1. Nutmeg and mace - world overview


Product Description

The nutmeg tree, Myristica fragrans, is indigenous to the Moluccas in Indonesia but has been successfully grown in other Asian countries and in the Caribbean, namely Grenada. A range of commercial products derive from the nutmeg tree of which the spices - nutmeg and mace - are the most commonly known and widely traded; other products are their essential oils, extracted oleoresins and nutmeg butter. Other nutmeg tree species include the M. argentea which produces 'Papuan' nutmegs from Irian Jaya and Papua New Guinea, and M malabarica which produces 'Bombay' nutmegs from India; both are used as adulterants of M. fragrans products. This report focuses on world trade in the spices which are classified under the following codes:

HS 0908.10

Nutmeg

HS 0908.20

Mace

SITC(3) 075.25

Nutmeg, mace and cardamoms

The spices in their ground form are mainly used in the food processing industry, principally in the seasoning of meat products; they are also used in soups, sauces, baked goods and spice mixes such as curry powder in Japan. Both spices have similar taste qualities; mace is more popular because of its light orange colour in light coloured foods. Nutmeg, in general, tends to be sweeter and more delicate. These products are also used in the perfumery and pharmaceutical industries. A possible, future use for nutmeg is as a natural control for insects that infest stored cereal grains.

Production and Trade

World production of nutmegs is estimated to average between 10,000 and 12,000 tons per year with annual world demand estimated at 9,000 tons; production of mace is estimated at 1,500 to 2,000 tons. Indonesia and Grenada dominate production and exports of both products with a world market share of 75% and 20% respectively. Other producers include India, Malaysia, Papua New Guinea and Sri Lanka, and other Caribbean islands such as St. Vincent. The principal import markets are the European Community, the United States, Japan and India (see statistical annex for import data). Singapore and the Netherlands are major re-exporters.

The East Indian islands of Siauw, Sangihe, Ternate, Ambon, Banda and Papua (Irian Jaya) produce nutmegs which are highly aromatic. Grenada produces the West Indian variety which is milder in flavor and lighter in colour. International trade in nutmegs is either of the East Indian variety or the West Indian variety, with a negligible quantity of wild 'Bombay' nutmegs imported by the United States.

Market Profile

International trade in spices as a whole, valued at an estimated US$ 1.5 billion for a volume of 400,000 tons, has experienced substantial growth in demand over the last two decades, particularly for major spices such as pepper.

Demand for nutmeg and mace grew in the 1970s but has been relatively stable despite a significant decline in prices due to oversupply (production and stocks1/) from the two main producers, Indonesia and Grenada in the 1980s. Prices are crucial for the decision to plant, and since the spices come from a tree and are harvested 7-9 years after plantation with the tree reaching its peak after 20 years, investment in this sector is a long term venture.

1/ Both Indonesia and Grenada usually keep one year's supply in stock; however, low prices led to stockpiling and the subsequent agreement to destroy an estimated 300 tons each of low quality nutmeg. In 1993, Indonesia and Grenada reportedly held 5,000 tons and 4,000 tons in stock respectively.

In 1986, the world price for higher grades of nutmeg was approximately US$ 1,000 per ton which did not ensure adequate returns to exporters. This led to a decision by Grenada and Indonesia to negotiate a marketing arrangement. In 1987, a 'Marketing Agreement' was concluded between the Indonesian producers group, Asosiasi Pala Indonesia or ASPIN formed in 1985, and the Grenada Cooperative Nutmeg Association (GCNA) with the objectives of controlling export volumes of nutmeg and mace to ensure price stability and of setting minimum price levels. Under the agreement creating the cartel, Indonesian and Grenadian producers agreed to the following minimum export prices:

Table 1: Minimum Export Prices Agreed to by Indonesian and Grenadian Producers Under 'Marketing Agreement' in 1987

US$/ton

Indonesia

Grenada

High quality nutmeg

6,800-7,000

6,650

Low quality nutmeg

1,000-1,200

5,575

High quality mace

13,500

11,750

Low quality mace

6,000

5,750

Source: Financial Times, 19 June 1992

Prices and revenues increased for both countries but in 1989, the cartel collapsed as Indonesian producers began selling below the minimum price levels, followed by the Grenadians. Despite efforts to reestablish the cartel, the subsequent economic liberalization of the Indonesian economy in 1990 effectively ended the Agreement.

In 1992, efforts were made by Grenada to recreate the cartel given the low world prices commanded by nutmeg and mace; it should be noted that Grenada earns up to 40% of its total foreign exchange earnings from exports of nutmeg and mace and it is therefore in the country's interests to keep prices high. An important feature of these negotiations was the attempt to eliminate intermediaries or commodity brokers from the market-2/. As a result of negotiations in May 1993, both Indonesia and Grenada agreed to destroy a percentage of their stocks in an effort to bolster world prices which rose by up to 40% following the announcement.

2/ In April 1992, the Indonesian state trading company, Berdikari, and the Dutch company, Catz International, formed a joint venture (BerCatz BV) to buy Indonesian nutmeg and mace and trade it on international markets. According to their own estimates, BerCatz controls almost all the nutmeg and mace exported from Indonesia. Marketing agents for Grenada are JHB International in Belgium.

In 1994, Grenada's nutmeg and mace output are expected to be below average due to bad weather; average annual production is between 2,700 tons and 3,000 tons of nutmeg and 275 tons of mace. Forecasts for 1994 are at 2,000 - 2,200 tons of nutmeg and 120 tons of mace. Forecasts for Indonesia were not available.

Prices

ITC's Market News Service (MNS) issues weekly prices on a subscription basis for twenty-one spices, spice seeds and herbs, covering: USA, Japan, Hong Kong, Singapore, and selected European and Middle Eastern markets. Extracts of MNS prices for nutmeg and mace on 29 April 1994 are given in Table 2.

