Over four years, prices for vanilla have jumped more than tenfold (back in 2012, a kilo of vanilla cost only $20), but in the near future the vanilla rally may end

Vanilla pods (Photo: DPA)

The shortage of high-quality raw materials on the world vanilla market has led to a new price hike. In the last year alone, prices for the popular spice, used to flavor ice cream, confectionery and many other sweet dishes, have tripled, from $80 to $250 per kilogram of high-quality pods. Over four years, prices have jumped more than tenfold (back in 2012, a kilo of vanilla cost only $20), but the vanilla rally could end in the near future, warns Bloomberg .

“There are limits to how much people are willing to pay for natural vanilla, and we are approaching that limit,” Josephine Lochhead, head of Cook Flavoring, one of the largest companies in the spice market, told the agency.

The main reason for the sharp rise in vanilla prices was the increased demand for natural flavors from companies such as Nestle and Whole Foods Market, amid a general shortage of quality raw materials and declining harvests.

The fact is that vanilla is difficult to grow (the insects that pollinate it are found only in Mexico, and in other regions the flowers have to be pollinated by hand), and therefore, after a sharp drop in prices in 2002, producers in China, Indonesia and Uganda began to switch to other crops. As a result, Madagascar became the largest producer of vanilla, where local residents were willing to work on plantations for $1.5 a day. In 2014, vanilla exports brought Madagascar, which accounts for about half of the supply of this spice to the world market, about $280 million; only nickel mining provided greater profits.

However, in 2015, the vanilla harvest in Madagascar was smaller than usual, while the quality of the product fell sharply. Trying to make the most of their money while vanilla prices are rising, local farmers have started harvesting before the pods have fully ripened. As a result, unripe pods flooded into the market, not having had time to accumulate natural vanillin, which, in fact, gives the spice its taste and aroma.

“The brand of Madagascar vanilla in the international market is under threat,” told Bloomberg Madagascar Trade Minister Henry Rabesahala . Alarmed authorities have already banned the export of unripe vanilla pods; in the last few weeks alone, in Madagascar, according to the head of the Ministry of Trade, several hundred kilograms of confiscated green vanilla have been destroyed.

At the same time, the Madagascar authorities are making all necessary efforts to increase the export of high-quality, and now very expensive, vanilla. In 2016, it is planned to collect about 2 thousand tons of spice from local plantations, the “harvest” of which will begin in July, compared to 1.2–1.6 thousand (according to various estimates) last year.

“We take this very seriously. We're not kidding. We don’t want to risk next season,” Rabesahala explained.

However, experts believe that in the near future, vanilla prices could collapse as quickly as what happened in 2002, when the cost of a kilogram of the spice fell from $500 to $15 in just a few months. The reason for the impending turnaround is said to be the rapid expansion of the area of vanilla plantations, which sooner or later should lead to a sharp increase in supplies.

“For example, in India over the last couple of years [vanilla] has been planted like crazy,” explained to Bloomberg . David van der Walde, head of Canadian vanilla distributor Aust & Hachmann,

World prices for vanilla have tripled in a year