives or traders who would help store and dry the cloves, then sell them to the cigarette producers. A group of Indonesian businessmen and speculators who tried to comer the market and failed went directly to former President Suharto's son, Hutomo Manfdala Putra, known as Tommy, for help and proposed that the government require clove cigarette manufacturers to buy all their cloves from BPPC. They had nearly 17,000 tons of cloves and Tommy had the clout.

In theory BPPC was to charge the cigarette companies more for the cloves and thus pay higher prices to the farmers. In 1990, BPPC was awarded an exclusive license for importation and sale of cloves and the Bank of Indonesia advanced the group $325 million in credits and loans. The price of cloves skyrocketed, farmers grew more and the result was an oversupply. In recent years the board became more of a "kickback situation," as family members of President Suharto took turns battling allegations of corruption.

The kretek industry generates about $2 billion a year in revenue and employs 4 million Indonesians one way or another from raising the crops to hand rolling the cigarettes. About five years ago, the country became self- sufficient in clove production, but in 1997 the island nation was hit by a series of three disasters.

First, major clove areas were hit by forest fires, then came a drought and, finally, torrential rainstorms soaked the island. The country's monetary crisis has put a hold on purchase of the 8,000 to 12,000 tons of cloves Indonesia was ready to buy to fill in the shortfall.

Indonesia controls the world market in cloves as the largest user of this item. When Indonesia buys cloves in the world market prices rise precipitously. When Indonesia doesn't buy (or even worse, actually sells), clove prices drop dramatically.

The last time Indonesia had a serious clove crop failure (1981) clove prices in New York topped out at about $5.38/lb. Currently the price is about $.75/lb. so the difference between Indonesia's importing or not importing cloves can be that dramatic.

[Chemical Market Reporter. February 2, 1998. Farley M. A Familiar Scent of Monopoly. Los Angeles Times. March 21, 1998.

Landes P. KHL Flavors, Inc. Personal communication. April 28, 1998.]

Article copyright American Botanical Council.


By Peter Landes