THE ESSENTIAL OIL INDUSTRY IN SRI LANKA - IFEAT

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This volume could be increased since only about 10% of the available leaf is used for oil extraction. Most leaf is used for fertiliser since the relatively low prices does not encourage the farmers to use it for oil production. Export of other oils are much smaller but have shown an upward trend in recent years. Thus, exports of pepper oil are growing and it is anticipated that this will continue with India being the dominant market. Nutmeg oil exports are growing; the crop is growing and has not suffered from any disease problems or low productivity. The export volume can definitely increase since there are 600 – 800 of nutmeg available and only about half of it is used for distillation. Cardamom oil exports are small but growing, especially organic oil, but Sri Lanka cannot compete with Guatemala with regard to conventional cardamom oil. Citronella oil exports are growing slowly but the major problem is the fluctuating prices, which make it difficult to induce farmers to grow the crop and produce the oil. Cinnamon bark oil is relatively stable but there has been a growing demand for the spice, especially from Latin America for culinary purposes. This is likely to grow further especially for organic oil. Exports of clove oil have been increasing recently and the dominant market is India. The export destination of the essential oils is illustrated in the following table, which shows the domination of the USA, EU and Indian markets. In recent years India has become a much more important market for Sri Lankan oils. ! !Major&des*na*ons&of&essen*al&oils&–&2011&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&& !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! Cinnamon!leaf! oil! USA& %& UK& %& France& %& India& %& Germany& %& Others& %& 57! 8! 4! 12! 2! 17! Pepper!oil! 13! 1! 1! 84! 1! 0! Nutmeg!oil! 52! 12! 3! 3! 16! 13! 24 Citronella!oil! 46! 3! 17! 0! 6! 27! Cinnamon! bark!oil! 12! 4! 16! 0! 63! 4! Clove!oil! 47! 2! 3! 39! 5! 6! 124
MAJOR CHALLENGES IN THE INDUSTRY Though the industry – both the government and the private sectors - have initiated many development programmes there are still many constraints to be overcome if Sri Lanka is to be competitive in the market. Some of the limitation factors associated with the essential oil industry include: • Instability of market prices which has an undesirable impact on both the farmers and the processors • Lack of long term backward integration for new cultivation • Establishing effective supply chain • Lack of initiatives for moving up the value chain; need to move beyond essential oils • Environmental/climate changes affecting everyone globally and we have to deal with them when they occur. DEVELOPMENT PROJECTS IN THE INDUSTRY Sri Lanka offers very good opportunities for the expansion of the organic essential oil business as well as various added value products. The smallholder families use very little fertiliser; there is very little pollution; the industrial base is not that large; the underground water streams are not contaminated, so there is negligible pesticides or heavy metal pollution. So organic essential oils is a niche market area which is growing and in which Sri Lanka can compete. In addition, investments are taking place to develop new products including fractions, isolates and CO2 processing – both conventional and organic. Companies also realise that they must integrate backwards in order to ensure raw material supplies. Companies are developing new plantations for new crops and expanding the existing cultivation area, including working with existing plantation companies to encourage them to plant spices alongside their traditional plantation crop production. Also they are trying to collectivise smallholders as well as organising buy-back schemes. The end of the civil war has led to the opening up of the northern and eastern parts of the country and is offering new opportunities to develop new areas of production. Donor agencies are also assisting in the development of lands, which are now free. INSTITUTIONAL SUPPORT Within the country there are a number of institutions that support the spice and essential oil sector. The Sri Lanka Export Development Board, which is the apex body, drives the marketing, value addition and promotion of the industry. It has supported the attendance of a few companies to the IFEAT Singapore Conference to expose them to the international industry. The government places a lot of emphasis on the minor crops and there are two ministries involved, namely the Department of Agriculture and the Department of Export Agriculture, which overlook spices. This reflects the importance of spices to the development of the rural economy. In addition, there are two private sector trade associations working alongside the government in helping to promote the industry, namely the Spice Council and The Spices and Allied Products Producers’ and Traders’ Association. 125
Page 1 and 2: ! ! ! ! ! ! ! ! ! ! ! Paper present
Page 3 and 4: ! Clima&c(changes(( ( The graphs be
Page 5 and 6: Pepper Oil Pepper, which is known a
Page 7 and 8: 15 Crop production: 2,700 mt Oil ex
Page 9 and 10: Cardamom Oil Cardamom is cultivated
Page 11: There are 4 main distillers in the
Page 15 and 16: THE FLAVOUR AND FRAGRANCE INDUSTRY
Page 17: THANK YOU ! ! ! ! ! ! ! ! ! !!!!!!!

THE ESSENTIAL OIL INDUSTRY IN SRI LANKA - IFEAT

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