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Global Vanilla Prices Could Climb After Cyclones, Late Blooming in Madagascar

Kamlesh Bhuckory, Bloomberg New(Bloomberg) -- Cyclones and late flowering may stoke vanilla prices with output in Madagascar, the biggest producer of the spice, expected to fall by more than 30% from a year ago, according to the main association of exporters.

Tropical storm Dumako is forecast by Meteo Madagascar to bring prolonged, heavy rains and winds after making landfall Tuesday in the Indian Ocean island’s northeast region where a fifth of its vanilla is grown. It comes just weeks after Madagascar was devastated by cyclone Batsirai and storm Ana that together claimed at least 150 lives.

The disruptions will slash foreign currency revenue from a key agricultural activity for the island nation, and halt the 2021 surge in exports. Madagascar accounts most of the world’s vanilla used to flavor ice cream to baked goods.

“Add to the fact that late flowering has already reduced output by 30% in 2022, we should expect a more drastic cut in production,” according to Georges Geeraerts, president of Madagascar’s association of vanilla exporters. Such a situation will “definitely” have an impact on prices, he said by phone, without giving an estimate.

The minimum sales price is currently set by the government at $250 a kilogram.

While Batsirai caused extensive damage to the country’s south east, which accounts for 10% of output, Dumako is in a region known for high quality vanilla as well as being the biggest producer.

Madagascar exported 1,675 tons of vanilla in 2020 worth $512 million, data from the World Bank show. The U.S. was the biggest buyer, taking almost 50% of the crop.

“The past weeks, we have noticed that buyers have increased orders, in anticipation of a probable scarcity and increase in prices,” Geeraerts said.

©2022 Bloomberg L.P.