Thursday, April 14, 2005

The Collapse of Vanilla Prices

Vanilla prices have definitely dropped and everyone who uses pure vanilla is cheering. I'm glad to see the prices drop for several reasons:

When prices hit $250 a kilo at point of origin, most industrial users (mainly frozen dessert manufacturers) stopped using vanilla entirely or switched to cheap synthetics, and vanilla consumption dropped dramatically. In 1998, world demand for pure vanilla was 2300 metric tons of vanilla beans annually. In 2004 it was 1200 metric tons and dropping! Consumption dropped by nearly half in six years!

When prices reached $500 a kilo at point of origin, growing vanilla was as dangerous as growing drugs! Theft, murder, and hijackings were commonplace in most vanilla-growing regions. In Madagascar, workers in the big processing houses had to change clothing when entering and leaving the workplace and were subject to pat-downs. The vanilla was put into large containers and welded shut each night and then opened with a blow torch the next morning! In Indonesia some villages built watch towers and growers all harvested the same day to prevent theft. In Papua New Guinea buses and trucks were ambushed along the highways and the vanilla and cash stolen. Mexico set up check-points along the highway and searched cars for stolen vanilla. Millitary helicopters circled plantations.

Growers harvested their vanilla well before it was ready to avoid theft. As a result, vanilla quality was uneven. Farmers who had paid premium prices to have their crops certified organic no longer bothered with the expensive and time-consuming process because their crops were valuable without certification. As a result, it became nearly impossible to find certified organic vanilla.

Individuals and cooperative groups worldwide planted vanilla with hopes of getting rich -- or at least paying their bills -- as the high prices spoke of hope. Coffee had collapsed a few years before the vanilla boom and growers tore up one crop to replace the other. Eventually an enormous overabundance of vanilla flooded the market from tropical countries worldwide. Some of the vanilla is premium quality, some is mediocre. But most of it was grown with hopes for a better life.

Now the craziness of the past several years is fading into the past...but what is the fallout of a boom/bust situation like this? Unfortunately, it's huge, but it's something that most of us are unlikey to hear about. Vanilla is an insignificant crop when compared with chocolate, coffee, sugar, or most other tropical commodities. We're talking less than 2500 metric tons in a boom time compared with millions of tons of coffee or cocoa beans. More than 97% of the world use of vanilla is from synthetics. So, it's highly unlikely that stories of the impact of the vanilla collapse will be headlines in industrialized countries.

So, here's what's happening currently: Most of the industrial users haven't switched back to pure vanilla, so tons and tons of vanilla are going to waste. Farmers have watched their latest dreams of getting a little further ahead dissolve into thin air. By the way, unless they knew how to properly cure and dry vanilla beans, the farmers didn't really benefit from the high prices. Rather, it was processors who gained from the high prices. A lot of middlemen, hopeful of breaking into the market and making it big-time are now considering new career options. The big vanilla companies are experiencing huge competition for the relatively small marketshare of vanilla sales. And the little companies are hanging on tooth and nail as it's nearly impossible for them to drop their prices rock-bottom to match the prices of the big companies as they haven't the resources to make it through until the prices stabilize. The only people to benefit from this transitional period are the consumers.

Personally, I hope that all of you who read this blog will take advantage of the low prices to use more pure vanilla. If you are at a loss for ways to use vanilla, our site offers hundreds of wonderful recipes and ideas: Our chefs-in-residence provide myriad ideas for using vanilla:

While most of us won't take the time to do this, if you are so motivated, please encourage your favorite ice cream makers, chefs, restaurants, etc. to use pure vanilla in their products. More on this topic tomorrow.

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