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Vanilla Pods

Why booming demand is making vanilla taste worse

There’s nothing plain about the vanilla market. The price of the bean used to flavour everything from ice cream and chocolate to cola and pastries, more than tripled in the past year as output slipped and quality suffered.

That should have been a boon for top producer Madagascar, the island nation off Africa’s southeast coast. Instead, the government is imposing measures to improve supply and quality to protect its market share.

At a time when Nestle SA and Whole Foods Market are using more natural flavours in food products, vanilla demand is growing, particularly in developing countries. But a prolonged price slump led to smaller global harvests.

And in Madagascar, which supplies half the world’s beans, farmers took short-cuts in the process used to create the aromatic qualities prized by consumers.

“The branding of Madagascar vanilla in the international market is threatened,” the counbtry’s Commerce Minister Henri Rabesahala has said.

In recent years, after a decade of low vanilla prices, production declined in places like China, Indonesia and Uganda as farmers switched to other crops and inventories shrank, data from the UN FAO show.

Madagascar remained a low-cost supplier because the labour-intensive harvesting and curing of vanilla remained mostly profitable with workers paid $1.50 a day, compared with $10 elsewhere, according to Cook Flavoring, a US processor that buys from several countries.

As prices improved, growers in Madagascar started harvesting more pods sooner than normal and packaging them in vacuum-sealed containers rather than curing and drying them.

This was partly to avoid theft, but also to capitalise on the rally. The packaging gave wholesalers the flexibility to wait for higher prices as global supply shrank. But because the beans were so immature, they hadn’t fully developed the compound – vanillin – responsible for all the flavour and aroma. It was almost like picking wine grapes before their time.

Rosewood smugglers

Compounding the problem was money laundering linked to illegal exports of rosewood, according to the government. The red-hued timber is prized by manufacturers of luxury furniture and musical instruments, mostly in China.

Since the government banned unlicensed logging in 2010, traffickers have used their illegal proceeds to buy green vanilla from local farmers that can be sold legally to generate dollar income, according to Rabesahala. Most didn’t care that they were buying immature, vacuum-packed beans.

With a smaller Madagascar crop last year and fewer good-quality beans, prices surged in the US, the world’s biggest buyer, where vanilla ice cream remains the most-popular flavour. Higher-end vanilla fetches $250 a kilogram – if you can find it – compared with $80 a year earlier and $20 as recently as 2012, according to Cook Flavoring, which gets 80 percent of its supply from Madagascar. Even lower-grade beans sell for $210, up from $60 a year earlier….

Bloomberg: Read the full story here

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