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Stéphane, can you introduce yourself briefly?
Could you tell us a little bit more about De Monchy Natural Products?
Sure. De Monchy Natural Products is a Dutch company based in Rotterdam, with headquarters in Rotterdam and facilities in the US, in Pennsylvania. And also different location in the sourcing countries such as Madagascar, Uganda, and Indonesia, for example, and now also in South America.
The strategy is to have the backwards integration for the natural products that we supply to the flavor, food, and fragrance industry.
With De Monchy Natural Products being present at the source in Madagascar, you’re in a good position to discuss with us today about the current state of the vanilla market. So you visited Madagascar recently, is that right?
In this context, I would like to tell our audience today what we will discuss in the podcast. We’ll talk about the last season volumes, the current crop, some market insights for the upcoming quarters.
We’ll discuss the government interventions, whether it will happen or not, the upcoming crop, and also, of course, discuss the other origins for vanilla, not only Madagascar, and the most important, the sustainability and how it fits into this context.
I feel it’s important to give some context to our audience on the cyclical aspects of the cultivation of vanilla in Madagascar and how it relates to key dates in the market.
Yes, absolutely. Actually, the vanilla production starts during what we call the blooming period, which normally takes place between September to December. It could last approximately three months when we have the pollination of the different flowers.
Then after, we start producing in Madagascar, the green beans from the end of May in some part of the country until, let’s say, mid-August for other regions. And then we produce what we call the Vrac campaign, three months after the beginning of the green campaign. And normally the export starts around the beginning of October.
In your annual vanilla market report, that was published a couple of months ago, you mentioned there was a rather large export volume last year. Could you explain to us what was the driver behind this?
Yes, absolutely. We were reporting in our last report, indeed, that more than 4,300 tons have exported by end of July, which was the biggest number ever for a Vanilla crop.
The main reason behind is, first of all, customers were able to secure a significant quantity with a good quality at a very competitive price by early 2024. So most of them, they took long positions.
The second reason behind was actually the concern maybe about new regulation to be set up for the new campaign. Actually, the export have been opened early October, which is, I think, a positive sign for the market from the minister. And the market is open.
So basically this concern was not justified afterwards, but that was the main driver for customers taking long positions.
This sets the stage for this new season. Could you please explain to us how the current crop is in terms of qualities and volumes, as you witnessed in your last visit?
The 2024 campaign was indeed much lower in terms of production. We can easily say that it was at least -30 % on the total overall volume.
But the quality – what we have seen on the ground and during our preparation – is pretty good.
We could say that with good quality and lower volumes, there would have been a lot of activity during the green campaign this summer. How was it really on the ground?
We have seen that due to lower volumes, there were actually less activity on the ground (about the green campaign).
But the other reason behind this is, first of all, due to the long positions taken by customers, they were not really confirming contracts with sustainable beans, because when you talk about green campaign, you talk about sustainable beans.
And the second reason behind is the price of the green campaign that was actually significantly higher than last year.
What about the preparation on your last visit? How did it look compared to last year, for instance?
The preparation went well. We had less quantity than 2023, obviously, as we previously stated. But overall, the quality is good.
I think we have a good picture of the situation in Madagascar up until the opening of the exports earlier in October. So now, looking forward, what is the outlook for the upcoming quarters on the market, from your perspective?
We can tell that, for the moment, there’s still a demand from our customers. Although most of them took long positions. But the market at the moment, as we stated in our report, is not increasing in terms of price, and we don’t see the market increasing in the coming months anyway (not before the next crop).
And I see the prices is remaining stable until the end of Q1 and beginning of Q2, and maybe being a bit more flexible before the next crop, because we know that there is a stock and a carry-over, and the next crop is going to be pretty big.
Speaking about prices, the Malagasy government implemented a minimum FOB price a few years ago that was abolished in 2023. Do you think we could see similar government interventions for this current crop?
Well, I don’t think so. I think, again, that there was a positive sign from the government to open the exports by early October and to keep the market completely open.
If there is a new regulation in place, I think it would be not before the next crop. And mainly, I expect – at the farmer’s level – to at least secure a minimum living income for the farmers, although it’s quite difficult to implement. We are perfectly aware of that.
Do you think there could be some further intervention that could be done to really support the farmers?
As vanilla exporters, we were all paying a 4$ tax per kilo of kilo exported. And I think this amount of money could be used to support the farmers during this intercrop season, when they are facing more difficulties. And again, maybe implement a new minimum price, for the green, at the farmer’s level.
As you explained earlier, we are now in the middle of the blossoming period for vanilla in Madagascar, during your visit in October. What were your observations?
Well, indeed, I was visiting Madagascar last October – so in the middle of the blooming season – we have seen a lot of flowers, so normally we can expect a bigger crop for 2025. We know also that botanically speaking, we should not pollinate all the flowers, otherwise the plant could become weaker and having less production.
But I would say overall, there is no risk for the 2025 crop.
And aside from the state of the vines, are there potential factors that could impact the vanilla market, or the harvest, next year?
There are natural factors, but obviously it’s difficult to predict what would be the weather in three or four months in Madagascar. We had a cyclonic period at the end of Q1. And we have seen some cyclones in Madagascar several years, but normally it should not impact really the production.
And maybe, on the geopolitical side, we could see something. But again, we don’t expect anything to be set up before the next crop.
I think we have a pretty good picture of the situation in Madagascar, let’s discuss other origins. Madagascar is of course, the biggest producing country of Vanilla in the world, but there are other important origins such as Uganda or Indonesia.
Could you please tell us a little bit more about those?
Indeed, Uganda, is a very interesting origin. We, at De Monchy Natural Products, really like Uganda as an origin as such, although it’s used by customers maybe as an alternative origins, because it’s also vanilla planifolia in Uganda, like in Madgaascar. But we see some very good beans with high vanillin content and pretty stable. The production has been significant over the last 2 years so it is an important origin.
In Indonesia, where we are also involved, in different programs, (in Java, for conventional productions, but also in the East part of the country for sustainable and traceable programs), the production is, let’s say, at the same level than it used to be, but the market is mainly dedicated for the US. The prices remain pretty firm in Indonesia, overall, like in Papua New Guinea, where the exports are divided between USA and Europe.
And, in a more global sense, what about the sustainability certifications today? How do they fit in this market?
Certifications is actually a really important topic (and becoming more and more important). Obviously everybody was starting mainly with organic certif to secure beans without contaminations (without nicotine, without pesticide). And today, it’s developing with FairTrade, Fair for Life or RainForest Alliance. We have seen that, during the last export, more than 30% of the total volume out of Madagascar were actually certified. That’s the first thing.
The second thing is that we see a demand from the customers to have traceable beans, but not automatically certified. So, we, at De Monchy Natural Products, are providing such traceability, with our good practices, and the customers are requiring now the full traceability, and, let’s say, a certification by a certification body, when it’s really needed.
But, in this market of vanilla, which have wild swings and prices, how does this impact the life of the farmers on the ground?
Well, different certifications have different contributions to the farmers. So, for the organic we pay a little premium, which is linked to the quality of beans. For example, on FairTrade or Fair for Life, we pay a more significant premium, which is mainly linked to the living income of the farmers. For RainForest Alliance, it’s also a different set up, but that brings also an added-value to the farmers.
So I think it’s very important to support those initiatives. I also believe there will be more initiatives in the future, that definitely contributing directly to the farmers’ life.
So this conclude this first episode of the “Together Discussing Natural Sources” podcast. Thank you Stephane for your participation and for your contribution.
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The Netherlands
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Breinigsville, PA 18031
United States of America
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