The State of the Vanilla Market: May 2023 Update


The global vanilla market is currently facing a challenging phase marked by falling prices and an oversupply of vanilla across major growing regions. This situation draws parallels with the vanilla crisis of 2004 when prices plummeted by 90% within a year. In this blog post, we will delve into the current state of the vanilla trade and explore how the market arrived at this point, as well as potential future developments. From the data and reports from Aust & Hachmann Canada, we will analyze alternative growing regions, the situation in Madagascar, and the implications for the industry.

Alternative Vanilla Growing Regions

While other vanilla growing regions like Uganda, Indonesia, and Papua New Guinea have witnessed significant production increases, they are unable to challenge Madagascar's market dominance. Even if their combined production were to surpass current levels, it would still be less than half of Madagascar's output. Despite Uganda's improved quality and lower prices, the vanilla industry continues to support Madagascar, reinforcing its dominance. However, it is crucial to establish a competitive balance between Madagascar and other growing regions to break this dominance and create a sustainable market.

Uganda, with its high-quality vanilla comparable to Madagascar, has the potential to become a significant supplier. If supported, Ugandan vanilla production could reach 500mt, representing about 20% of global production. However, the support for Madagascar vanilla, driven by brand recognition and reluctance to change formulations, prevents the necessary balance. If prices fall to the levels seen from 2006 to 2011, Ugandan and Tanzanian vanilla farmers may abandon their plots, further solidifying Madagascar's dominance.

Indonesia and Papua New Guinea

Vanilla production in Indonesia and Papua New Guinea is also at risk in the coming years. If prices drop below $50.00/kg, it may no longer be economically viable to process and export vanilla from these regions. While Indonesian exporters may store unsold inventories and focus on other commodities, PNG exporters are more likely to follow the market, even if prices go below sustainable levels. The industry saw this during the previous crisis when vanilla from Papua New Guinea reached unsustainable levels below USD$10.00/kg.


After the peak prices of around $600.00/kg six years ago, vanilla experienced a steady decline due to factors such as high prices, poor quality, and decreased demand. However, a rebound in demand for industrial vanilla during the COVID-19 pandemic temporarily halted the decline. Stable prices and strong exports were observed until 2022, but the increasing production signaled further price erosion. To address this, the government enforced minimum price policies, export restrictions, and politicized licensing processes.

The fixed minimum export price initially set at $350.00/kg was largely ignored by exporters. However, in late 2020, the government revised it to $250.00/kg and imposed repatriation obligations, causing exporters to find offshore USD to bridge the price gap. In the 2021/2022 season, Madagascar exported over 3000mt of vanilla, not due to increased demand but buyers hedging against the hardening minimum price policy. The opening of the 2022/2023 season saw minimal demand, leading to delayed exports and an oversupply of vanilla.

The upcoming 2023/2024 crop is estimated to be substantial, adding to the excess inventory from the previous crop. The CNV, an organization supporting the fixed price policy, may take further actions to stabilize the market, but rumors suggest an outright crash is inevitable. The possibility of a short-term ban on lower-grade vanilla exports from Madagascar could stabilize the market, as witnessed in the past.


The vanilla market is facing a critical situation with excessive inventory and strong production. Prices have already dropped significantly since the major players in the vanilla industry.

Speculators play a crucial role in stabilizing the market during times of oversupply and falling prices. By purchasing large quantities of vanilla and storing them, they effectively reduce the available supply in the market, preventing prices from crashing even further. These stored beans can be released gradually when demand picks up, helping to balance the market.

However, speculators alone cannot solve the challenges faced by the vanilla market. The key lies in creating a competitive balance between Madagascar and other vanilla-growing regions. Currently, Madagascar dominates the market, accounting for more than half of the global vanilla production. This imbalance not only limits competition but also leaves the market vulnerable to the fluctuations and challenges specific to Madagascar.

Uganda, with its high-quality vanilla production, has the potential to challenge Madagascar's dominance. The vanilla from Uganda is botanically similar to that of Madagascar and offers a comparable flavor profile. Additionally, Uganda has significantly increased its production in recent years and could soon exceed 500 metric tons, representing around 20% of worldwide production. However, the support from the flavor industry for Ugandan vanilla remains limited, as the focus continues to be on Madagascar vanilla. It is essential for the industry to recognize the potential of alternative growing regions like Uganda and promote a more diverse supply chain.

Indonesia and Papua New Guinea, while also experiencing increased vanilla production, face challenges due to the declining prices. If prices fall below $50.00/kg, it may become economically unviable for Indonesian exporters to process and export vanilla from Papua New Guinea. Indonesian exporters, with their financial stability, may choose to store their unsold inventories and shift their focus to other commodities. However, this could lead to a dire situation for vanilla in Papua New Guinea, as exporters there are more likely to follow the market despite the low prices.

The situation in Madagascar is complex, with government intervention and enforcement of minimum prices causing further complications. The fixed minimum export price, set at $250.00/kg, has proved unrealistic and disconnected from the actual market price. The government's attempts to enforce this price through tax audits and regulations have led to unexpected tax bills for exporters. The export licenses have also become politicized, further complicating the trade. These factors have contributed to an oversupply of vanilla in Madagascar, with a carry-over inventory from the previous crop and a large estimated crop for the upcoming season.

Certainly! In addition to reevaluating vanilla policy and pricing, there are other measures that can help address the challenges faced by the vanilla industry:

Diversification of growing regions: Promoting and supporting vanilla production in regions other than Madagascar can help create a more balanced and resilient market. This includes investing in infrastructure, providing technical assistance, and facilitating access to markets for vanilla growers in countries like Uganda, Indonesia, and Papua New Guinea.

Quality control and standardization: Establishing and enforcing quality standards for vanilla can help differentiate premium-grade beans from lower-quality ones. This can help create a tiered pricing system that rewards growers who produce high-quality vanilla and discourages the production of inferior beans.

Sustainability practices: Encouraging sustainable farming practices, such as agroforestry and organic cultivation methods, can help protect the environment and ensure the long-term viability of vanilla production. It is important to promote sustainable practices that preserve biodiversity, conserve water resources, and minimize the use of synthetic inputs.

Value addition and product diversification: Encouraging the development of value-added vanilla products, such as extracts, concentrates, and gourmet products, can help increase the demand for vanilla and create additional revenue streams for growers and processors. This can also reduce the industry's reliance on raw vanilla beans and make it less susceptible to price fluctuations.

Collaboration and industry partnerships: Collaboration between vanilla growers, processors, traders, and flavor companies is crucial for addressing the challenges faced by the industry. By working together, stakeholders can share knowledge, coordinate efforts, and develop strategies that benefit the entire value chain.

Consumer education and awareness: Raising consumer awareness about the challenges faced by the vanilla industry and the importance of supporting sustainable and ethically produced vanilla can create demand for responsibly sourced products. Certifications and labeling initiatives can help consumers make informed choices and support sustainable vanilla production.

By implementing these measures, the vanilla industry can work towards a more stable and sustainable future, ensuring the availability of high-quality vanilla and fair economic opportunities for growers around the world.

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