Bracing for the Vanilla Boom
Some of Madagascar’s farmers, made wealthy by this year’s vanilla crop, will spend their cash in crazy “hot money” sprees. But their profligate spending may not be as illogical as it first appears
As the vanilla market opens in northeastern Madagascar this season, some local farmers will earn more money than ever before. With global vanilla prices now hovering around US$500 per kilogram—approximately the price of silver—a farmer’s crop could be worth tens to hundreds of thousands of dollars, in a country with an average income of less than two dollars a day.Previously:
Northeastern Madagascar is the center of the world’s vanilla production, generating nearly 80 percent of the global supply. The bean constitutes Madagascar’s largest export. Vanilla (Vanilla planifolia) is an orchid that grows like a vine. Thick and waxy, the vine is punctuated by occasional clusters of white flowers that, if pollinated, will each yield a long, green vanilla bean. The plant has been cultivated in Madagascar since the colonial period, during which time prices paid to vanilla producers were set by the French colonial regime. After the country’s independence in 1960, the new government of Madagascar took over, continuing to set low but predictable producer prices.
Beginning in the mid-1990s, at the insistence of global financial institutions, the Malagasy government deregulated local vanilla markets. (Malagasy is the term for the language and people of Madagascar.) Then in 2000, one of the largest cyclones in the region’s history devastated prime cropland; the resulting scarcity made vanilla prices soar into uncharted territory—about US$300 a kilogram. Rural villagers whose crops survived became rich virtually overnight. But rather than saving or investing the money, many villagers spent their earnings in what they refer to as “hot money” (vola mafana) sprees—buying copious luxuries, drinking heavily, or engaging in other types of profligate spending.
During the vanilla boom in 2000, hot money became a notorious feature of the social landscape in northeastern Madagascar. At the outskirts of town, you might have seen a chameleon traversing the bush with money glued to its back or a man joyously smashing mangoes along a dirt road. An elder neighbor may have tinkered aimlessly with his shiny new motorbike, having no intention of actually learning how to ride it. At the local market, someone dressed in fancy shoes might have stepped on your feet, teasing that he did not do it but rather “the vanilla” did. All across the region, farmers turned to seemingly bizarre ways of divesting themselves of their new wealth.
But less than five years after the 2000 boom, buyers turned to synthetic alternatives just as a wave of new growers joined the market, triggering a crash in the global price of vanilla by simultaneously lowering demand and increasing supply. Local prices dropped to as little as US$5 per kilogram, and vanilla farming once again became associated with meager returns. Farmers sold their motorbikes and mattresses, going back to sleeping on straw beds. Within the past few years, however, reduced supply due to more cyclones coupled with increasing global demand for natural vanilla have created yet another boom. Last year, prices reached up to US$600 per kilogram. No one knows how long this latest boom will last....MUCH MORE
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