Vanilla price reaches record high after Madagascar cyclone

The price of vanilla has soared to a record high as Madagascar, the world’s top producer of vanilla beans, grapples with damage wrought by a cyclone.

Used in ice cream, chocolate and perfume, vanilla pods are trading at an all-time high of $600 a kilogramme, according to Craig Nielsen of US vanilla and flavourings group Nielsen Massey.

Prices for vanilla, which is not traded on an exchange, had already surged over the past year thanks to speculative hoarding and rising demand as more consumers shun artificial flavourings and ingredients. The price climbed from about $100 a kg in 2015 to $450-$500 at the start of this year.

“Inventories were already depleted, and now we have the damage caused by the cyclone,” said Mr Nielsen. “It will be a tough time [for the vanilla market] for the next couple of years.”

It was a view echoed by Lawrence Kurzius, chief executive of McCormick, the US spice and food ingredients company. He told investors at the company’s first-quarter results that he sees this “high vanilla pricing continuing certainly well into 2018”.

Vanilla pods grow from tropical vines, and it takes about three years for a plant to mature and produce beans. Unlike crops harvested annually, “it doesn’t have a quick bounce back”, a separate McCormick executive added.

Cyclone Enawo has displaced almost 500,000 people since it struck the island off Africa’s east coast last month. The UN last week warned that agricultural damage had “started to affect the socio-economic situation in the north-east”. It said that vanilla pods that had been stored had been stolen while the price of basic food was increasing.

Madagascar produces about 80 to 85 per cent of the world’s vanilla crop. Other producers include Papua New Guinea, Indonesia, Uganda and India.

Eurovanille, the French vanilla trader, estimates the tropical island’s production losses amount to about 20 per cent in green vanilla bean volumes, before they are processed, for 2017. Last year, production was hit by drought, and traders were hoping that output would recover in 2017. The cyclone has already erased any uplift in production.

It will be a tough time [for the vanilla market] for the next couple of years

“The biggest issue will be the quality,” said Mélanie Legris, sales and marketing manager at Eurovanille.

That is exerting more upward pressure on prices given large food companies including Nestlé and Hershey have said they will use natural flavourings. This has led to a hurried search for new sources of natural vanilla flavourings. About 90 per cent of the vanilla flavouring used by the world’s confectionery, cake and ice-cream makers is synthetic, mainly derived from petroleum and costing a fraction of vanilla extracted from the beans.

Vanilla traders and flavouring companies are providing aid and donations to Madagascar’s relief effort. The island’s public infrastructure has been severely damaged, with electricity and phone services cut off. Nielsen-Massey said it had donated $50,000, while Swiss cocoa and chocolate group Barry Callebaut and flavourings group Prova, which have a joint project in Madagascar, said both companies were donating SFr50,000 for support of the local farmers.