Patchouli and Other EO Price Increases

[Guest guest]

Hi Patty,

 

Chris already answered this one .. but I'll add a bit. EO prices are driven

by pretty much the same variables as are other commodity prices.

Transportation costs, production costs, supply vs demand .. which is driven

by many things .. not the least being climate change and natural disasters

... and exchange rates. But we must also include politics and ethics.

 

 

> Hi Butch and whomever my have some input here.

> I'm in need of some patchouli essential oil or at

> least I was until I saw the huge jump in price.

>

 

I can't keep up with the price changes on Patchouli .. they are moving too

quickly. I bought 10 kilos and adjusted my prices (upward) around 2 weeks

ago .. that oil went out the door like a scalded dawg and I ordered more ..

the price has risen again. I then learned that the price has risen even as

I was selling the 10 kilos for the old price .. that's why it went out

the door so fast.

 

 

 

> What's going on with with this eo? Granted, it has

> been a couple of years since I purchased some but it

> has gone through the roof making it on the

> unaffordable side.

>

 

Patch is going up .. where it will stabilize this year is unknown. Lemme

get general for a minute then I will be a bit more specific on Patch.

 

Chris mentioned climate changes and other factors and she was right on all

of them .. the causes are (in some cases) merely excuses to gouge the market

... I believe that is the case with Patchouli now .. same as it was for

Vanilla Absolute for the last few years.

 

Transportation Costs: The increase in price of oil to $90 a barrel has an

impact on transportation costs. I wrote before where I had paid like 250%

more to send a sea van from Turkey. But increased cost of oil can be more

of an excuse than a valid reason because the cost of fuel is not steady ..

though some price increases will be steady .. folks pay them and the product

sells and the prices remain high. From day to day the price of gas at the

pump fluctuates 10-15 cents per gallon .. this is based on speculation .. on

the Future's Market. Oil prices are speculative .. same as corn, wheat, soy

beans, Portland Cement, pork bellies, etc. Prices can fluctuate wildly

based on international events. Last week, the Turkish Parliament approved a

one year window for permission to the military to go into Northern Iraq

after the Kurdish Terrorist Organization (PKK) that has been attacking

Turkey from that area .. the military has not crossed the border .. probably

won't cross it .. but the price of oil began to climb. The reasons for

Turkey's decision are based on U.S. domestic polices .. just as jerks in the

oil market have occurred when we rattle our sabers at Iran. The increased

costs of domestic shipping or prices at the gas pump are not always based

on a real increase in the cost of fuel .. in many cases they are merely an

excuse to increase profits. But .. they are a reality and they have an

accordion effect .. like traffic slowing from 65 MPH to 35 MPH can cause

those at the end of a one mile stretch to have to drive 10 MPH. A 10%

increase in fuel costs can result in a 50% or more cost for a product

because along the line (from raw materials to finished product) prices will

increase to cover the 10% increase.

 

Currency Exchange Rates: I began this with a quarter page explanation on

this .. but after I read it I was bored .. so I cut it back. Hold down the

applause. ;-) Exchange rates are the price of one currency in terms of

another. They are determined mainly by supply and demand, export/import

trade and flow of capital. Look at currency as you would another commodity

and you get the picture. Rates constantly shift because investors are

looking for the best returns on their money. Rates are driven by conditions

so complicated than even the experts disagree on what formula(s) should be

used. Consumer Price Index is one factor. The cost of goods (including

food) and services in the USA is lower than in Europe .. but the US Dollar

(USD) is at an all time low now against the Euro .. 1 EUR = 1.42635 USD.

Is this a valid exchange rate? Maybe not but its a reality we have to live

with. The USD is OK when exchanges are made in many Third World countries

and the lion's share of essential oils come from Third World and Emerging

Market countries .. so one might wonder why essential oil from Indonesia or

Madagascar costs more now. Its because these two countries have chosen to

use the Euro as a basis for exchange.

 

Since creation of the Republic of Turkey the USD was used as a base for

determining exchange rates. Hyper inflation was a norm in Turkey for many

years .. 100% plus I saw many years. When I first went there in 1964 the

rate was 1 USD = 9 Turkish Lira (TL) .. when I left in May 2007 it was the

equivalent of 1 USD = 1,560,000 TL (in January 04 the Turks dropped six

zeros .. one million became one .. so one USD is worth 1.211 Turkish Lira

(TL) today.. when I opened my company in Turkey (in 1995) it was 1 USD =

1.750 TL .. when I closed it in 2004 it was 1 USD = 1.450 TL .. I got out of

Turkey just in time. ;-) The Euro exchange rate now is 1 Eur = 1.728 TL

... around 50% higher than it was in the late 90s.

