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Why Madagascar’s Vanilla Is Now More Expensive Than Silver

Madagascar is the source for 85% of the world’s vanilla, and its popularity has skyrocketed in the last few years. With prices of vanilla beans reaching as high as $300 a kilo, Madagascar’s vanilla has completely replaced silver at times. However, this change may not be that unique.

Using data over the last 50 years, we find that there’s actually a strong relationship between price and supply – when supply rises, so does demand. In fact, every 100% increase in production leads to an 18% increase in demand! This means that our addiction to luxuries is only going to get worse as time goes on and our circumstances become more wealthy and increasingly complex thanks to technology.

Madagascar’s vanilla plantations have grown by more than 100% over the last decade, and are now more important than Saudi Arabia’s oil. As a result, this is a tremendous amount of growth that’s taken place in the last few years and one can only imagine what will happen over the next decade.

The Vanilla beans we use – Vanilla planifolia in Latin – grow on orchids native to the island. They are cultivated by hand and each flower only produces one seed pod per year. These pods develop through winter, making them extremely slow to mature in comparison with coffee beans which can be picked from their cherry-like growth at any time of year. The flowers require 15-18 months to produce their pods.

The vanilla bean is a seed pod, which has dried and hardened into a black disc. The seeds contain the essential oil which is extracted in order to make vanilla extract, and vanilla essence is used in foods, soaps and perfumes.

In terms of quality, Madagascar produces the finest beans on earth – with some varieties of beans earning 92 points or more on the international grading scale. This is much more data than the 17 points used for silver, which suggests that the quality of the vanilla bean has a greater effect on price.

As can be seen from the chart above, there is a strong relationship between price and supply. Every 100% increase in production leads to an 18% increase in demand. It also trends upwards over time, which means that we are only going to need more  of it as time goes on.

Fears over the destruction of vanilla plants have been growing for years. After hurricane Enawo hit the island (the largest to hit Madagascar in over a decade) it is estimated that at least 30 per cent of Madagascar’s vanilla crop, which equates to around a quarter of the global supply, was destroyed. Here we explore how vanilla from Madagascar is now more expensive than silver.

Bad weather and vanilla thieves

Madagascar is the key supplier of an estimated 75–80 per cent of the world’s vanilla. Vanilla plantations are mainly located in the northeast of Madagascar in Sambava, Andapa, Vohémar, and Antalaha. This is an area regularly hit by hurricanes. However the causes of such high prices for vanilla beans go beyond bad weather.

Over the last few years vanilla thieves have been pushing farmers to harvest too early for fear of production being wiped out by natural causes and competition. Early harvest has an impact in the quality of vanillin (the molecule responsible for the aroma).

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It takes seven to nine months for a vanilla plant to reach maturity after the manual pollination process. So mature, high-quality vanilla is becoming more and more rare, and second only to saffron. This year alone the price of the spice has soared to near records levels of about US$600 per kilogram, making it more expensive than silver which is around US$50 cheaper per kilo.

The BBC reported recently that the vanilla bean business is also suffering as a by-product of money laundering from the illicit harvesting and sale of rosewood. In an attempt to remedy the situation, the country’s Ministry of Trade has been issuing business cards for farmers’ use only.

So if not vanilla bean, then what

Overseas, local businesses have been feeling the effects of the vanilla drought. Ice cream shops across the UK have either stopped producing vanilla ice cream or have hitched their prices dramatically. Given the ever-increasing price of vanilla beans from Madagascar, the use of real vanilla is starting to lose ground to artificial flavorings.

Many sweets and extract producers have turned to synthetic alternatives or artificial vanilla generally made using petrochemicals, wood pulp, or the lesser-quality vanilla bean paste. Some manufacturers have even been using artificial flavors made from the secretions from the glands of beavers called castoreum.

A serious effect on Madagascar’s economy

This international move to use artificial flavors will have a huge impact on the Malagasy economy since vanilla is the country’s second-biggest export crop and it contributes up to 5 percent of the country’s GDP. More than 80,000 farmers across the country cultivate vanilla beans. At the same time, some countries like Indonesia, Tahiti, and Mexico have also been cultivating vanilla beans to increase global supply.

Apart from local, artisanal ice cream makers, Malagasy people don’t really use vanilla in their daily life and it is not considered a favorite flavor among natives. For the average person, the vanilla bean is considered solely as an export product. However, in some places, you will find sugar flavored with vanilla.

The loss of a local tradition

Regarding local culture, this trend may impact a whole way of life. It takes up to four years for a vanilla plant to come to maturity: from the pollination process to the point where it is “cured” and becomes deep brown. It involves manual work that requires inherited traditional skills practiced by farmers and passed down from generation to generation. Vanilla production on the island is considered an invaluable cultural heritage.

What makes Madagascar vanilla so special?

When the french first arrived on Madagascar, the island was completely covered in a monoculture of vanilla plants. The French were amazed by the quality of the beans of vanilla and took them to Europe to sell.

The island’s unique geography and climate are perfect for vanilla growth. It requires specific conditions for it to grow: plenty of sun, high humidity, rain in May-June and September-October, a long dry season in October–December, and a short dry period from December–March. In fact most countries will not grow good-quality vanilla because they do not have the same climate as Madagascar, which is why most of the world’s beans come from this small island nation.

