The Hindu Business Line : Vanilla prices may fall further on weak demand

Slipping trend
Madagascar is projected to have a good crop
No good order from the US, which is the major market
First grade beans fetching only Rs 50-60/kg
Current international price far below remunerative levels

G.K. Nair

Kochi, Oct . 11 Lack of growth in demand coupled with projected good crop in Madagascar this year could push the prices of cured vanilla beans further down.

The prices in the international market are reported to have dropped to $16-18 a kg for best selected quality vanilla. There has been no good order from the main market, the US, so far this year except for some 30-100 kg, an industry source told Business Line, adding “We don’t entertain these kind of orders, which are not beneficial. If it is for at least a tonne a month, then it would be somewhat worthy of accepting”.

“We are a late entrant in the world market and an insignificant player, where as Madagascar has been there for long and has a brand name,” he said. “On the other hand, they undercut the prices as the cost of production in that country is much less,” he added.

Lower output seen

The cost of production in India, especially in Kerala, which produces over 50 per cent of the total national output, is comparatively much higher. Therefore, the current international price is far below remunerative levels.

At the current rate, even major corporate plantation companies are finding it difficult to maintain their existing vanilla gardens, another industry source pointed out.

He said vanilla harvesting had started in the plains of Kerala and the first grade beans were fetching only Rs 50–60 a kg. Total production this year is expected to be less due to diseases caused by incessant rains in September last, he said. As a result, the total cured bean output is estimated to be somewhere between 175–200 tonnes.

The sharp fall in prices has brought down the area under the crop from 5,800 hectares in 2005 to 5,100 hectares in 2006. This has declined further last year as several farmers have given up cultivation of the crop, he said.

Domestic offtake

As the international demand does not show any sign of picking up the only solution to help the farmers is to increase the consumption of natural vanilla in the Indian domestic market, which imports large quantity of synthetic vanilla every year, a growers group said.

Though the usage of natural vanilla in ice creams is gaining acceptance among ice cream manufacturers as more and more companies had started using it for flavouring instead of synthetic vanilla, it has not reached the expected levels, the group said.

The Union Minister of State for Commerce, Mr Jairam Ramesh, recently said the Centre was considering extension of subsidy to manufacturers who use natural vanilla in their products.

But, that alone would not help, said the plantation company official. The government needs to enforce a food law making it mandatory for the manufacturers to use natural vanilla and including labelling on similar lines the Food and Drug Administration has done in the US, he argued.

Thus, if the Government initiated measures to stop the use of synthetic vanilla in food products and instead use natural vanilla, that would push the domestic demand and the growers would get fair prices for their product, he added.