Handbook of Vanilla Science and Technology

I The Fair Trade Certified price for cured vanilla beans from Madagascar is $47.50 per kg. This includes $6.50 per kg for the Fair Trade premium. As already discussed, the Fair Trade premium goes to the community as a whole. The balance of $41.00 per kg goes to the curer. By contrast, the current price for beans of identical quality, but without Fair Trade Certification, is roughly $20.00 per kg.

Is the true cost of sustainable production really more than double the current market cost? Notwithstanding the acknowledgement that the current market price has discouraged farmers to the point that many have turned to producing other crops instead, the answer is most likely no. Evidence of this excess can be observed by a related event that took place in the summer of 2009.

Concerned about declining production resulting from discouraged farmers abandoning vanilla, a group of exporters petitioned the Madagascar government to establish a minimum export price for vanilla beans. Some in the industry argued that the reason was really to offset poor decisions by exporters holding large inventories of beans purchased at prices well above the current market price. Regardless of their true intentions, the minimum price they recommended was $32.00 per kg.

This price was suggested by industry insiders who are extremely familiar with the costs of production. These are people who make their livelihood by buying, curing and exporting vanilla beans. They would certainly know what price level would provide farmers an adequate incentive to keep growing vanilla. In fact, one could argue that the recommended price was too high, designed to not only support ongoing production but to increase exporters’ profit margins as well. Perhaps the Malgache government thought so too. A minimum export price of $27.00 per kg was signed into law by President Andry Rajoelina in the summer of 2009.

II As described above, growing and curing vanilla beans is extremely labor intensive. The per capita annual income of a vanilla farmer is about $300. Vanilla beans from Madagascar are considered to be the best quality in the world, with the possible exception of those from Mexico. The beans are left on the vines for up to 10 months. They are then harvested one at a time to ensure each bean is at the peak of maturation.

By contrast, the per capita annual income of a vanilla farmer in Indonesia is closer to $1,000. However, Indonesian beans are often harvested months before maturity to prevent them from being stolen. This effectively lowers the cost of production, but it still likely exceeds the level in Madagascar. Many of the flavor precursors have not yet developed in early picked beans, leaving the cured beans largely devoid of traditional vanilla flavor and aroma. So the quality of the Indonesian beans at the time of harvest is decidedly inferior to those in Madagascar, even though the cost of production is substantially higher.

The curing process complicates the issue even further. It is unrelated to the farmer’s cost of production but also has a major impact on the final quality of the beans. In Madagascar, curing is painstaking and lasts for several months. The end result is complex profile of both bold and delicate flavor and aroma. In Indonesia, curing is often done over a wood fire in a matter of hours.

So, there is the conundrum for Fair Trade pricing. At the farmer level, the country with the lower cost of green bean production produces the highest quality beans, while the country with the higher cost of production produces beans that taste like wood smoke.

III Since Fair Trade Vanilla was first established in 2005, India has been the only significant producer. This can be attributed to a number of factors. Perhaps the most important reason is the relatively high cost of production in India compared to other origins. Like their counterparts in Madagascar, Indian vanilla growers allow the beans to reach full maturity before harvest. Yet, the per capita income rate is roughly double that of Madagascar.

Indian growers often purchased cuttings to start their vanilla farms. By contrast, most Madagascar farmers had been growing vanilla on their farms for generations. They had ready sources of new cuttings literally in their own back yards. To offset higher costs of production, Indian growers quickly embraced the higher pricing afforded by Fair Trade Certification. As a result, a significant portion of Indian production was converted to Fair Trade.

Indian production of Fair Trade Certified vanilla beans probably averaged 20 to 30 metric tons per year in 2006 to 2008. Production from all other origins wasjust a few tons per year. Unfortunately, production during these years exceeded demand. Discouraged Indian farmers responded by cutting back. In 2009, global production of Fair Trade Certified vanilla beans was roughly one half the previous level, approximately 10 to 15 metric tons.