 

A low USD can hurt European exports .. and assist US exports. Americans

must pay more for European products but they can get ours for less .. on

paper. Keep in mind that the low USD does not really have much impact on US

domestic prices .. it affects international business dealings and the stock

market .. but it does not always negatively impact the US stock market .. it

can increase certain stock values. Exchange rates generally impact the

cost of goods that are traded internationally and they affect competition

between imports and domestic production .. exporters often absorb the

exchange rate changes by taking less profit on single exports but making

more exports. Domestic consumers take no notice of exchange rates if they

buy domestic goods .. but that is not a viable option when we are buying

essential oils.

 

This year, Europeans and Americans will pay less for US Orange Juice so we

will sell more .. Americans will pay more for French Wine so we will buy

less. And we will pay more for essential oils from a country that uses the

Euro exchange rate because it takes more USD to purchase 1 Euro. The

international price of oil (fuel for transportation) is still based on the

USD .. America has the cheapest fuel costs in the world (outside of the

Middle East) .. but European governments tax their fuel at wild and crazy

rates. Whether exchange rates are superficial or not is not important ..

they are a reality and they will have as much of an impact on the increased

cost of essential oils as will fuel costs.

 

If the USD is at an all time low against the Euro .. why then are essential

oils prices generally lower in the USA than they are in Europe? I believe

it is because for most EO .. the USA is the biggest market and the prices

producers can get are driven by variables in the international market other

than exchange rates .. today most producers are making less profit per kilo

but they are selling more product.

 

Europeans/Canadians/Australians, etc., today can get great deals on US

products .. to include essential oils sold from America even though

the Origin is elsewhere. The reason is .. because they can buy more USD

with fewer Euro Another reason is because of taxation .. US import taxes

for products from most countries is low .. US export taxes are almost

nonexistent .. and for some countries payment of import taxes to bring in US

goods can be lower than payment of their own domestic taxes.

 

 

If the above is confusing .. consider that it is a simplification of a far

more complicated system. Investment advisers spend lots of time juggling

the figures and they don't always get it right. ;-)

 

 

Climate Change: We have lived with this for years and will continue to do

so. Even back when I was dealing with commodities I saw the price of

sunflower seeds (for example) fluctuate as much as 50% in one season.

There will be good years and bad years .. the 2007 crop year was a bad one

in most countries. Typhoons, forest fires, too much or not enough rain, too

hot or too cold, etc., have had a real negative impact on supply of

agricultural/aromatic commodities .. both in the USA and abroad.

 

Ethics and Pricing: Competition laws have been around in one form or

another for centuries and they are generally accepted as being global

standards today .. the US Antitrust Laws and the European Union Competition

Laws are the most influential when it comes to exercising scrutiny in the

international market place. But they are not perfect and some countries

play games .. or allow their traders to play games. There is only so much

control the international market can enforce and that control depends on

open market conditions .. cartels and predatory pricing .. price gouging ..

over taxing exports and holding back of products .. all of these things can

upset the normal flow of goods in an open market system. But .. holding

back of products is not always an ethics or legal violation. Farmers who

raise a lot of grain normally have silos so they can store (hold back)

wheat, corn, rye, etc., during the harvest season and get a better price

later on. Same goes with taking cattle to the market.

 

 

I believe that price gouging was the reason for Vanilla Absolute being so

high the last few years. Around three years ago I stopped offering

Vanilla Bourbon Absolute (Vanilla planifolia) .. both my Retail and

Wholesale links have indicated Temporarily Out of Stock .. even though I

suppose 3 years is a bit more than Temporary. ;-) I have some in stock

now and it will be on the site .. along with some price changes .. in the

next few days.

