Nothing plain about vanilla

Sky-High Cost of Top Ice-Cream (1) copy


There’s nothing plain about the vanilla market.
The price of the bean used to flavour everything from ice cream and chocolate to cola and pastries more than tripled in the past year as output slipped and quality suffered. That should have been a boon for top producer Madagascar, the island nation off Africa’s southeast coast. Instead, the government is imposing measures to improve supply and quality to protect its market share.
At a time when Nestle SA and Whole Foods Market Inc. are using more natural flavours in food products, vanilla demand is growing, particularly in developing countries. But a prolonged price slump led to smaller global harvests. And in Madagascar, which supplies half the world’s beans, farmers took short-cuts in the process used to create the aromatic qualities prized by consumers. “The branding of Madagascar vanilla in the international market is threatened,” Commerce Minister Henri Rabesahala said in a telephone interview from the capital, Antannaarivo.

Low-Cost Grower
In recent years, after a decade of low vanilla prices, production declined in places like China, Indonesia and Uganda as farmers switched to other crops and inventories shrank, data from the United Nations Food & Agriculture Organization show. Madagascar remained a low-cost supplier because the labor-intensive harvesting and curing of vanilla remained mostly profitable with workers paid $1.50 a day, compared with $10 elsewhere, according to Cook Flavoring Co., a U.S. processor that buys from several countries.
As prices improved, growers in Madagascar started harvesting more pods sooner than normal and packaging them in vacuum-sealed containers rather than curing and drying them. This was partly to avoid theft, but also to capitalize on the rally. The packaging gave wholesalers the flexibility to wait for higher prices as global supply shrank. But because the beans were so immature, they hadn’t fully developed the compound — vanillin — responsible for all the flavor and aroma. It was almost like picking wine grapes before their time.

Rosewood Smugglers
Compounding the problem was money laundering linked to illegal exports of rosewood, according to the government. The red-hued timber is prized by manufacturers of luxury furniture and musical instruments, mostly in China. Since the government banned unlicensed logging in 2010, traffickers have used their illegal proceeds to buy green vanilla from local farmers that can be sold legally to generate dollar income, according to Rabesahala. Most didn’t care that they were buying immature, vacuum-packed beans.
With a smaller Madagascar crop last year and fewer good-quality beans, prices surged in the U.S., the world’s biggest buyer, where vanilla ice cream remains the most-popular flavor. Higher-end vanilla fetches $250 a kilogram — if you can find it — compared with $80 a year earlier and $20 as recently as 2012, according to Cook Flavoring, which gets 80 percent of its supply from Madagascar. Even lower-grade beans sell for $210, up from $60 a year earlier.
Dairies and bakeries are balking at the increases, and some are switching from pure-vanilla extracts and powders to cheaper alternatives, like synthetics, and products blended with lower-grade beans or those made with natural ingredients that mimic the flavor of vanillin, said Josephine Lochhead, president of Cook Flavoring, which her grandfather founded in 1918.
To discourage lower-grade beans, Madagascar agreed this month to block exports of immature green vanilla, imposed a ban on vacuum-packed pods and increased the power of local security organizations to act against transgressors. In recent weeks, the government burned hundreds of kilograms of seized green vanilla, Rabesahala said.

More Supply
High prices may not last. With the rally in its fourth year, more production is on the way, and Madagascar will harvest a bigger crop this year than last, in keeping with the plant’s biennial cycle, said Lochhead at the Cook Flavoring. In 2002, prices fell from more than $500 to $15 in just a few months, once it became clear supplies were increasing, she said.
This year’s harvest in Madagascar, which begins in July, probably will rise to about 2,000 tons from about 1,200 to 1,600 tons in 2015, according to Rabesahala, the commerce minister.

Fresh Brown Organic Vanilla Bean

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