Market Report CITRUSANDALLIED.COM CITRUS MARKET REPORT – March 2016

ORANGE

March 2016 Volume Items

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4 ORANGE 1 4 LEMON 1 4 LIME 2 4 GRAPEFRUIT 2 4 TANGERINE 2 4 ROB’S CRYSTAL BALL 3 Essential Oils 4 Garlic 3 4 Rosemary 3 4 Star Anise & Natural Anethole 4 4 Basil 4 4 Bay Oil 4 4 Bitter orange 4 4 Buchu 5 4 Cardamom 5 4 Carrot Seed 5 4 Cassia & Natural Benzaldehyde 5 4 Cedarleaf Western Red & Terpeneless 5 4 Chamomile Roman 6 4 Cinnamon Leaf /Bark 6 4 Clove Leaf & Eugenol 6 4 Coriander seed 6 4 Petitgrain Cordillera 6 4 Cumin Seed 7 4 Davana 7 4 Eucalyptus Radiata 7 4 Eucalyptus & Eucalyptol 7 4 Ho Wood (Natural Linalool) 7 4 Geranium 8 4 Ginger 8 4 Lavender 8 4 Lemongrass 8 4 Mandarin Petitgrain (Mandarin Petitgrain Terpeneless) 8 4 Litsea Cubeba & Natural Citral 9 4 Nutmeg 9 4 Mint – Peppermint & Spearmint 9 4 Pimento Leaf 10 4 Tagetes South African 10 4 Wintergreen 10

The combination of Citrus Greening Disease in Florida and the expectation of a small crop in Brazil has led to a shortage in orange oil and related products such as orange terpenes. There is no need for hyperbole. The situation speaks for itself and the gravity is reflected by high prices and poor availability. This is a situation where it is better to have been a relationship buyer rather than a price buyer. C&A intends to support our regular customers with good quality single fold and folded orange oil at fair prices. We do not see the supply situation improving for a number of years because the time it takes to grow an orange tree and for the tree to reach maturity is now at issue. The short life expectancy of a newly planted orange grove makes little economic sense and that fact is clearly reflected in the paucity of new plantings. Here are some statistics. Production in 2016 is expected to be down by 29% when compared to 2015 and 2015 was the worst year for production in the past 50. Only 37 million boxes of orange fruit will be processed by all processors in Florida. Not too long ago, that number was well over 100 million boxes.

LEMON The expectation of a very good crop in Argentina has been tempered by a small crop in Spain. Production in Spain for this season is lowerby50%when compared to an average season and down by over 60% from the high production in 2015. The reason for this reduction has been very hot weather that affected the blooms, thus attenuating the production season. Since hot weather has prevailed throughout much of Europe, demand for refreshing fresh lemons has been high. As mentioned, we expect a large crop in Argentina. For buyers who can hold off placing contracts, you may be rewarded with somewhat lower prices come August.

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LIME The slow reduction in prices on Lime over the past two years may continue, though at a slower rate. We say “may” because without knowing what rains will fall, an educated guess is the best we can do. On the side of a continued slow decline are two factors. The first is a low-value peso and a strong dollar. And the second is a lessening of civil unrest in Michoacán. There is also the possibility of slightly more fruit available for processing in Colima. On the other side of the equation, the crop in Michoacán is delayed by a month and is not likely to increase until late May. It is still too early to talk about fruit prices but, at this moment, prices are ever so slightly lower than they were a year ago.

GRAPEFRUIT Grapefruit is a nightmare. Since citrus greening does not distinguish between an orange and a grapefruit tree, and since Florida is even more important when it comes to global production of grapefruit, compared to its importance in orange production, it should come as no surprise that prices are high, availability is low and top quality oil is hard to find. The latest USDA estimate calls for 10.5 million total boxes of which 2.3 million will be for white oil and 8.2 million boxes are for red fruit. This is such a far cry from the heady days of 50 million boxes that it underscores the dismal condition of the citrus industry in Florida. C&A continues to source grapefruit oil from all over the world in an effort to meet the shrinking demand for this product. If you need grapefruit oil, any forecast you can provide would be most helpful.

TANGERINE Tangerine Oil production remains low and the demand is hard to measure. We continue to source oil from all producing regions in an effort to meet the forecasts of our customers. While supply is spotty, so is demand. Tangerine Oil is mostly used in flavor and beverage formulations to modify the flavor of orange. Perhaps the high price of orange oil has led to fewer projects that would require using tangerine as a modifier.

