Certain Increase In Essential Oil Prices

[Guest guest]

Hi y'all,

 

A few days ago I made a post to the group and down in the body of that

post I mentioned that climate change this year and last has had an

impact on essential oils prices .. for those who might not have read

down that far I will mention it again now, but I'll not just hit on

climate change .. I'll cover a few other conditions that drive prices

and I'll do it in a drawn out way because its important for folks to

understand the reasons. If they understand .. and plan .. they'll have

less wrinkles in their faces and in their pocketbooks. ;-)

 

The below is part of what I had intended to pitch at the Austin AT

Shindig .. which, unfortunately (for me and mine .. at least) ;-) I

was unable to attend due to a situation beyond my control. This is a

long post .. those who have known me for almost 14 years .. and some

who have known me for a shorter period .. know that I rarely make short

posts. ;-) I believe that short posts on important subjects are a

waste of time to write or read because they generate more questions and

a lot of confusion. This group is in some ways is like a round table

discussion; lots of good info is put out but there's also a lot of

small talk similar to that one would expect at a cocktail party or a

church picnic. There is a time for small talk but it generally does

little except help folks to understand personalities .. those who have

known me for a long time know my personality .. some of the new folks

might never know me cause its highly unlikely that I'll be around this

industry that many more years .. a couple at the most cause its time I

sat back and enjoyed the lifestyle I have missed for the last 20 years.

 

Its easy to forget that the entire chain of EO production is driven not

only by climatic conditions but also by increased transport, labor and

other overhead costs .. as well as normal inflation. Employees expect

to receive pay hikes each year or they get behind normal inflation.

 

But .. there are other conditions that we might not ever think about.

These conditions are the producers interpretations or forecasts of

future profits .. based on production and sales costs .. demands.

 

In the early 90s my Turkish company dealt in commodity trading .. I had

a full time analyst to keep up with current/future prices. We must

look at EO as being agricultural commodities .. prices will go up or

drop based on many conditions/variables .. those who follow trends for

wheat, sun flower seeds, soybeans and even non-agricultural commodities

like Portland Cement and copper, etc., know that one can lose a lot of

money on 10 metric tons of product if they over/under estimate prices.

 

Farming (and EO production) is a commodities business and many farmers

and EO producers bite the dust each year due to miscalculations of

prices or a surprise imbalance in production costs vs sales prices ..

which is driven by supply/demand. The days are gone where farmers

simply plant and sale .. they (like the EO producers) must be experts

in economics and they must follow the futures markets as best as they

can and still this can catch a lot of them short.

 

Major sales (in metric tons) of Corn .. for example .. have increased

20-25% in the last year due to new markets for production of fuels ..

demand for soybeans, on the other hand .. has decreased in relation to

that of corn so farmers are putting their land in corn. This trade off

can have a MAJOR impact on prices at the feed lot and then at the

supermarket if professional trading groups and government and

international agencies don't get involved and attempt to balance the

markets. Sometimes these efforts fail .. its a constant balancing

act .. one can only produce one crop at a time on a piece of ground and

when markets swing its inevitable that they will be followed by

surpluses or shortages of certain other crops.

 

Likely it is that 2 years from now demand for Soybeans will be greater

than the supply .. the result will be increased cost of Soybeans and

some farmers will jump on that wagon for at least a year .. maybe 2.

Tennessee, for example, is now in the midst of a pilot project for

production of diesel fuel from Soybeans .. which is good from a point

of reducing dependence on fossil fuels as well as to bring about some

balance in the varieties of crops grown in the area .. my county and

the adjoining county will likely have a factory for the production of

Soybean diesel fuel in the next year or so .. maybe less. If we then

have an increase in the production of soybeans we will have a decrease

in production of corn .. which will bring us back to the problem that

they were attempting to repair in the first place. Look for this swing

to also affect the volume of production of many aromatic plants.

 

Where I am going is .. we can expect to pay more for most essential

oils produced from the present 2007 harvest/distillation and almost

certainly from the 2008 crop. We will see minor price increases in

retail sizes and more significant increases in bulk/wholesale prices.

Those sellers who do not reflect these price increases are not paying

enough attention to business. If they are selling now based on their

last purchase costs rather than their replacement costs .. they'll take

a hit for sure. If they are large enough they'll survive .. if they

are financing an expensive hobby they will likely be forced to close

shop.

 

Those who are astute business folks .. but still keep the same prices

they've had in the past .. bear watching. Reason is .. they've either

started purchasing cheaper priced/cheaper quality oils from geographic

Origins that are not favored for a particular oil .. or they might be

selling " stretched " or " manipulated " oils.

 

I (and most responsible/credible sellers) pay a lot of attention to the

international EO market .. similar to Wall Street paying attention to

future profits/losses of various companies. I have begun making a

detailed analysis of my " replacement costs " and in many cases they are

going to be higher .. most bulk sellers have already accomplished this

task but I'm still unpacking boxes from my move so I'm a bit behind the

power curve. I receive intel reports from various agencies as well as

communicate with many international producers and its certain that

world wide, climate change and forecasts for supply/demand have already

had a negative impact on most EO prices this year .. too much or not

enough rain has drastically affected prices .. Turkish and Bulgarian

Rose Otto production this year (for example) was 30-35% below last year

and the price doubled .. the Turks could not keep up with demand from

the perfumeries and there is ABSOLUTELY no bulk Turkish Rose Otto to be

purchased right now .. I expect that there is no totally pure Bulgarian

bulk Rose Otto available either because if the Turks were not able to

meet demands for their product .. logic tells us that buyers who might

have previously included Turkish in their formulas were forced to turn

to Bulgarian .. or vice versa. I am also noticing many other EO that

are now selling at premium prices.

 

Will the Turks plant more Damask Rose bushes? Maybe. Its a gamble

because its not the major crop even in the Rose Valley of Isparta ..

its a cash crop grown in little corners of many farms that primarily

depend on subsistence farming to survive .. so its a big gamble because

climate change can not only have a negative impact on this cash crop

but also it can impact the supper table when one devotes land used to

produce food for their family to a risky cash crop. My opinion is that

there will be very little change in the acreage of Damask Roses grown

in Isparta, Turkey .. or in Kazan, Bulgaria because the Bulgarians are

even now facing a labor problem since joining the EU. Even though Rose

Otto prices have almost doubled since last year I would buy a few kg

now if I could because I believe they will increase more next year.

 

In addition to making this post to inform folks on this list about what

I believe is going down .. I will be using it to explain to many buyers

who are now asking me for kilos of this or that oil .. why I can't

provide them right now. I will be adjusting my prices this week, just

as most wise bulk/wholesale dealers have already done.

 

I could drag this out with a lot more justification for the position I

have taken above but I think it might bore folks .. those who accept my

position as written won't be shocked to see prices increase world wide

and those who don't accept this will accept it .. in time. ;-)

 

Y'all have a good one .. and keep smiling. :-)

 

Butch http://www.AV-AT.com

 

AROMATIC JOURNEYS: If you would like to take a trip through the Rose

Fields and Stills of Turkey, go to the following URLs ...

 

My writings on distillation of Rose Otto can be found at URL

http://www.av-at.com/distillation/rosadamascena1.html

 

Here is a URL with lots of good photos of wild aromatic plants of Turkey

http://www.av-at.com/stuff/triptoturkey.html

 

Martin Watt visited the Turkish Rose Fields in Summer 2000 - then the

following article on his trip was published in the Winter 2000 edition

of the European magazine " Aromatica " .

http://www.aromamedical.com/articles/rosedistillation.htm