Breaking the law, the commodity way!

Spend Matters welcomes a post from regular contributor, Nick Peksa, of Mintec Ltd. on what's happening with various commodities around the world this week.

The choice this week is a mixed bag, ranging from cloves, to phosphate rocks, to tartrazine and finally chicken. They all have a theme which is quite difficult to spot apart from the recent price movements. The theme is legality, starting with the base commodity, followed by some interesting trivia.

The market price for cloves is spiralling out of control and is reaching record highs, heavy rainfall in Indonesia is damaging crops, and Sri Lanka is having a bad crop year. Clove stocks are exhausted in Brazil and a lot of the Madagascar harvest has already been purchased in forward contracts. No price relief is expected to come from the Comoros or Zanzibar either.

Banned in the USA: Clove cigarettes are illegal in the USA, the ban is one of the first visible effects of a law signed by President Barack Obama in June 2009 that gives the Food and Drug Administration wide-ranging authority to regulate tobacco.

The prices of phosphate rock have been forced up by recent industrial action in some of the major producing countries -Tunisia and Morocco. Morocco holds significant stocks of the world's base reserve and effectively bad news in Morocco, means bad news for everyone. In Morocco, protesters blocked the railway line between phosphates mines in Youssoufia and plants in Safi causing phosphate rock delivery delays.

In August the month on month price of phosphate rock is 11% fob Morocco. Cfr India is up 30% when compared to June price.

Banned from detergent: Phosphorus is a traditional cleaning agent, all dishwasher detergent sold in 16 states are all free of but a trace of phosphates. Until now, dishwasher detergents could contain up to 9% phosphorus (by weight), about the same found in common houseplant fertilizers.

Thai Chicken
Thai Chicken is now cheaper due to reducing feed costs, but primarily for the reason mentioned below.

Banned in Thailand: On July 20th 2011 Thailand Commerce Minister Pornthiva Nakasai declared that the recommended prices for all types of chicken would be decreased by 5 THB a kilo. Any vendors found violating the new price ceiling will be subject to a penalty of up to seven years in jail and/or a fine of not more than 140,000 THB ($3,000).

- Nick Peksa, Mintec, Ltd.

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