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Treatt: Raw material prices weakening more slowly than anticipated

By Elaine Watson , 09-Aug-2011

The expected weakening of raw material prices this summer has been slower than expected, making life very unpredictable for buyers in the flavors and fragrances industry, according to one leading supplier.

In its July market report, Treatt - which supplies raw materials to flavor compounders and food and beverage manufacturers – said it had become “increasingly evident that the anticipated weakening of raw material prices has been slower arriving than originally thought”.

It added: “Many buyers within the flavors and fragrances industry continue to face unpredictable conditions.

"The mint market is a prime example of inconsistencies between expected and actual market tendencies, whereby the arrival of a bumper crop has been superseded by the influence of speculation driving prices to even higher levels.

"This trend is further exacerbated with buyers having previously delayed entering the market until this time expecting to receive lower prices."

Meanwhile, continued strong demand in China, India, Brazil, Indonesia and Russia; adverse weather patterns; and the “continued trend of hand to mouth purchasing keeping inventory levels at a minimal throughout the supply chain”, were also keeper prices for several other flavor ingredients firmer than previously anticipated.

Strawberries: A ’difficult situation’

Drilling down into specifics, a cold spring in the north west of the US leading to delayed crops, coupled with a sharp rise in demand, meant strawberry prices in particular had not come down, said Treatt, which supplies clear distillates from strawberries for beverages and dairy products.

“Huge increases in demand have led to price wars amongst farmers and many regular customers have either been pushed out or held at bay, while large companies have been able to pay premium prices in order to ensure supply. We expect the market to calm in the coming weeks, but it is a difficult situation at the moment."

Bitter orange oil market ‘very firm’

While bitter orange oil production was underway in Brazil, there was limited availability to purchase, noted Treatt.

“The market has risen steeply from last year. During the last five to six years, the bitter orange oil business has been quiet as many orchards in Brazil have been destroyed.

“Demand over the past year has increased significantly and the few processors for bitter orange are struggling to keep up. This noticeably short supply will continue to keep this market very firm.”

Tangerine oil supplies remain tight

Finally, tangerine oils supplies would remain tight throughout 2011, it predicted: “Very little inventory of tangerine is available despite a very good Florida crop which has recently finished processing. The fruit in Mexico is on the trees, but production remains more than five months away.

“With no significant production of oil in China this past season, the market has been and will continue to remain firm for the foreseeable future.”

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