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Rob's Crystal Ball In order to gaze into the future to predict what is going to happen, one needs to see clearly. My crystal ball is filled with haze. What I see are the reflections created by a prism from so many factors that the overall view is opaque. Whether this is due to weather, the stock market in China, the stock market in the US, elections in Germany, upcoming elections in the United States, currency uncertainties, the threat of a global recession, the future course of action by the Federal Reserve, all, or none of the above, there is so much happening politically and economically that the most prudent course of action is to make purchasing decisions based on cautious optimism. Currently, our inventory positions are based on cautious optimism. We continue to cover forward contracts and to purchase those products basic to our product line in sufficient quantities to cover the expected demand of our customers. We encourage all our customers to share with us any information that will make it easier for us to cover your needs and to feel free to ask questions of us with regards to the market directions for specific products. Best regards, Rob

Essential Oil Garlic As predicted, garlic prices continue to escalate. While this is the rerun of a movie we have seen before, sourcing of Garlic oil is becoming more and more complicated. In recent months the distillation of garlic root hair, dry garlic, funkled garlic and garlic sprout has resulted in more poor quality garlic oil in terms of color and aroma. The producers in China feel the new oil will only negatively affect the prices which they believe could increase by an additional 10-20%. The matter may get worse as distillers are more reluctant to spend the money to distill oil without firm orders from customers. It was also reported that the best raw material, the garlic bulbs, are too expensive to distill. All these factors will influence the quality and price of garlic oil into 2016. C&A continues to have a good position on top quality oils. We welcome your inquiries.

Rosemary The availability of Rosemary oil has not improved. The recent harvests in Morocco and Tunisia have been problematic while the demand for rosemary antioxidant continues to escalate. We believe Rosemary will remain a difficult oil to source. Fortunately, we are well covered and are in a healthy position to fill your needs.

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Star Anise & Natural Anethole Anise Oil, grown in the Yunnan Province of China, is distilled from April through J u n e a n d t h e n a g a i n f r o m O c t o b e r t h r o u g h D e c e m b e r . Prices are as low as they have been over the past 5 years. For this reason, we have made a decision to cover the requirements of those customers who provided forecasts for 2016. If you have not forwarded this information to us, please do. While it is impossible to call the low in any market, we see the current situation as quite favorable. If the prices are not at a low, they are close. Interestingly, exports of Anise Oil from China continue to rise and carryover levels are reported to be in decline. This presents circumstances that often foretell firming prices. We welcome you inquiries.

Basil The July crop in Vietnam approaches. It is reported that no carryover stocks exist at source. That means our recent prediction rang true. As demand increased, stocks did indeed dwindle. If your company has requirements for oil produced in 2015, please contact us as our inventory is also diminishing. Assuming you are covered, the next time to buy forward will be in August.

Bay Oil Bay oil continues to be at the top of everyone's crisis list (including ours) because of governmental policies and Hurricane Erika which devastated the little island of Dominica along with the largest distillery. It is reported that the factory has not yet been rebuilt but smaller distillers are making a little headway in a market that is seriously short. C&A has developed a WONF (With Other Natural Flavors) to provide a cost effective alternative during this difficult time. Please contact your C&A representative with current needs. We want to help.

Bitter orange The summer crop in Brazil is reported as similar to last year. In the Dominican Republic, the demand for fruit has been uncharacteristically strong; and this has added pressure to the availability of oil. With that said, we continue to be active in this specialty essential oil and maintain a good position of oil from both the northern and southern hemispheres. We are always happy to update you when questions arise as we monitor the new crops in Brazil and the Caribbean region.

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Buchu This South African essential oil continues to show robust demand based on a myriad of health-related benefits and claims. We continue to offer the most popular qualities and hope your demand remains strong!

Cardamom The Guatemalan crop is just finishing up and the next crop will be distilled in the fall. In Guatemala, we have learned that last year's crop was below average, in part, due to disease while India's output (25 to 30MT) is near a record high. We think the higher production in India has steadied the usually volatile Cardamom market, and that this is a good opportunity to cover your needs. Conversely, the demand on the seed-side from the Middle East, is showing signs of real weakness due to the bad economy as a result of low petroleum. This new development could hurt the cardamom industry if prices fall below the cost of production.

Carrot Seed Prices and supply of Carrot Seed Oil continues to be stable. However, if you have sizeable needs, we suggest you stay well ahead.

Cassia & Natural Benzaldehyde It is reported that the volume of oil produced in the fall crop fell far below last year's production while at the same time, prices declined. The spring-summer crop begins in May and we already have seen some upward pressure on prices since the Chinese New Year. As we mentioned in the last Crystal Ball, we expect prices to increase as demand picks up. As this report goes to press, we hear the cold weather in the Guangdong and Guangxi regions could have significant declines in yields. At present, the market is stable and we invite your inquiries as we are well-positioned.

