Vanilla Madagascar - crisis recovery... or not yet?

Rémi Pulvérail

3 January 2019

Following the interesting November report from Aust & Hachmann (Vanilla Market Update - November 2018), we would like to emphasize a few points which - to our opinion- are quite questionable.

The report is very optimistic, and we all hope that the unusual crisis on the vanilla market comes to an end as the current situation does not benefit anyone. However, some more pessimistic elements (unfortunately) should also be considered to make up one’s mind:

The growing demand for vanilla green beans at the early stage of the crop is fuelling the crisis and major users need to be aware of that. In July 2018, hundreds of tons of green beans have been purchased by major fragrance and flavour (F&F) houses (most of the time at crazy prices) to locally produce what one’s calls ’quick processed beans’. The process starting from green beans basically consists in cutting and heating beans on ovens to increase its vanillin content. This grade is convenient for the industry as it is a cheap and fast process (compared to the 5/6 long months of the traditional curing process...). The drawbacks of this fast-growing market is that farmers will get far less revenues when they sell green beans rather than cured beans... and will therefore do their utmost to keep prices very high to compensate their loss.

In addition, the very high market price for green beans in July has been a benchmark for all the players.

Last but not least, on the long run one must take into account that farmers shall lose their expertise to cure the beans (traditional know-how) which is a serious issue from a sustainability and ethics standpoint.

The bulk market which starts around October (cured beans sold by farmers to exporters) has suffered from this green beans market trend: farmers being reluctant to significantly reduce prices.

So far, the other traditional producing countries (despite historical high prices) are not credible alternate sources - in terms of volume and even quality - to Madagascar: the industry is still highly dependent on this ’risky’ country, which is not a good news.

One’s shall ask why F&F houses have not more successfully rolled out their ’sustainable’ sourcing projects elsewhere to diversify their risks... especially at this very high market price?

The flowering at this stage is more than poor both in the SAVA [1] region and in the other producing areas like Mananara (next kingdom of Vanilla according to ’connoisseurs’), which is a major threat for the next crop.

Buyers are more than ever buying from hand to mouth and less and less accept to pre-finance their suppliers, which is a key issue at all supply chain levels.

Restoring some visibility for the local players (at least in terms of contracted volume) is one of the key criteria which shall bring some relief on the market. By the way, this is a key sustainability topic, even if apparently not relevant according to the SVI group...

Let’s not forget the presidential elections which were held on November 7 and December 19, 2018.

And going forward... the potential climatic issues ahead! January to March is the yearly period when cyclones and heavy rains come from the east. This shall at worse be bad news (deteriorate the current situation), at best be...no news (for sure not improve the situation).