Here We Go Again: Another Vanilla Crisis Looms!
Yep, we sure did and the price of a little bottle of vanilla was ridiculously high! So how can this be happening again? Sadly, very easily. Worse, it shouldn’t have to happen!
In the commodity world the operative words are supply and demand. When it comes to anything grown in the tropics, most especially luxury crops like coffee, chocolate, vanilla and sugar, supply and demand are sometimes manipulated to drive prices up or down. More than anything, however, most buyers attempt to pay the lowest possible prices and sell as high as the market will bear.
Coffee, cacao and sugar are large enough volume to be sold on the commodities market, including sales of futures. Vanilla is the poor stepsister of these bigger luxury crops. While the other three commodities sell in millions of containers, vanilla sells in metric tons. Only 2300 metric tons in a very good year. And while it once sold on the exchange, those days ended in the early decades of the twentieth century.
So why is vanilla the poor stepsister? After all, everyone loves vanilla and it’s in just about everything — ice cream, sodas, desserts, yogurt, candles, perfume — why isn’t it on the exchange?
There are cheap, readily available imitation flavors: Only one percent (1%) of everything vanilla-flavored and perfumed worldwide is made with pure vanilla!
There simply aren’t good imitations for coffee or cacao. There are sugar substitutes and corn syrup but because sweet is addictive to humans, the demand for cane and beet sugars is always very high.
Here’s a brief overview of vanilla in the last 15 years.
In 1997, cured, dried gourmet quality vanilla beans were selling for $5 a pound at source in Madagascar. In some countries it sold for even less. Farmers selling the green, un-dried beans were paid anywhere between a nickle and 35 cents for 2.2 pounds of vanilla. The people who cured and dried the beans made a little more than the farmers, just enough to break even, if that.
Understandably, farmers tore up their crops, then major weather events destroyed much of the vanilla crops still being grown. Suddenly there was low supply/high demand.
By 2003 the prices had shot up to $225 a pound at source! Sounds good for the farmer and those who cured and dried the beans, doesn’t it?
Not necessarily. Beans were stolen, farmers were killed, crops were harvested too early to prevent theft. Local police and the military had check points to monitor outsiders. For about two years, growing vanilla was as dangerous as the drug trade.
The high prices helped those who understood that soon the prices would collapse again. They bought trucks, generators and other items that would make life a little easier. For many farmers in rural areas where money was so hard to come by they didn’t quite grasp the concept of lots of it, they squandered it on palm wine, women and even status symbols they couldn’t actually use, such as refrigerators in areas with no electricity. (They double well as a dresser, however.)
In 2004 the prices dropped dramatically and continued to fall. Those who could, diversified their crops. Given that the majority of farmers have the equivalent of five acres at most, they tore up their vanilla and planted something else.
By 2010, vanilla was selling for $7.00 a pound — two dollars more than fifteen years earlier! In Madagascar, farmers were encouraged to store part of their crops in order to force prices up. Remember — supply/demand. You do what you must in order to survive. Problem is, many didn’t have storage for the vanilla.
Now all the stashed vanilla has been used. Extreme weather events and global climate change are affecting production. Mexico lost 90% of their 2011 crop, first to a bad freeze, then heat and drought, the very same drought that devastated Texas crops. Some countries suffered major loss due to plant viruses.
Vanilla has gone up 20% at source in the last few months and is expected to go up another 20% within the next two months. You won’t see a change at the retail end for a while, but there will be a change in price, maybe before the winter holidays.
Vanilla is incredibly labor-intensive. That’s why it’s expensive, and it really should cost more than it does. Growing vanilla requires a long-term investment of time, energy and money as the first big crop won’t be ready for about five years.
Only those who are still growing it will benefit from the price increase. When farmers see that vanilla prices are rising quickly, they’ll plant again with hopes of making money. Chances are, the prices will drop again before they get the windfall they desperately need.
Most vanilla is grown organically but the majority of farmers cannot afford to pay certification fees. There are only a few groups worldwide that are Fair Trade certified. If they could be certified, they could make enough money to survive. The reality is that the majority of vanilla sold is not purchased at fair trade prices.
What will happen next? We have no idea how high the prices will go. What we do know is that the big vanilla companies that sell both pure and imitation vanillas have no intention of paying the high prices caused by the shortage. Instead, they will promote their imitation vanilla and the big manufacturers will happily buy it.
The manufacturers will blatantly ignore the FDA regulations and will use “natural flavors” or “other natural flavors” in their products. These are euphemisms for imitation ingredients, in this case vanillin created from rice bran extract or paper pulp effluent. In fact, many of the manufacturers of the pricey boutique vanilla ice creams sold to the big supermarkets switched to imitations during the last crisis and never switched back to pure vanilla!
The use of imitation vanilla further undermines the farmers, of course. Their market continues to shrink yearly. Only specialty food manufacturers and consumers who care about quality will buy pure vanilla. After all, why pay a premium price if you can use imitation?
Some farmers have – or will – plant other crops. Others have – or will – attempt to migrate to industrialized countries hoping for work. With stricter immigration laws, the dream of a better life is increasingly difficult. Fewer children will go to school as there are school fees in most developing countries. More children will go without medical care. It’s a vicious cycle where no one wins and ultimately, it affects us all.
What you can do:
- If you know that the company you purchase vanilla from is paying fair prices for product, keep buying from them.
- If you don’t know, find a company that does. Then tell your friends.
- If you feel so inclined, write to the ice cream or yogurt company you like and encourage them to use pure vanilla in their products.
The Vanilla Company purchases beans from a collective in Madagascar and directly from farmers in Mexico and Tahiti. We pay fair prices to the growers. We also provide information for farmers as well as educational opportunities when possible either through the Global Women’s Leadership Network or Worldwide Farmers Exchange.
Until we, as consumers, take a stand to support small family farms and farmers, whether here in the US or elsewhere in the world, we will see cyclic events like this repeat until finally, the farms or the products will cease to exist. In this case, there will be no more pure vanilla.
As more information becomes available, I will post it at my site at www.vanillaqueen.com and on The Vanilla Company Facebook Page.
Please help us save pure vanilla!
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