Will the 2019 Crop Bring Lower Vanilla Prices?
This article deals with a crisis that hit the vanilla industry in 2015 and drove up prices. But even without a crisis, vanilla is expensive. To find out why, read here. To learn about the current crisis and why vanilla is almost unaffordable for some, read on.
In May of 2019, a new market report was released by a European company that has been in the vanilla business for more than 100 years and is known for their honest and reliable industry assessments. The report confirmed that the price for vanilla beans has softened, but has a way to go before it will be in the “affordable” category. At this time, most beans are selling for about $400 a kilo at source. For a sense of how this impacts Europe and the US, by the time the vanilla beans are shipped and airport fees, port fees, agent’s fees, custom fees and storage fees are paid, it can be as much as $100 more a kilo by the time everything is paid by the importer.
The quality of the vanilla beans in Madagascar improved last year, and there is still a lot of unsold stock from the 2018 crop. The flowering in Madagascar as well as mainland Africa was late this year and not as plentiful as hoped. Nevertheless, there are enough vanilla beans at this time that there probably won’t be serious shortages. Madagascar’s estimated 2018 crop was between 1600 and 1800 metric tons (mt) with about 1200 mt exported by the end of March of 2019.
While East Africa increased production, quality remains uneven, with some plantations producing decent vanilla beans but the majority producing mediocre quality. At this time there is a lot of unsold vanilla in Uganda and both the farmers and sellers are disappointed as they sit on a lot of beans they’d like to sell.
Mexico had less than 10 metric tons of green vanilla beans this year and the industry appears to be dying. Prices were between $800 and $1000 a kilo and were quickly sold to buyers who depend on Mexican beans. We declined at that price point. Mexico has some incentive to plant to take advantage of the higher prices and vanilla is now growing in Oaxaca, but not enough to help save their industry at this time.
Polynesia and India continue to have low production. Tahiti is growing far less vanilla than it did in the 20th century. However, sellers are attempting to keep their prices higher than Madagascar’s prices, so their market hasn’t been able to grow. Most buyers have been purchasing Tahitian beans from Papua New Guinea for extracts as the price is significantly less expensive.
Papua New Guinea is expected to have between 150 and 200 mt tons of vanilla this year, slightly less than last year. If they’re wise, they should keep up production and produce consistent quality as they’re in a position to establish themselves as a big supplier in the marketplace. However, after the last crisis, they cut production significantly. When the current crisis hit, it took several years to build up stock..
Indonesia is expected to have between 100 and 120 mt tons this year; a segment of that will be imported from Papua New Guinea. They have planted extensively so by 2020 should have a significant crop. Overall quality is okay but not exceptional though some areas are producing very nice beans.
This crisis was initially man made
As most of you already know, the crisis we are dealing with was largely man made and not caused by cyclones, fire or drought. In 2015 Madagascar experienced poor flowering and a very small vanilla bean crop. Buyers quickly purchased the last of 2014 crop, knowing prices would go up.
Then, when the green beans were harvested in May/June, multi-national speculators went into the newer vanilla producing area south of Sambava, the traditional growing region. They outbid all buyers of the just harvested green vanilla beans. As it was a short crop to begin with, by holding the beans off the market, the speculators forced the prices up further.
Some beans were only cured (fermented) for a few days, then vacuum-packed to theoretically complete the process later. This technique creates very poor quality beans with a low flavor profile. Because so few beans were available, however, they had a ready market with extract manufacturers who paid the high prices for their beans in order to fulfill their contracts with companies.
The government steps in
The Madagascar government attempted to curb the cheating and poor curing practices by banning the sale of green beans during the harvest as well as outlawing vacuum-packed beans. Unfortunately, there isn’t the infrastructure or the will to consistently enforce the rules and most middlemen ignored them in the rush to sell the green beans. The green beans sold for as much as $80 a kilo, a huge boon for some farmers and the middlemen who normally make this much money in six months.
What it meant, however, was that the cured and dried beans reached untenable prices in the same way as the last crisis (caused by storms) in 2001 – 2004, when prices of cured and dried beans to the traders were in the range of $500 a kilo at source. In fact, in less than three years market prices increased 1500%. Five years ago, cured, dried beans of good quality cost as little as $20 a kilo at source, which means that the farmers and middlemen who gather the beans in rural areas and bring them into cities or to the packing houses, barely made a living.
Not enough vanilla?
