The Hindu Business Line : Vanilla prices unlikely to pick up this year

IF the current market trend is any indication, the prices of vanilla are unlikely to pick up this year despite a projected fall in production in Madagascar.

According to market sources, this year, vanilla output in Madagascar, which had an over-production last year, is estimated at around 600 tonnes. With a carry forward stock of 400 tonnes, the total availability in the world's largest producing country will be around 1,000 tonnes.

The new entrants into the vanilla business would fill up the void created by the decline in Madagascar's output. As a result, the total world production might remain unchanged at last year's level of 2,500 tonnes, the sources told Business Line.

Indian production will be around 120 tonnes and with a carry forward stock of 20 to 30 tonnes, the availability will be around 150 tonnes.

In fact, 50 per cent of the user industry, such as ice cream, biscuits and flavouring, in the top consuming countries (mainly the US) is yet to start using natural vanillin again. The major users are said to be holding stock for two years. "The blow of high cost purchase is so severe that it will take some time for them to revert," they pointed out. Therefore, the situation appears to be grim for the current year and even next year.

Harvesting in the coastal belts of Karnataka and Kerala has already started, while it will commence in the hilly areas in December. The sources add that there are no buyers at present, as they are waiting for a clear picture to emerge from Madagascar, which will start selling in January 2006.

The current situation reminds one of the 1994-95 season, when the vanilla prices dropped to $12 a kg through backdoor sales in Madagascar. In fact, before 1994, Madagascar, which was controlling the world market, was selling at $70-75 a kg. But after the change in Government through a coup, backdoor selling started and pushed the prices down. Thereafter, the price of vanilla moved up gradually to touch $500 a kg in 2003. Since then, it has witnessed a sharp decline and it is presently $15 a kg. In Papua New Guinea, gourmet grade is offered at $20 a kg. "The current overall situation does not look like promising," they said.

Indian exports during April-July this year dropped to 8.95 tonnes valued at Rs 2.42 crore from 14.16 tonnes worth Rs 22.26 crore during the corresponding period a year ago. The unit value fell to Rs 2,703.84 a kg from Rs 15,721.96 a kg. Exports in 2004-05 stood at 38 tonnes against 27 tonnes in 2003-04. The consumption of synthetic vanillin in the country is estimated at 500 tonnes a year, while that of natural vanillin is negligible. The consumption pattern of industries is: biscuits -11.50 per cent; ice cream - 4.80 per cent; perfumery/flavours - 27.90 per cent; Agarbathi - 52 per cent; pharmaceuticals - 2.80 per cent and miscellaneous- 0.1 per cent.

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