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Indonesian Market Update Q2 2020

As with most parts of the world Indonesia has also seen the economic impact of Covid-19. Lockdown orders, currency collapses and a lack of available logistic solutions for exports have all made for a turbulent couple of months. When we talk about Indonesia we usually starts with the trials and tribulations of Mother Nature but she had to take a back seat recently. That said we are still seeing the impact of a late rainy season which has pushed back the usual harvesting periods. We are also in the period of Ramadan so activities are lo as often farmers focus on rice crops. The end of Ramadan (Idul Fitri) this year falls on Sunday 24th May. Following this and depending on the Covid restrictions we may see more activity.

The collapse of the local currency late March made export pricing significantly cheaper for a few weeks which masked any movement of prices at a local level. Some prudent buyers jumped on this opportunity to secure fresh material and today’s exchange rates are still relatively attractive compared to recent norms.

The currency collapse late March reduced export prices as much as 20%

Patchouli

Prices have been slowly increasing locally. New season material is yet to come online after the late rainy season meant many new plantings were delayed until December (2019) and this January. It is thought that following Idul Fitri there will be activity with some local prices easing by the end of June. As with all products, how the exchange rates impact export pricing is something outside our control.

Clove oils

Local prices have risen 10+% in recent weeks but this hasn’t been noticed too much due to the advantageous exchange rates. Following Idul Fitri the clove bud season will start and by August the focus will be on leaves. At this time we can expect to see some better prices.

Indonesia is the biggest producer for Clove Oil accounting for over 70% of global production. It is also AAI’s largest product as it represents between 60-70% of their total output of essential oils.

Nutmeg

The typical February-March harvest was in part damaged by excessive rains reducing the overall output. As a result the availability of material is low and local prices have risen. Again the exchange rates are masking the export prices.

Vetiver oil

Generally the local prices remain stable for some months with the only fluctuations seen as a result of the exchange rates.  Prices are low when compared to recent historical levels and other origins.

Citronella Oil

Java farmers are more focused on rice crops during these times but thanks to the investments last year to plant citronella on other islands AAI have managed to maintain good supplies when others haven’t.  Java prices have seen some increases but the AAI investment has allowed for more stability for their clients.

Elsewhere Ginger demands have been significantly higher during the Covid-19 period as it is used in local medicinal drinks resulting in higher prices. Massoia supplies are low but so to is global demand so prices remain stable. Prices are also stable on Cinnamon Bark, Cajeput and Cananga.

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