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Is world's largest vanilla market on verge of collapse?

From Ben Wedeman, CNN and Susannah Palk
  • Madagascar is the world's leading exporter of vanilla
  • The country produces the world's highest quality vanilla, with a vanillin content of 1 - 2 percent
  • Vanilla farmers earn little more than $1 -$1.50 a day
  • It take 260 days to maintain one hectare of vanilla crop

Sambava, Madagascar -- The world's largest vanilla industry is feared to be on the verge of collapse as farmers struggle to earn a living.

Madagascar, renowned for its high quality vanilla, is the world's leading exporter of the spice, accounting for half of global production.

But abysmal wages, sharp competition from markets in Asia and the growing popularity of synthetically produced alternatives means Madagascan farmers are abandoning their crops.

According to the International Fund for Agricultural Development (IFAD), most vanilla production is concentrated in the north-east of the island, where about 70 percent of the population depends on the spice to earn a living.

Jean Bruno is one such farmer and earns little over $1.50 a day.

He told CNN: "Yes, it is difficult to grow, to tend it day after day. But the worst part is the price, it's miserable."

Video: Madagascar's bitter-sweet spice

Economist Michel Manceau, who is currently collecting information on Madagascar's vanilla crops, agrees. He believes with prices so low, many farmers will stop growing the crop altogether.

"The game is to press the price down as strongly as possible to those people, who today are making a dollar a day family income, if they are only in vanilla," he said.

"A dollar a day. That's the limit that has been reached in the last two or three years and most of them are quitting vanilla," he continued.

It is difficult to grow, to tend it day after day. But the worst part is the price
--Jean Bruno, Madagascan vanilla farmer.

Vanilla is a volatile commodity, and the past decade has seen prices fluctuate widely. According to the IFAD, in 2003 a single kilo of vanilla could cost you up to $500. Today the price hovers around the $25 to $30 mark, barely enough for farmers to survive.

Ironically, it was vanilla's inflated prices in 2003, when farmers profited the most from the sweet-smelling spice, which have spelt disaster for Madagascar's vanilla industry.

The price surge was the result of a devastating cyclone in 2000, which destroyed vast acres of crops. With the bean in short supply, prices soared and major importers turned to synthetically produced alternatives, the IFAD said.

Winning back these importers has been difficult, with many companies looking to avoided future pitfalls in such a volatile market.

Recovery has been made even harder by competition from countries such as Indonesia, India and Uganda, who entered the market after the 2003 price hike.

It's a dismal situation for a country renowned for making some of the world's best vanilla. Although the Madagascan crop is one of the most labor-intensive in the world, it is highly prized due to its high vanillin content, which gives the vanilla its flavor.

The vanilla bean was introduced to Madagascar during the 19th century. With no local bees to pollinate the crop each flower must be pollinated by hand in order to produce the prized vanilla beans.

It's a timely process, which is compounded by the fact that each flower only lasts one day, meaning growers have to inspect and pollinate their plantations every day.

The European Development Research Network estimates farmers needs to spend 260 days per hectare during the first year and about 460 days during the next four to eight years in order to maintain a vanilla crop.

It's a huge amount of time, especially considering a rice harvest requires an average of 120 man hours per year. As a result, many vanilla farmers say they no longer reap the rewards of their hard labor.

Claude Andreas, the president of the Madagascar Vanilla Growers' Association summed up the situation simply, telling CNN: "At less than $25 a kilo, the price is too low. If it goes below that the farmers will just stop growing it. They can't make ends meet."