MANDENA, Madagascar — On a recent steamy morning, Simon Vanombelona was clearing his vanilla field to make way for a rice paddy.

“If the quantity is sufficient I’ll eat first and then build some stocks,” said the 49-year-old Vanombelona.

So severe is the price slump for vanilla in northeastern Madagascar, which is home to the best vanilla in the world, that growers are focusing on subsistence crops at the expense of vanilla beans that just a few years ago fetched several hundred dollars a kilo. Now local farmers say they only get about $5 a kilo for the fruit of their very arduous labor.

The wild fluctuations in prices are primarily the result of exacerbated cycles of supply and demand. When prices shoot up as they did in the early 2000s, growers respond by planting more vanilla but because a vanilla plant takes three years to produce its first pods the timing is often tricky. Growing in tropical areas, vanilla is also vulnerable to cyclones and disease, the effect of which is often amplified by speculators leading to extreme variations in prices.

At the moment, prices are exceptionally low because vanilla brokers — taking advantage of cheap vanilla and the fact that vanilla beans can be preserved in warehouses for several years — have been stocking up.

Vanilla pods on a vine near the village of Mandena in northeastern Madagascar. (Nicolas Brulliard/GlobalPost)

“There have been excess stocks of vanilla beans really for the better part of the last three of four years,” said Rick Brownell, vice president of vanilla products at Virginia Dare, a New York-based company that has manufactured vanilla products for more than 80 years. “There is very little risk in writing forward contracts for vanilla beans and even for the end product, vanilla extracts and flavors at this point. The price can only go higher. It really can’t go any lower.”

The vanilla vine is a plant from the orchid family that is native to Mexico. Originally, the plant couldn’t be grown anywhere else because it was pollinated by a species of bees endemic to Mexico. When it was discovered in the mid-19th century that the plant could be pollinated by hand, it was exported to other tropical regions of the world and is now successfully cultivated in places as diverse as Indonesia, India, Uganda and Papua New Guinea.

Madagascar, the world’s fourth largest island, has proved particularly well suited for the culture of vanilla and has become the world’s largest producer of the spice. The warm climate is propitious, and local farmers have perfected the art of growing vanilla, which requires the right amount of shade, elaborate pruning and frequent weeding around the plant. Madagascar's vanilla is highly prized because it is the richest in vanillin, the compound that gives vanilla its distinctive flavor and smell.

The pods are harvested green and have to be dried for at least six months before they can be exported. Companies such as Virginia Dare then make the vanilla extract that is used in beverages, ice creams, yoghurts and perfumes.

Historically, vanilla has been a very valuable commodity. To prevent the common theft of vanilla pods right before harvest time, some growers mark their pods the way ranchers mark their cows, with intricate designs that remain identifiable after the curing process.

Vanilla theft became a particularly lucrative crime in the early 2000s when demand exceeding production led to prices reaching $400 or $500 a kilo. The high prices proved a boon for the local economy when newly rich vanilla growers raided the region’s auto dealers and electronics stores, even leaving tips to merchants.

Scared by the ballooning prices, some vanilla consumers resorted to using synthetic vanilla, which, along with excess production, contributed to a sudden and sharp fall in prices.

“Vanillin is vanillin. Synthetic or nature-made it’s still the same,” said Daphna Havkin Frenkel, director of research and development at Bakto Flavors LLC and a visiting scientist at Rutgers University. “Don’t believe anyone who tells you otherwise.”

To make matters worse, the government's attempts to control the price for vanilla has backfired. A government decree this summer that set a minimum price of $27 a kilo for vanilla ready for export has brought the industry here to a standstill, local vanilla exporters said. The measure, probably intended to bring economic relief to struggling vanilla farmers, has had an opposite effect.

Claude Andreas, the head of a local vanilla industry group, said the minimum price is much too high for the current market. As a result, Madagascar’s vanilla exporters, who are not authorized to sell below $27, are not buying vanilla from local growers to replenish their stocks. The majority of vanilla exporters have written to Madagascar’s trade minister to repeal the decree because they fear competitors will take away Madagascar’s market share by undercutting the minimum price.

“They won’t buy it for $27,” Andreas said of vanilla brokers, “because they can buy it for $25 in Indonesia.”

http://www.globalpost.com/dispatch/africa/091109/madagascar-vanilla-economic-downturn