Vanilla report 25
The last six months of the worldwide vanilla bean trade have been unstable, without any historic precedent. After five years of continuously rising prices, most of these increases have been wiped out over the last six months as vanilla prices have dropped about 90% at origin from where they stood at the beginning of 2004. As soon as the purchasing of vanilla at the industrial level slowed to a trickle; prices subsequently crashed and panic is now slowly creeping into the vendor community. In the past few months, there have been two major Vanilla Conferences and one orchestrated excursion to Madagascar which, in our opinion, has done very little to spur interest. Of course, rumors fill the market about massive positions taken by certain vanilla dealers and/or other similar stories in an attempt to reverse sagging prices. We feel the downward trend is irreversible.
November 10th, 2004, marks the ‘official’ opening of the vanilla market in Madagascar – although we are all aware of some early exports. The Government’s decree to prohibit the sale of cut vanilla is in place; however, to evade this law, exporters are simply not cutting the 7 – 10 cm beans they normally would and this decree will therefore have no impact. The quality of this year’s crop is good with a 60% whole bean – 40% split bean ratio. The crop size is significant at 1300 to 1400 MT (this quantity includes 200 MT poor grade cyclone cuts). In view of the fact that the flowers on the vanilla vines were not properly culled in 2003 when price expectations were still very high, there is an abnormally high percentage of short beans this year. Approximately 50% will be below 14 cm (5.4 inches), therefore, we expect vanillin levels to average between 1.5% to 1.6%. There will also be less prime (black or gourmet) beans, however, we still expect between 100 – 125 MT. Although some local exporters in Madagascar have taken significant positions, half the crop remains unsold. With regard to the estimated 200MT of unsold vanilla from the 2003 crop, because of the high phenol levels associated with these beans, rendering them very difficult to sell, they will more than likely be blended with the 2004 inventory.
At this point in time, we expect the 2005 crop to be somewhat smaller but still more than sufficient – it is too early to estimate the tonnage. The Comoros will add 120 to 125 MT of high quality vanilla to the 2004 totals and we expect Uganda to supply 100 MT and another 125 MT in 2005. With regard to Indonesia, there is still material available from the 2004 crop but for unexplained reasons, prices have not been reduced in relation to other markets.
We expect less of a demand for ‘early picks’ in 2005; therefore, the quality of the 2005 crop in Indonesia should improve as will the yield. We estimate 175 – 250 MT of vanilla will be available from this region in 2005. We are already seeing some low-grade material moving from Madagascar to Indonesia for blending due to the more favorable Malgache pricing.
With regard to Papua New Guinea, presently we are in between seasons, however, we believe at least 200 MT will reach the market in 2004. Without a doubt, beans from Papua New Guinea have been readily accepted in the food service sector, and they will also make further inroads at the industrial level. With input from Indonesia, we expect the quality of the vanilla from PNG to improve and at least 250 MT should be available in 2005.
Concerning vanilla of Indian origin, we are seeing Indian exporters adjusting to the reality of the market price-wise and although quality issues remain, many buyers are giving this vanilla serious consideration. We expect 100 – 125 MT from this area in 2005.
Finally, with regard to vanilla from French Polynesia and Mexico, we believe market conditions will make it very difficult for these two traditional origins to be competitive.
In summary, we feel prices will continue to fall through the end of 2004 and through 2005. There will be attempts made by some to manipulate the market and this may cause some bumps in the downward trend, but, by the end of 2004, the market will be saturated with vanilla and this number will only get worse in 2005 as vanilla consumption struggles to recover. Unfortunately, from the vendor’s point of view, we see a soft, over-saturated market with depressed pricing continuing at least into 2006 (barring natural calamities etc.)
We should eventually see much better quality vanilla due to the expected furious cutthroat competition that will exist in the market. Although the market is vulnerable to manipulation due to the very low pricing, we see the buyers firmly in command.
AUST & HACHMANN (CANADA) LTD/LTEE
November 5th, 2004.
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