Quality Standards

Nutmegs and mace are classified by origin (East or West Indian) and by grade.

(a) Nutmegs

Whole nutmegs are grouped under three broad quality classifications:

- Sound: nutmegs which are mainly used for grinding and to a lesser extent for oleoresin extraction;
- Substandard: nutmegs which are used for grinding, oleoresin extraction and essential oil distillation
- Distilling: poor quality nutmegs used for essential oil distillation.

Indonesia:

High quality or sound whole nutmegs are traded in grades which refer to their size in numbers of nutmegs per pound: 80s, 110s and 130s (110 to 287 nuts per kg), or 'ABCD' which is an assortment of various sizes.

Substandard nutmegs are traded as 'sound, shrivelled' which in general have a higher volatile oil content than mature sound nutmegs and are used for grinding, oleoresin extraction and oil distillation; and 'BWP' (broken, wormy and punky) which are mainly used for grinding as volatile oil content generally does not exceed 8%.

Distilling grades of nutmegs are of poorer quality: 'BIA' or 'ETEZ' with a volatile oil content of 8% to 10%; and 'BSL' or 'AZWI' which has less shell material and a volatile oil content of 12% to 13%.

Grenada:

Sound nutmegs are sold as sound unassorted which corresponds to the Indonesian grade 'ABCD'. In Grenada, determining whether a nutmeg is of sound quality is carried out by a water test where nutmegs are placed in a basket partly submerged in water: sound nutmegs sink whereas the unsound float.

Substandard nutmegs are classified as 'floats', and as 'detectives', the latter is similar to the Indonesian BWP grade but considered of higher quality.

Distilling grades of nutmegs are primarily exported to the USA and consist of 'floats'.

Table 2: MNS Prices for Nutmegs and Mace as on 29 April 1994

Origin / Destination

Nutmegs - Grade

US$/ton CIF

Grenada / main European port

SUNS

2,000


GUNS

1,800


80's

3,200


60/65's

3,350


110's

2,950

Indonesia / Netherlands

BWP

1,425


BWP spot

1,385 (June-July)


Shrivels

1,825 (June-July)


ABCD spot

1,700 (June-July)

Indonesia / Germany

Shrivels

1,600 (June-July)


ABCD

1,700 (June-July)


BWP

1,675 (June-July)

Indonesia / United Kingdom

SUNS

1,875 (June-July)

Papua New Guinea / Netherlands

BWP

1,425


ABCD

1,950

West Indies / USA

Whole spot

2,205

East Indies / USA

Whole spot

1,765 (September)

Indonesia / Japan

110's spot

2,100


110's

2,500 (June-July)

Indonesia / Saudi Arabia

FAQ

1,600

Sri Lanka / Bahrain

110's

1,170

Sri Lanka / Kuwait

110's FAQ

1,035

Origin / Destination

Mace - Grade

US$/ton CIF

Grenada / main European port

Mace 1

8,500 (August)


Mace 3

1,600

Indonesia / Netherlands

Broken 2

3,000 (June-July)


Whole

3,100 (June-July)

Siauw / USA

Siftings 2 spot

2,645

Source: Market News Service, "Spice World", N° 21/94, 8 June 1994

(b) Mace

The same applies to mace which is classified as whole pale mace, No 1 broken mace, selected, unassorted or siftings (Indonesia), and as whole, broken blades or siftings (Grenada).

However, the standards are not well defined and the preference for a specific quality depends a lot on the preference and experience of the buyer.

The international standards applicable for trade in spices of nutmeg and mace are ISO 6577:1990 (Nutmeg, whole or broken, and mace, whole or in pieces - Specifications).

Distribution Channels

In principle, the distribution channels for nutmeg and mace are the same as for other spices which, since the 1980's, have seen a shift towards direct sales to end-users by producers; this has also led to a reduced role of major trading/entrepôt centres such as Singapore in the case of nutmeg and mace.

The distribution network is naturally influenced by the monopoly Indonesia and Grenada have on the nutmeg and mace trade and their efforts to decrease the role of intermediaries. The establishment of the Grenada Cooperative Nutmeg Association in 1947 had already significantly decreased the role of Grenadian dealers in the distribution chain. This was further intensified with the subsequent appointment by GCNA of JHB International as their marketing agents; and with the creation of ASPIN and the joint venture between the Indonesian state trading company, Berdikari, and the Dutch company, Catz International, to form BerCatz BV which markets virtually all Indonesian exports of nutmeg and mace.

Packaging

Nutmegs are usually packed in double-layered linen, jute, sisal or woven polythene bags. If other packing is used, care must be taken to avoid materials which might lead to 'sweating' and the development of mould. Spices must be thoroughly dried before shipment. They can then be transported in containers in conventional vessels. Packaging should be such that maximum weight loss is 10%, (e.g. 20 kg declared weight should be at least 18 kg upon arrival at port).

Environmental regulations regarding packaging will be of increasing importance. A source of information on this is Duales System Deutschland GmbH (see Useful addresses).

Useful addresses

Tariff information

Environmental packaging

Worldtariff Ltd

Duales System Deutschland GmbH

220 Montgomery St., Suite # 432

Abtielung Vergabe "Grüner Punkt"

San Francisco, CA 94104-3410, USA

Postfach 1324

Tel: (415) 391 7501

Rochusstraße 2-6

Fax: (415) 391 7537

D-W-5300 Bonn 1

International Customs Tariff Bureau

Germany

38, rue de l'association

Tel: (228) 97 920

1000 Brussels, Belgium

Fax: (228) 979 2198