Cinnamon Market - Small Cinnamon Farms Support the Economies of Sri Lanka and Indonesia

Spices, Aromatic, Drug And Pharmaceutical Crops January 25, 2016
Author: Olga Minchina
Account Manager

cinnamon market

Cinnamon is one of the most common spices today. It can be used in cooking, when added to salads, soups, or beverages (cinnamon flavored tea is very popular nowadays), or pharmaceutical industry. Besides, it is one of the most repeatedly used additives in Aurvedic and Chinese medicine, and production of perfumery products.

It may be hard to believe that cinnamon, now a staple spice in people's diet, used to be a coveted rarity. As far back as in the 15th century, it was the quest for cinnamon that drove the exploration of the world.

The cinnamon industry is very important for Sri Lanka as it provides revenue and employment to people. Most of the cinnamon farmlands are owned by small holder plantations. In Sri Lanka, there are around 250,000 cinnamon cultivators and 400,000 employees; the cinnamon industry is the main source of income for about 60,000 family units.

In Indonesia, meanwhile, the success of the industry partly owes to the efforts undertaken by the country to revive the spice industry. For instance, The Indonesian government strives to rehabilitate and enlarge existing spice fields with the ultimate aim of taking Indonesian spice exports to a new level, thus rekindling its well-deserved reputation of one of the key global spice exporters.

On the whole, Indonesia has a total of 17 million small farms producing a vast variety of food and non-food products (IFAD). Spices are predominantly produced by smallholders, who tend to sell them to village collectors. The latter accumulate larger volumes from different farms and then sell the product either to the domestic primary processing industry and/or spice exporters. At this stage, the drying often takes place, as small farmers cannot often provide adequate condition for performing the drying process well enough. Sometimes, smallholders may belong to cooperatives, working together with farmers to reach sufficient volumes for processing and exports. The role of large plantations is negligible in spice production in Indonesia, and many are owned by the government.

In 2014, India (21%), the U.S. (21%), the Netherlands (7%) and Mexico (5%) were the leading destinations of cinnamon imports, together making up 54% of global imports. The share of India increased significantly (+10 percentage points), while the share of Mexico illustrated negative dynamics (-1 percentage points). The shares of the other countries on the global cinnamon market remained relatively stable throughout the analyzed period.

In 2014, Indonesia and China were the main global suppliers of cinnamon with a combined share of 62% of global exports. However, the fastest growing suppliers from 2007 to 2014 were Madagascar (+8.6% per year) and Viet Nam (+7.7% per year). Viet Nam strengthened its position in the global import structure, from 12% in 2007 to 17% in 2014.

Indonesia dominated in global cinnamon production and trade. In 2014, Indonesia exported 59% of its total cinnamon output. Of this amount, 40% was supplied to the U.S., holding an 86% share of total U.S. consumption.

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Source: World: Cinnamon (Canella) - Market Report. Analysis And Forecast To 2020