Cedarleaf Western Red & Terpeneless If you have sizeable requirements for this unique and hard-to-find North American essential oil, please contact us as many months in advance to source/contract for you.

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Chamomile Roman While the last two crops have been dismal we hope this summer's crop is better. If you currently have small requirements, C&A does have a limited supply. We hope to be able to provide some better news this summer as the next harvest commences.

Cinnamon Leaf /Bark The inclement weather in Sri Lanka continues to plague production volumes and yield in Cinnamon. We note prices for bark oil have not increase while those of cinnamon leaf have. It appears both prices and availability will pose a challenge until the fall peak season, but we have worked to cover our traditional customer needs until the next crop. In the meantime, give us your 2017 requirements and we will do our best to lower your costs in 2017. That is, if Mother Nature cooperates.

Clove Leaf & Eugenol Similar to the last report, this important Indonesian essential oil, primarily produced in Java, has experienced some price softness which we have acted upon, after last year's decent fall crop. We also took solid positions since the Indonesian rupiah has fallen a substantial 9% in 2015. The next peak crop time is in September so we will continue to monitor this essential oil and report to you. C&A is basic in Clove Leaf, Bud and Stem oils for our customers-year-round use.

Coriander seed The perfect storm of a very poor crop in India, the annexation of Crimea by Russia and severe banking restrictions appears to have de-escalated and subsided! We were also informed that all cellular activity went dead for weeks, a severe water shortage for irrigation existed, and power outages were the norm, all of which practically brought transportation to a standstill. Today, it almost feels like a normal market exists. We thank our customers for providing meaningful volumes this fall which in turn helped us to cover at precisely the right time and at the most favorable prices. In recent weeks, we were not surprised to see prices firm as the stocks at source are scarce. We still recommend holding a bit more in stock just in case this geopolitically unstable area becomes unsteady again. We welcome your spot inquiries.

Petitgrain Cordillera The weather has taken a toll on this beautiful oil from Paraguay. This difficult to find essential oil from South America is best purchased by staying at least six months ahead since the availability remains poor and transit time is frequently measured in months, not weeks. C&A has a modest position and welcome your inquiries while the supplies last.

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Cumin Seed With the continued instability in the Middle East, we recommend that customers stay ahead by covering their needs for Cumin Oil. Fortunately, in the face of political uncertainty, prices have remained constant as carryover inventories have provided a cushion. From origin, we hear that the upcoming crop in April looks poor which in-turn could provide the basis for price increases during 2016.

Davana Prolonged rains in Karnataka, India during the planting season has delayed the Davana crop by at least a full month. We are watching this part of the world closely and will report back. It is likely the shorter season will hurt the quality and yields. For adequate coverage of Davana, it is imperative we know your volumes as the timing for purchasing often is based on days, not weeks. C&A is prime in Davana and can offer the best quality and at the most competitive prices.

Eucalyptus Radiata Eucalyptus Radiata is a new offering from C&A. Unfortunately, production at source as been challenged by both frost and drought, which, has hurt both the collection of the leaves and yields for oil. Not surprisingly the supply is short. If you plan to purchase this special variety of Eucalyptus from C&A, please give us your 2016 requirements so we can encourage growers in Africa to plant enough to satisfy your needs. Again, as this publication goes to press, we hear the worst drought in South Africa in 130 years is killing whatever chance they had at producing more radiata. Please stand by as we monitor this bad situation.

Eucalyptus & Eucalyptol The uncharacteristic freezing weather in the Yunnan Province along with brisk demand has kept Eucalyptus and Eucalyptol in short supply. Despite the recent and continuing devaluation of the Chinese currency, prices for these products continue to firm. We recommend staying ahead on this popular essential oil which is harvested during the peak period of June to August but in reality is processed 7 out of 12 months of the year.

Ho Wood (Natural Linalool) In the past 5 years the number of trees have declined which has firmed prices but in the past year some new planting has taken place even with the high cost of labor. We continue to keep a solid position and welcome your inquiries.

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Geranium The trend continues with Egyptian oil and Chinese oil at opposite ends of the price spectrum. Chinese oil (May-September harvest) is double the cost of the Egyptian (June-July harvest). The gap appears to be closing as prices for Egyptian oil are firming and inventories are decreasing while at the same time Chinese oil inventories are increasing and prices are beginning to soften. It is reported that the Chinese exports have slowed considerably and that farmers are planting grape trees instead of Geranium. It might be a good idea to stock-up on the Chinese quality if you see a future need. We have good positions on both oils and welcome your inquiries.

