Posted: Wednesday, November 21, 2012 12:00 PM
Favorable weather improves yields; increased domestic demand aids farmers
By JOHN SCHMITZ
For the Capital Press
With indexed contracts now the norm and the flood of cheap, offshore oil on the wane, Northwest peppermint growers are in better shape than they were a few years ago.
"I don't think they're getting rich but I think they're making fairly good money," said Les Toews, vice president for purchasing for major mint handler I.P. Callison & Sons.
"I really can't quantify it but we've seen some major new plantings come in, new growers becoming part of the industry with significant acres," Bryan Ostlund, Oregon Mint commission administrator, said. "We've also seen continued expansion in Union County and the Hermiston area."
He doesn't see a turnaround in Central Oregon, which was once a peppermint stronghold in the state but now growing the crop primarily for tea leaves.
Ostlund said that handlers have done a good job of coordinating index contracts that peg grower prices to the cost of inputs. "It's worked very well at all three levels: grower, handler and end user."
Toews said that Northwest contracted peppermint oil is at $23 to $27 a pound, with spot prices a dollar or two less.
This is much more than the sub-$20 per pound paid a few years ago, before Callison led the way in developing indexed contracts pegged to the rising costs of production, which today run between $1,800 and $1,900 an acre.
About 87 percent of the Northwest peppermint crop is contracted for, with the remainder sold on spot, or open, markets.
Hotter than usual weather in Idaho, with about 17,000 acres devoted to peppermint, produced "extraordinary high yields" of up to 150 pounds per acre in 2012, Toews said.
Overall, with close to 50,000 acres planted to peppermint in the Northwest, Toews said he is not worried about a glut of peppermint oil here. "Farmers have been careful to plant to their contracts and not have a lot of extra oil."
Manufacturers who use peppermint in their products are relying more on domestic oil as opposed to cheaper oil grown offshore, Ostlund said.
"They're shifting from so much foreign oil coming into the U.S., with manufacturers realizing that they're probably better off trying to bring stability to U.S. production than the craziness that exists in international markets."
Rod Christenson, administrator of the Washington Mint Commission, said that higher priorities on non-mint, food crops in China and India have helped lessen the volume of cheaper, lower quality peppermint -- and spearmint -- oil available for export, which in turn has increased global prices.
"This is great news for us. We've been battling those low prices for years," Christenson said.
Toews said that the main reason foreign mint oil prices are up is that countries are keeping it at home to meet demand from a growing middle class, which has more money today and higher concerns for personal hygiene.
Christenson said there's a chance that demand for peppermint oil will drop off a bit in the next few years. "We're hearing from some major end users that inventories are higher than they thought so they're cutting back on purchases, and that's going to trickle down to growers."
"We expect markets to fall a little bit because there is a big carryover, but it's hard to tell when that will happen." Toews said.