The genus Cinnamomum

308 M.S. Madan and S. Kannan
The model
Holt’s (1957) exponential smoothing model uses a smoothed estimate of the trend as
well as the level to produce forecasts. The forecasting equation is:
Y(m) S t mT t
The current smoothed level is added to the linearly extended current smoothed trend
as the forecast into the indefinite future.
St Yt (1 )(St1 Tt1) (2)
Tt (St St1) (1 )Tt1 (3)
Where,
m forecast lead time
Yt observed value at time t
St smoothed level at end of time t
Tt smoothed trend at end of time t
smoothing parameter for trend
smoothing parameter for level of series
Equation (2) shows how the updated value of the smoothed level is computed as the
weighted average of new data (first term) and the best estimate of the new level based
on old data (second term). In much the same way, equation (3) combines old and new
estimates of the one period change of the level, thus defining the current linear (local)
trend.
Demand
On the demand side, apart from the increased imports from the traditional importing
countries like the US, Mexico, Germany, and the Netherlands, import demand has also
increased significantly in the newly emerging markets like the Middle East where the
increase in demand for the product is not strong enough to create a demand driven
force, but is enough to sustain the present level of production and export mainly for
cassia. India, the largest consumer of spices in the world, is also increasing its import
of cinnamon and cassia. In light of tariff-free trade among countries of the world,
import is bound to increase not only in developed country markets but also in spice
producing, developing and under developed countries. But in all these newly emerging
markets imports are dominated by cassia. In recognising the increasing demand for
‘cinnamon buns’ in the US fast food diet, it is considered that this trend is likely to continue.
Further, invasion of this western food culture into many emerging economies,
along with an increase in income levels, is bound to accelerate the demand for fast food
the world over. The growing awareness about the natural flavours and colours among
health conscious consumers will also change demand.
In the absence of consolidated data for world imports, the data on exports were taken
as the net imported quantity of the world market, as one country’s export becomes
another country’s imports. Future demand for the commodity is forecasted using the
model identified. The equation fitted for demand is:
(1)