Kochi 30/03/2009
Is vanilla on its way to recovery in India after a
dismal phase where farmers destroyed the vines after failing to sell the beans?
Well, it seems that the market and farmers have matured and the demand and
supply situation is finding an equilibrium where farmers can get a decent return
on investment.
Supply has come down significantly in India with farmers abandoning vines and
often destroying them when prices touched the bottom. Meanwhile, demand has
slowly grown thanks to the efforts of various farmers cooperatives. Exports have
also increased steadily over the years and the dynamics has eventually pulled
back the commodity from distress.
After an initial euphoria over the huge returns from vanilla farming, farmers
who invested heavily in vanilla had to encounter a market where they could not
sell their products. Farmers in the south Indian states, especially Kerala, took
to vanilla farming after 2000, when prices climbed to record levels mainly due
to hurricanes damaging crop in Madagascar, the world's leading producer of the
commodity. Vanilla prices soared in 2003-04 to touch Rs 20,000 per kg for cured
or processed beans. Later, a bumper crop in Madagascar saw Indian prices
dropping to less than Rs 600 per kg of processed beans.
Crop loss due to fungus disease and neglect of the vines has led to supply
dropping down considerably, MC Saju of the All Kerala Vanilla Growers
Association told FE. Saju estimates the production for 2008-09 to be around
200-250 tonne as against 600 tonne in 2007-08, with most of the farmers
abandoning the crop. Production in the last harvest season slumped to 600 tonne,
a decrease of 40% on a year-on-year basis. The area under vanilla farming has
already come down from 4,000 hectares to less than 1,000 hectares.
Vanilla prices were languishing below Rs 35 per kg for green beans before
various farmers organisations took the initiative to procure, process and market
the beans. Vanilco, the company promoted by the farmers to process and market
the product, took a brave step and procured beans from hassled farmers. The
company then took the initiative to market processed vanillin extract in the
domestic market. With Amul, Mother Dairy and the Kerala-based Milma inking deals
with Vanilco to use the natural vanilla instead of artificial vanilla in their
ice creams, domestic demand slowly revived. The government, too, did its best
with procurement efforts and...
promises to insist on labelling the usage of artificial vanilla in food
products.
"Domestic demand for natural vanilla extract is increasing with more
manufacturers turning to natural stuff. Amul consumes more than one tonne per
month for its ice cream division," Saju said. Other ice-cream manufactures are
also slowly turning to the natural stuff with the government encouraging the
substitution. Domestic prices have moved up to Rs 125 per kg of green beans from
the low of Rs 35, Saju said. He expects the market to firm up further in the
coming days based on a global shortage of the commodity. Farmers will find
vanilla farming viable once the price touches Rs 250 per kg for green beans,
Saju said. "Vanilla is on the recovery path in India. Demand for natural vanilla
will increase slowly, but surely," he said. Given the dwindling supply situation
and increasing demand, the fair equilibrium is not far, he added....
From The Financial Express...
