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VANILLA MARKET UPDATE 2017

Madagsacar's output may have been reduced by 30%

On March 2017 the worst tropical cyclone in 13 years struck Madagascar.This may push up already record prices for vanilla beans that are used to flavor everything from cafe lattes to ice cream.

The storm that killed at least 78 people in the Indian Ocean island nation last week may have damaged as much as 30 percent of the crop, according to Aust & Hachmann Canada Ltd., the world’s oldest vanilla company.

The vanilla market, worth about $1.3 billion a year at current prices, was already tight after output slipped and quality suffered over the past two years in Madagascar, which accounts for more than three quarters of global supply. Prices have doubled in a little over a year to more than $500 a kilogram.

“It’s most likely going to increase prices,” said chief executive officer of Nielsen-Massey Vanillas Inc. “How much they increase and for how long is still yet to be determined.”

Demand for pure, natural vanilla has been growing after food manufacturers including Nestle SA and Hershey Co. shifted from artificial flavoring. Farmers haven’t been able to keep up with increasing consumption, as it takes three to four years for plants to start producing vanilla beans

Global Impact

When prices are high, it gives farmers an incentive to pick the beans before they reach maturity. Immature beans lack flavour. When price reaches a certain limit, some companies opt for synthetic vanillin. Natural vanilla is more important in ice cream products than in bakery products which include other ingredients.

MADAGASCAR: The 2015 crop was low, 1,300 to 1,400 tonnes. The 2016 harvest started in June or July and was ready for shipment about November or December. The flowering for the 2016 crop was good, and there were hopes prices woulkd start to drop in the fourth quarter of 2016.

UGANDA: The climate allows two vanilla harvests a year. The global vanilla shortage affects prices and supplies here too.

INDIA: Vanilla is labour intensive compared with other spices and the sustained period of lower prices, led to less interest in growing vanilla. Many people prefer working in towns to farms in the country. The good news is vanilla replanting has started in India.

March 2017

NOTE: India has been producing high quality vanilla for many years but it is still events in Madagascar that affect the global supply. More than 80% of the world’s vanilla comes from Madagascar.