Ginger The gradual price increases the past few years have begun to reverse. Once the weather becomes warmer this gradual trend could continue. C&A has a good position and will be competitive.

Lavender As predicted, the prices started below last year's level with a markedly better crop but recently prices have started to climb as all the good quality oil has found a home due to pent up demand. The challenge this season has been to find the highest quality. This theme has been voiced by all the processors. While the weather in producing region has been unseasonably warm and dry, it is too early to know anything concrete about the July through September harvest. It would be prudent to have some inventory as we enter into the next harvest and communicate your annual requirements. C&A is here to help you bridge the gap.

Lemongrass In a repeat of our last report, the situation for lemongrass has not changed. We continue to contract well in advance so that Guatemalan lemongrass is planted and distilled on our behalf to keep pace with the rising demand of this beautiful aromatic Central American essential oil.

Mandarin Petitgrain (Mandarin Petitgrain Terpeneless) The January harvest is coming to a close and while the costs are higher than last year the market remains soft. We feel this is the best time to lock in your volumes for 2016 so we invite your inquiries. We have stocks to meet your needs.

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Litsea Cubeba & Natural Citral Litsea Cubeba is harvested and distilled during the months of August through October in the Yunnan & Jiangxi Provinces. The essential oil is the starting material for making natural citral. While it is early to start writing about the new crop, the processors have indicated that carry over stock is mostly gone. We are happy to report that the weather is cooperating. If favorable weather continues up to the harvest, we expect prices to remain steady. It is also worth mentioning that pricing softened in the 2nd half of 2015 since the crop size increased 20% from 2014. Another important detail to note is the that the citral content of the oil produced in 2015 was somewhat lower than in prior years. This directly effects the cost of producing natural citral as the yields were reduced. As such, we recommend staying a bit ahead as FCC quality citral may experience high demand prior to the new crop. Furthermore, the supply timeline for Litsea Cubeba requires up to 3 months between the time pre-shipment samples of the new crop oil are available at source and the time when we have processed natural citral. We invite your inquiries as we have good supply at the present time. We will keep you informed as we all keep an eye on the Chinese Renminbi.

Nutmeg In our last report, we stated that in contrast to the past 10 years of everincreasing prices, nutmeg oil has softened considerably in the last nine months. A weaker Indonesian Rupiah, new plantings in the traditional growing areas of Sumatra, and the new growing region of Sulawesi have collectively satisfied the demand for both nutmeg spice and the oil. While that statement was true, the low prices did not last for long and demand has reversed that trend. Somewhat higher prices have been supported by heavy rains and a slow-down in production. We continue to strive to find the highest quality nutmeg oil, at competitive prices and maintain strong positions. Citrus & Allied welcomes your inquiries!

Mint – Peppermint & Spearmint On the North American front, the snow pack looks to be much better than in 2015 which is good news for the supply of water for 2016. While still early, it looks like most of the crops in all domestic producing regions, have come through the winter months in good shape. The acreage appears to be similar to 2015 as a large majority of the mint is contracted. Last year we experienced very hot temperatures in many of the growing regions which produced uncharacteristically higher Menthofuran oil in some growing areas. This, in turn, put added pressure on already poor availability of low furan oil. Thank goodness a handful of growers harvested early and did a good job! We look forward to updating our customers in the coming months as we visit our fields and get a first-hand look at the plant growth this summer. As always there will be news! Spearmint, like mint, is almost entirely contracted and in balance with supply and demand.

In India, mentha piperita and mentha arvensis strengthened in price but basically remained in a stable range since the summer. Early indicators are that this year's acreage will be above last years. Therefore, if the weather cooperates and the Indian Rupee doesn't strengthen vis a vis the US Dollar, it could be a promising year for mint. We encourage your inquiries and very much want to assist you.

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Pimento Leaf The collection of the leaves has ended and we await the new reaping cycle in summer. It appears the supply is barely meeting demand. To offset this our suppliers are active in the other Jamaican Parishes to find new trees. C&A is basic in pimento and invites your inquiries.

Tagetes South African Last week marked the beginning of the next crisis in Tagetes. For the third year in a row the worst recorded rainfall in 130 years and well above temperatures have basically destroyed any possibility of a crop this summer.

Wintergreen Over the past few seasons this boutique essential oil harvested in July & August, has been in short supply. So short, that we believe the demand exceeds the supply. This year, our larger customers informed us of their volumes, thus permitting us to cover. We therefore find ourselves in a much better position to service all our customers in 2016. We look forward to assisting you with Wintergreen oil.

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