Vanilla Pricing Volatility

As you may have noticed, the price of vanilla has been steadily climbing recently, whereby recently I mean the last 5 or so years. Unfortunately, that slope is getting steeper, not leveling out. The majority of the world’s vanilla comes from the island nation of Madagascar, in the Indian Ocean east of Africa. Last year’s crop was dramatically below expected levels at only 1200 tons, way short of expectations of 1800-2200 tons. Prices have been steadily climbing for over a year.

To exaggerate an already extremely constricted supply, now we have the massive damage done by Cyclone Enawo last Tuesday, March 7th, to compound the problem. The cyclone made landfall with flooding and winds between 200 & 300km/h. Reports are estimating damage to 80-90% of the crop in two of the largest producing areas.

Exports have been halted until a thorough assessment of the damage has been completed, at which time a more final sense of the price increase should be available. Prices are up already in response to this, and is almost certainly going to continue to increase.

On top of the higher price, we may see what’s called ‘hurricane vanilla’ become available in the market. At this time of year, the vanilla is on the vine ripening. The beans are full size and full weight at this point in their growth cycle. However, the flavor hasn’t developed yet. That happens in the last 3-4 months, and that won’t be happening for the crop in these regions this year. The salvageable under-ripened beans may be sold as a last resort, but the quality will be low. If we’re forced to get into this grade of product as the year progresses, we’ll be sure to label the product as such and be perfectly upfront about what’s going on.

Update on May 04, 2017
Gordon, our in house product guru, tracked down this excellent article from the Baltimore Sun describing the mechanics of pricing this difficult and essential crop. This was written at the end of 2016, before the Cyclone damage this March. Read the article With vanilla shortage, prices soar by Lorraine Mirabella.

Update on September 18, 2018
Quartz has an interesting ‘by the numbers’ piece published yesterday outlining the economics of this essential ingredient. Vanilla is now more valuable (by a large margin) than silver, and only about 1% of the vanilla flavored products on the market use real vanilla to imbue that flavor. The vast majority use cheaper alternatives that get close, but not quite all the way to the authentic and complex flavor of this difficult crop. Read the article Quarz Obsession | Vanilla.