 

For years the price of Vanilla Beans was stable .. then due to a series of

typhoons, and climate change and political instability, there was a shortage

and prices suddenly increased as much as 650% .. in 2004 they hit over $500

per kilo. These price increases caused many farmers to turn to Vanilla

Beans in lieu of other crops .. and in 2005 they found that there was an

oversupply .. prices dropped to around $45 per kilo. Because farmers in

Madagascar, Réunion, and the Comoros Islands had gambled on continuing high

prices .. they borrowed a lot of money. When the prices fell many of them

went broke. They lost homes and cars and even farms. However, when the

bottom fell out of the market .. the producers of Vanilla Absolute did NOT

lower their prices. The cost of Vanilla Absolute remained as high as it had

ever been. I refused to buy Vanilla Absolute because I believed what was

happening was price gouging .. and at the expense of little people who were

without representation .. or relief. So .. I offered no Vanilla Absolute in

crop years 2005 and 2006.

 

It is my opinion that MAYBE the price increases in Patchouli MIGHT be a

result of holding back product. The demand remains the same but supply is

short. For sure there is a major shortage of Patch this year due to

climate conditions and we could reasonably expect a 35% - 45% increase in

prices .. but even when that happens, normally there should be some

stabilization in prices .. Patch prices are still moving .. trying to

determine costs is like shooting at a moving target. Perhaps I am wrong

but I believe that growers are holding back product .. feeding it out to

exporters a little at a time so they can raise their prices and recoup more

of their losses. I have 10 more kilos of Patch incoming now but the price

has increased again .. its now over 65% higher than it was last year. Try

to purchase 10 kilos and 100 kilos and see if you can get a discount on the

larger order. I am sure you can not.

 

Coriander Seed oil is much higher now and the replacement cost of Haitian

Vetiver (which I sell) is at an all time high. This is (I think) a valid

increase because Haiti has had far too much rain since March and the crop

has been poor. We can expect an increase in Italian citrus oils due to

climate change and wild fires .. but I will continue to sell Italian

Bergamot, Lemon, Mandarin, Petitgrain and Blood Orange oils. Its up to the

buyers to determine if they would prefer to pay less money for less quality

... I will stick with what I think is the highest quality and I believe the

majority of my customers will do likewise. IF the prices for a particular

oil go REALLY crazy .. like we see with Corsican Helichrysum italicum ..

then I will not offer that oil from any source.

 

There are other price increases .. and they will affect all sellers so if we

should think that the price of an oil has become unaffordable then our

options are limited.

 

 

> Looks like I'll be keeping what I have dear just like

> my sandalwood eo.

>

 

The price of Mysore Sandalwood has increased but this is a recurring thing

... price fluctuates greatly on this product. I can remember when it was

$700 a kilo. ;-) Mysore Sandalwood prices are only driven by supply

temporarily .. based on domestic consumption in India. The main reason for

price increases is manipulation of taxes by the Indian government. Its a

long story but please don't believe those folks who write that there has

been no legitimate Mysore Sandalwood .. or even NO Mysore Sandalwood at all

... on the market for years. Both statements are pure Bovine Excrement!

 

Patti in Kenosha

>

> Fragrantly Yours,

> Patti

>

 

And to you and yours.

 

 

> Patti's Potions Natural Soaps

> Where it is always polite to

> Stick Your Nose in My Business

> www.pattispotions.com

> http://pattispotionsnaturalsoaps.blogspot.com/

>

 

Y'all keep smiling. :-) Butch

 

http://www.AV-AT.com .. Wholesale/Retail GC Tested EO/Rose Products, Tested

Hydrosols and other nice things shipped to you from our store/warehouse in

Downtown Friendsville, MD. Pop: 597

 

 

 

[Guest guest]

> I can't keep up with the price changes on Patchouli .. they

> are moving too

> quickly.

 

[Dave]: I have read - and I do not know how true this is - that patchouli

has been severely overharvested, to the extent that it is simply vanishing,

similar to the large walnut trees of North America.

 

 

 

Version: 7.5.488 / Virus Database: 269.15.3/1082 - Release 10/20/2007

2:59 PM

[Guest guest]

Thanks Butch, I knew you would have the skinny on the

patch increase.

I had to break the news to my customers who were

asking this past weekend. It won't be back anytime

soon for this soap lady.

 

Of course if they wanted to purchase some, I would

glady make a batch for them! yeah right, like that

will happen anytime soon!

Patti in Kenosha

 

Fragrantly Yours,

Patti

 

Patti's Potions Natural Soaps

Where it is always polite to

Stick Your Nose in My Business

www.pattispotions.com

http://pattispotionsnaturalsoaps.blogspot.com/