The Hindu Business Line : Vanilla fails to lure buyers despite lower price

THE world vanilla market continues to witness a slump, as most of the major buyers are not in the market despite the rock-bottom price that has resulted in the trading limited to around 50 per cent of the total global production.

The world production last year is estimated at around 2,300 tonnes with Madagascar topping with about 1,600 tonnes.

Now the buyers are "very stringent on the quality", market sources told Business Line. The average price offered at present is reported to be somewhere between $25-$35 a kg.

They said the industry was yet to revert to the use of natural vanillin in their products, which had so far been at a very slow pace.

And yet, every body believes that the prices will stabilise at moderate levels in two to three years.

Indian production last season is estimated at around 80 tonnes. The country exported 38 tonnes worth Rs 27.59 crore in 2004-05 as against 27 tonnes worth Rs 32.72 crore in the previous year.

The unit valued realised last fiscal was Rs 7,228.38 a kg compared to 14,178.10 a kg in 2003-04.

It is understood that many processors in the country are holding back substantial stock anticipating that the prices would increase.

According to experts, the cured beans could be stocked for about two years provided it is kept in suitable conditions. But due to the humid and rainy conditions prevailing in Kerala it could be risky.

Besides, there could be weight loss due to moisture evaporation. Many processors in order to avoid the risk have liquidated their produce, as it is better to sell immediately after the harvest.

The Indian production, they said, would cross 100 tonne of cured beans this year, as many new plantations would be yielding in the next season.

Increasing vanilla production in countries from Papua New Guinea to Colombia has led to as sharp decline in the price of vanilla beans and extract in the world market.

The production in Madagascar, the world's largest producer, is expected to be less this year as the country had a good crop in 2004.

The production there had gone up from 400 tonnes in 2003 to an estimated 1,600 tonnes last year.

The sharp fall in production in 2003 have pushed up the prices to an unprecedented level of around $500 a kg, they said.

In fact, for the past five years, farmers have benefited from high prices due to political crisis and devastating cyclones in Madagascar.

High prices encouraged other countries including Papua New Guinea, Uganda, India, Costa Rica and Colombia to enter the vanilla business.

These production increases, combined with a drop in demand from food manufacturers who are using more and more synthetic vanillin, have sent wholesale bean prices down almost 90 per cent from their peak in December 2003, the experts said.

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