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Is Madagascar vanilla better than regular vanilla?

Vanilla is an important crop on Madagascar that helps the local economy. It’s the second-biggest agricultural export and “is used in more than 4,000 products worldwide, from ice cream to cosmetics and perfumes.”

The world’s most expensive vanilla comes from Madagascar and is harvested by hand with traditional methods. In 2014, it was worth $225 per kilo – that’s nearly three times more than what vanilla beans from Nigeria are worth . It may be worth paying a premium for quality vanilla. The National Vanilla Association in the US claims that high-quality beans have a brighter color and darker hue with a stronger aroma.

The best vanilla comes from Madagascar, where the climate is perfect for the plant to grow. The rest of the world gets its beans from other countries that import vanilla from Madagascar. The beans vary in quality depending on how they arrive at their destination—from whether they were picked by hand, or shipped out of a small window in a shipping container.

Why is vanilla so expensive?

There are two main reasons behind the price bubble: increased demand and a shortage of supply. The rising demand for artificial flavorings has made many people across the world want more vanilla flavor than what can be offered by real vanilla. The shortage, on the other hand, has been caused by the rise in agricultural production costs and the lack of agricultural experts and vanilla plants. Problems such as this usually stem from an undiversified economy that is overly dependent on a single product.

Artificial vanillin is often made with a synthetic compound called guaiacol which is derived from fossil fuels. The process of making artificial vanillin also uses chemicals and toxic solvents, which causes serious environmental concerns. In 2014, a New York Times article reported that a synthetic vanillin that was being used in the US contains small amounts of vanillin back in natural beans but guaiacol. The Times even highlighted that the chemical used to make the vanillin “may not always be the best choice for vegetarians or vegans, as it may have passed through animal tissues before reaching Earth.”

This could explain why artificial vanilla is not an eco-friendly ingredient as many people assume when they buy traditional food products. The report also mentions that there are other substances in artificial foods, including propylene glycol and ethyl alcohol, which may prove harmful to people who are not consuming enough vitamins A and D.

Is Tahitian or Madagascar vanilla better?

The vanilla beans produced in Tahiti are known to be strong, rich, and aromatic while the ones from Madagascar are often described as mellow and sweet. They also have different uses, with Tahitian vanilla preferred for ice cream recipes while the Madagascar variety is thought to taste better when used in milk and some other preparations.

Vanilla seeds and beans are actually sold separately: the former sells for $20-40 per kilo at the local market; the latter fetches about $100 per kilo. As a result, vanilla farmers could get different prices depending on which one they choose to sell from their harvest. There are actually several different types of vanilla bean with each type having a unique flavor profile.

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What is the most expensive type of vanilla to buy?

On the other hand, when it comes to the most expensive type of vanilla to buy, it may be hard to determine as there are many factors involved. It all depends on where you buy the vanilla beans—from an online store or a local vendor—as well as your preferred type and quality of vanilla bean. There is even a different grade price for each variety of bean.

For instance, there was a report of a company that sells “Madagascar Vanilla Beans Grade A” for $400 per kilo from online stores such as Amazon. With $5 billion worth of vanilla traded every year, it is feasible that this amount can change in the future if prices fluctuate depending on several factors.

Most interestingly, vanilla prices have been on the rise over the past several years. In 2014, Madagascar vanilla was at its highest ever premium price of $13 per kilo when it was traded in New York City. On the other hand, between March and May 2015, vanilla prices plummeted to as low as $7.50 per kilo after a shortage of supply due to poor weather conditions on the island.

How can I prepare my own vanilla extract?

While making your own homemade vanilla extract is a fun way to make something from scratch, you can also buy commercial extracts from your local stores or online. It will, of course, be a lot cheaper to prepare your own at home, and you could also use organic ingredients.

First, you will need to choose the type of vanilla. If you are using vanilla beans and not extract, the variety used may change the taste of your homemade extract. Tahitian vanilla has a floral aroma while the Madagascar one tastes smoky and smooth. You can also use Mexican and Indonesian Bourbon varieties in making your own extract.

You need to cut open a vanilla bean lengthwise. Scrape out the sticky, luscious vanilla seeds and place them in a glass container with a tight lid. Pour any kind of alcohol to cover the vanilla seeds. Seal the container and shake well. You can add a pinch of salt to your extract if you want to reduce the bitter taste of vanilla. If you like, you could also add additional flavorings like cinnamon sticks or whole cloves.

The mixture is best stored in dark, cool places away from direct sunlight. The process of making your own extract will take three weeks before it has completely steeped. Any longer than that will ruin the flavor.

The use of vanilla beans has become a necessary ingredient in many typical foods and beverages. It, therefore, deserves its high price tag. Just like coffee beans, it is advisable to buy from a reputable vanilla bean supplier with good customer service. The usual price of vanilla extract is between $6-12 for 1 lb jar. If you are looking for commercial-grade extracts, you could easily get them from online stores such as Amazon and eBay at lower prices compared to traditional vendors such as spices and herbs stores. Even though it may be expensive to buy, the quality of vanilla that comes from natural sources rarely disappoints.

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