The Hindu Business Line : Market intervention in vanilla may hurt STCL

THE continued downward trend in the prices of vanilla beans in the world market might land the public sector STCL Ltd in a loss, as it is in the process of buying three tonnes of cured beans at Rs 1,500 a kg as a market intervention exercise.

The Government had asked STCL to procure cured vanilla beans of A-grade quality. It has decided to buy from the cooperatives and farmers' groups the cured beans, quality of which is to be ensured by the Spices Board.

The current international price for cured beans is at $20-25 a kg and hence the price offered for green beans in the growing States is between Rs 100-120 a kg. At this rate, the cost of cured beans would come to around Rs 1,000 a kg.

When the market price is ruling at this level, STCL is likely to incur of a loss of Rs 500 on one kg of cured beans, official sources told Business Line. If the prices failed to move up to the level of the procurement price, STCL might land up in a total loss of Rs 15 lakh, they pointed out.

In the world market, the buyers were becoming increasingly quality conscious and hence, they were rejecting the product even if there was a marginal difference in the flavour profile, industry sources said. STCL might have to ensure the flavour profile besides looking for a sure market, they said.

The sources said four major companies had bought about 400 tonnes of green beans so far this season at the prevailing rates. "As the international price for the cured bean is at $20 to $25 a kg we could afford to offer a price higher than this," they said.

The buyers in the world market are inactive as they are waiting for the Madagascar crop to hit the market some time in January 2006. The demand for natural vanilla in the world market this year is projected to be less than 1,000 tonnes as against 2,500 tonnes in 1999, as the major buyers in the US are yet to enter the market.

Global output is estimated at around 2,200 tonnes, as more countries taken to vanilla cultivation. Indian production this year is estimated to cross 125 tonnes of cured beans from around 100 tonnes last year. Lack of demand has put the growers in difficulty and the prices offered are very low.

The major buyers in the world market, mainly in the US, have to deplete the stock held by them from the earlier purchases before entering the market, they said. "In fact nobody is sending a firm reply to the offers made by the producers and hence it is not going to be encouraging this year," said a senior official of a vanilla plantation company.