The Hindu Business Line : Vanilla prices may gain 10% this year

Kochi April 27 Prospects of a decline in the production of vanilla beans in the world's largest producer, Madagascar, following six devastating cyclones that tore the Indian Ocean Island during the past three months, could push up its prices this year.

Though the extent of damage to vanilla crops is yet to be known, one report quoting government sources puts it at 80 per cent. Harvesting begins in July.

However, market sources estimated the loss ranging from 20 to 40 per cent. Madagascar was expecting a good crop this year ranging between 1,600-1,800 tonnes as against its usual output of 1,100-1,200 tonne. Moderate estimates put the production at around 1,000 tonnes this year. The world demand for the year is estimated at between 1,500 tonnes and 1,600 tonnes while the total global output is estimated at 2,000 tonnes.

The world demand has failed to pick up as anticipated, as the end-users who had switched over to synthetic vanillin when the natural vanilla prices shot up to $450-500 a kg about four years ago, have not yet reverted to the natural product. They may be waiting for the prices to stabilise at acceptable levels, industry sources said. However, with the existing demand and the drop in Madagascar production the prices are expected to move up late this year and early next year to remunerative levels, official sources here said.

Meanwhile, Mr C.V. Jacob, Managing Director, Synthite Industrial Chemicals told Business Line that his company had exported 40 tonnes of cured vanilla beans last fiscal at $18 a kg. According to him, the crop loss in Madagascar was estimated at 20 per cent and hence a 10 per cent increase in prices could be expected this year.

The demand has to emanate from the end-users mainly the food and ice cream industry in the US and Europe. But, it is not forthcoming as anticipated as the reversion from synthetic vanillin to the natural product is at a very slow pace.

As the prices have remained below remunerative levels for a long time, some farmers have even decided to remove the plants while others are just pruning them and leaving it without carrying out the pollination. If they do the pollination then they would have to do the follow up activities involving huge expenditure, which the growers cannot afford at current prices, a planter said.

The Indian production is estimated at around 200 tonnes of cured bean.

The production in other countries is also going to be on the higher side. Therefore, if the demand failed to pick up corresponding to the increase in production, the increase in prices would be very slow, they said.

According to them, the only solution now to help the Indian growers is to increase the use of natural vanillin in the country, they said. At present, consumption of synthetic vanillin in the country is estimated at round 500 tonne a year and if part of it is substituted by natural vanillin the scope for vanilla cultivation in the country, mainly in the southern states, is enormous.

Annual vanillin growth in the mature markets of Europe and the US is reportedly stable at around two per cent. "Synthetic vanillin is a cost effective alternative to natural vanilla and the global demand currently hovers around 16,000 tonne a year."

In 1998, 2,300 tonne of vanilla beans were used worldwide. In 2004, it was 1,200 tonne. In 2005-06 it has come down to an estimated 1,000 tonne as against an estimated production of 2,300 tonne. Thus, there has been a declining trend creating a more sellers and few buyers situation.

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