21 June 2016

Madagascar's Vanilla Farmers Face Volatile Times After Poor Harvest

Photo: World Resources Institute Staff
Vanilla is a major export for Madagascar (file photo).

It is early morning in Analakely market, the bustling heart of Antananarivo, Madagascar’s capital city.

Hawkers from the surrounding countryside ply for business as shoppers throng through narrow alleyways of stalls. Jars of fresh chillies, peppercorns and pineapples are piled high, and the pungent aroma of vanilla wafts through the air.

Yet the vanilla pods on sale appear second rate: unripened, limp, thin and browny-green instead of the fat, chocolatey brown fully grown pods. The best pods are reserved for export - they call it “green gold” - but these days even that is no guarantee of the best product.

Francis Falihari comes from a family of small-scale vanilla farmers. He has travelled here from the northern city of Sambava to sell his wares. He holds out a sickly looking pod. “This is not what people want. With this I am lucky to make a few dollars. We know it is ‘green’ but last year we did not have a good harvest. We couldn’t afford to wait for it to grow. We had no choice but to cut it early. It is impossible to survive from growing vanilla alone if you are small farmers like us. We do grow other things, but that is only so we have enough to eat.”

Falihari blames the companies who own large plantations for getting greedy. “They cut corners to make a bigger profit. They start to cut down early so we have to do the same.”

Falihari explains why he still brings his vanilla to market, rather than trying to sell his entire crop to exporters.

“I know some farmers who do this,” he says. “But it is even worse for them. Yes, they sell all of their crop but they do not have enough profit to feed their children. The problem is the rich people in Madagascar do not want to pay the poor people. They know we are desperate and can beat us into accepting a low price even though they make a very big profit.

“Too many people want to buy vanilla and there is not enough to go around. It is better for my family for me to come here. This way I can sell to different stores and sometimes I find tourists who will pay more.”

Madagascar produces approximately 80% of the world’s vanilla, the majority of which comes from either large growing houses or small-scale farmers in the north-west region of Sava where the humid conditions are ideal for the crop.

Last year’s harvest was smaller than expected. But yields are volatile, causing vicious price fluctuations – between 2012 and 2016 the market price for UK importers moved from approximately £18/kg to current spot prices of approximately £267/kg. This makes it very difficult for economically vulnerable farmers to gauge whether the harvest will net them enough money to last through the “hungry season” (the non-harvest period).

“The idea that farmers are able to have a livelihood strategy for the long term is a joke. You just can’t have a small-scale farmer devote their entire livelihood to a crop that goes through boom and bust cycles every five years,” says Dr Benjamin Neimark, a lecturer at Lancaster University in the UK.

While some farmers can allocate a portion of their land to subsistence crops such as rice, vanilla offers an unmatched economic opportunity.

But producing high-quality vanilla is a long game. The labour intensive process of planting, harvesting and curing means it is years before growers see a pay-off.

In Madagascar’s concentrated market of producers, there is an advantage to being first. To prevent growers sacrificing quality by harvesting early, and to eradicate theft of near-ripened vanilla, the government sets a date before which it is illegal to trade the commodity.

Unfortunately for small-scale growers, lax enforcement means the date is often ignored and crop security is a major issue. Farmers often have the option of harvesting an inferior product early or waiting for the due date and receiving a lower price.

According to Alan Walsch, Madagascar country director for Germany’s society for international cooperation (Giz): “They [small-scale vanilla farmers] are in need of money much earlier before the harvest officially starts. The pressure to sell the vanilla before the date is quite high.”

Many farmers choosing to sell to exporters – who sometimes compromise quality by vacuum packing and holding stock until price rises – complain that the amount of money they receive bears little relation to the previous year.

The spread of mobile phones in Sava has improved information-sharing, handing growers some defence against inconsistent and unfair pricing by exporters. But scant information about the international market means that, according to Walsch: “Farmers have very little insight into understanding why prices are higher or lower the next year.”

Furthermore, experiments with mobile money - which has helped farmers elsewhere in Africa circumvent corruption by digitising money - have been stymied by Sava’s lack of cash points.

The system presents a challenge for importers trying to purchase ethically. The co-founder of American company Lafaza, Nathaniel Delafield, says one issue is “ensuring cash, that a business might think is being paid to the farmer, is actually being paid to the farmer and not somehow being syphoned en route”.

In certain communities, the Rainforest Alliance and the Fairtrade Foundation provide a range of ecological and financial assistance, including the creation of co-operatives that afford some farming groups the power of collective bargaining.

However, wild oscillations in price make a pillar of ethical trade - finding a fair base price - difficult. The Fairtrade Foundation offers this, when required. However, the small end-market means that occasionally only a portion of the harvest is bought at that price.

While larger importers have the luxury of tinkering with ratios of vanilla to synthetic, or bio-synthetic, vanillin when prices rise, retailers of pure vanilla remain at the mercy of the erratic market.

Axel Steenberg, co-founder of UK Fairtrade-certified spice firm Steenbergs, says: “We’ve gone up four to five times in pricing over the last 12 months; there’s no way I can double my prices here. I can’t go to my customers and say, ‘Well it’s going to go up 25% but then it might come back down.’ In the end we’re absorbing the gap.”

Madagascar

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