Due to Cyclone Enawo, that hit Madagascar March 7, 2017, there was a 15 to 20% loss of vanilla beans. Somewhere between 1300 and 1500 metric tons of vanilla from Madagascar came onto the market at the end of 2017. While better than the 2016 crop, a significant amount was harvested too early or was vacuum packed too green and was not good quality. However, Indonesia and Papua New Guinea have ramped up their production, which helped boost the total world crop considerably. A fair percentage of the beans beans were better quality than what came in from Madagascar. News travels quickly via the Internet, however, and vanilla prices from these countries are understandably very high as well. It is during times like this that farmers can earn a lot of money if they have decent quality beans to sell. While it may appear that the market will continue like this indefinitely, the reality is that the prices are dropping and will continue to do so throughout 2019. It does not appear there will be a full collapse anytime soon. While we expect prices to continue to drop some through this year, it will likely not be dramatic. Quite honestly, farmers deserve far more than $20 a kilo for cured, dried beans. However, there needs to be a balance between starvation wages and untenably high prices.
When prices are extremely high and the extract makers tell their clients the price for pure vanilla extract, the clients, who are primarily frozen dessert and dairy manufacturers, have the option to choose pure vanilla or a variety of natural vanilla flavors drawn from plants other than from vanilla beans. The flavors are significantly less expensive, enough so that when a crisis like this occurs, many companies may not go back to using pure vanilla even when the prices drop significantly.
Short term expectations
The pollinating seasons (October and January) in Madagascar and Africa were late and relatively small this season.
Of far greater concern is the quality of the Madagascar vanilla. With prices still high, theft remains a big issue wherever vanilla is grown. In order to keep their crops, farmers harvest earlier than they’d like; an early harvest means compromised flavor and quality. There are both large and smaller companies doing all they can to make sure they are buying as high-quality products as possible and with a fair price for growers. 2019 has been a relatively quiet year for typhoons in the Indian Ocean region where Madagascar is located. All we can do is hope all will be okay.
Why does this happen with vanilla but not chocolate or coffee?
Because there are viable alternatives to vanilla beans such as imitations and “natural flavors,” vanilla is a far smaller industry than chocolate or coffee. Coffee and chocolate are traded in millions of containers each year; vanilla comes in at roughly 2300 – 3000 metric tons in a good year. As a result, vanilla isn’t traded on the international commodities market. There are no protections for vanilla growers and no rules or sanctions on the industry.
Until fairly recently, coffee had a base price in place; farmers were at least guaranteed a minimum wage during a surplus. This is no longer the case. Chocolate also used to have a base price, but this was discontinued several years ago. This makes it more challenging for the farmers, most especially the smallholder growers. Coffee and chocolate also have non-profit associations that help growers and promote their products. While prices and available volume for coffee and chocolate fluctuate, they are more stable markets than vanilla. That said, small shareholder coffee and chocolate growers and those who labor on large plantations are extremely poor. It is for these reasons that I am concerned about social justice issues for the smallholder vanilla growers. Many smallholder vanilla growers also grow cacao or coffee, which help in their survival.
At this moment, vanilla prices are $400 a kilo for beans at source depending on size and quality of beans. Extract grade vanilla beans, are still more expensive than gourmet grade. Most traders are investing only for the short-term given the high prices. In addition to the $500 – $600 a kilo price tag, there is also the cost of shipping the beans long distances, port fees, customs fees and risk factors such as poor quality or mold. While the big buyers of vanilla beans make money, it is not proportionately higher due to the shortage. Extract manufacturers may make only a $5.00 to 10.00 a gallon profit in order to remain competitive. As the margin-of-profit in the food industry is very small, despite the high prices, most of us selling vanilla are making a minimal profit.
In the meantime….
With the climate changing worldwide, and especially in the Equatorial band where all three of these luxury crops are grown along with other important crops like sugar, bananas, and much more, the stakes are continually higher. This is why it’s so important to be proactive and do all you can to support tropical farmers by purchasing fairly traded products whenever possible.
You can help keep our farmers in business and get the best tasting vanilla available at the same time!
Our own Rain’s Choice vanilla extracts are made with 20% more vanilla beans than required by law. This gives our extracts an excellent depth of flavor that is so strikingly noticeable that it is not uncommon for us to get reviews like the one below.
We use sugar cane alcohol, vanilla bean extractives and distilled water. Period! All of our vanilla products are gmo and gluten-free.