Vanilla prices have surged 130 percent in the U.S., the world’s No. 1 buyer, where vanilla ice cream is the most popular flavor, Bloomberg reported.
That means it will cost more to get chilled this summer on everyone’s favorite frozen treat. It also means cakes and perfume could face rising prices, according The Guardian.
Half the world’s vanilla beans come from Madagascar, with higher-end beans fetching $250 a kilogram compared with $80 a year ago and $20 as recently as 2012, according to Cook Flavoring. Cook gets 80 percent of its supply from Madagascar, according to Bloomberg. Even lower-grade beans sell for $210 a kilogram, up from $60 a year earlier.
Madagascar had poor harvests in 2015 and 2013, according to the Mirror. The 2015 harvest of 1,700 tonnes was around 800 tonnes short of the average annual yield. Demand is growing from emerging markets such as China, experts told the trade journal The Grocer.
Vanilla is not a controlled market, said Harry Rao of ingredients supplier Vanilla Mart. “A few big suppliers dictate the prices,” he said. There is no Fairtrade system for Madagascan vanilla, the Mirror reported. “The cost of vanilla tends to rise quickly but fall very slowly.”
Quality has also been affected, according to USAToday: The higher prices are attributed not only to lower supply, but also poorer quality. Some growers harvested beans prematurely. Some companies are looking for alternatives to avoid sourcing the more expensive vanilla, Bloomberg reports.”There’s a limit to what people will pay for natural vanilla and we’re nearing that point,” Cook Flavoring President Josephine Lochhead told Bloomberg.
Nestle SA and Whole Foods Market Inc. are using more natural flavors in food products, pushing up demand for vanilla.
But when prices were low for a prolonged period, global harvests shrank. Madagascan 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 told Bloomberg in an interview from the capital, Antannaarivo.
After 10 years of low vanilla prices, production fell in China, Indonesia and Uganda as farmers switched to other crops and inventories shrank, according to data from the U.N. Food & Agriculture Organization show.
Madagascar continued to supply cheap product because the labor-intensive process of harvesting and curing vanilla remained mostly profitable, Bloomberg reported. Workers were 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 rose, growers in Madagascar started harvesting more pods prematurely and vacuum-sealing them rather than curing and drying them. This was partly to avoid theft, but also to capitalize on the price rally. Packaging allowed wholesalers to stockpile the vanilla as world supplies shrank. But because the beans were immature, the vanillin compound didn’t mature.
Harvest season begins in July, and Madagascar’s harvest is expected to increase from about 1,200 to 1,600 tons in 2015 to about 2,000 tons in 2016, according to the Commerce Minister Rabesahala.
The country’s National Vanilla Platform, a government and industry body created in December, is working to ensure the quality of the crop when it reaches the world market later this year.It’s checking the inventory of an estimated 100,000 growers, collectors and exporters.
“We are very serious about this,” Rabesahala said, according to Bloomberg. “We don’t want to to jeopardize the next campaign.”
