Will Madagascar’s new vanilla crop pressure prices in Q4 2018?
Given vanilla’s economic importance, the Malagasy government has made moves to manage the vanilla market and foster crop production and quality. For example, the deadline for export selling of the old crop was extended by one month to encourage the selling of older beans, thinning lower-quality stocks that would otherwise be mixed into new-crop supplies. The start of new-crop export sales has also been delayed to mid-October.
Private estimates of the 2017 crop have ranged as high as 1,600 MT of beans. About a tenth of these remained in-country as stocks prior to the end of the export season, mostly as lower-quality beans harvested early or processed poorly. (As explored in our report on the vanilla market, growing demand, high prices, investment, and new technologies paradoxically pressured vanilla production, vanillin content, and quality in 2016 and 2017.)
Growers are uncharacteristically holding much of the island’s remaining stocks at this point; a more gradual softening of prices could be another benefit of encouraging more selling prior to the new crop’s export period. Market watchers know that boom-and-bust periods are not unknown in the vanilla market. Though many disagree, calls by some for a crash in vanilla prices are not without reason: The 2017 crop was not hit as hard as first feared by last year’s Hurricane Enawo, high prices have curbed demand, other origins are seeking to increase output, and conditions for the new crop have been broadly favorable. Already, some price weakness is reported—at least relative to the US$600-plus per kg levels that have made the news. Production is expected to be equal or better to the 2017 crop, but bean quality, flavor, and vanillin content could vary widely.
Despite the wide use of vanilla in food products and the current trend for natural products, U.S. vanilla imports have been discouraged by high prices.
The market will continue to watch the tense political situation ahead of elections: laws passed and tossed out, continued protests, the court-ordered dissolution of the government, etc. Opposition parties seem skeptical regarding the new government formed by the current president, and a peaceful resolution does not seem certain at this stage.
U.S. quarterly vanilla imports, year-on-year growth
Source: USITC, McKeany-Flavell
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