Low Prices and the Long Game. The Window for Vanilla Buyers
Madagascar oversupply keeps prices historically low
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Opening prices up, recovery still distant
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Ideal window for long-term contracts
Global Market Overview
Little has changed in the global vanilla market since our last report in May. Inventories, primarily of Madagascar origin, have declined somewhat but remain stubbornly high, both at origin and in the warehouses of vanilla dealers around the world. While market sentiment remains decidedly bearish, Madagascar’s export data suggests that buyers are taking advantage of record-low prices to secure long-term supply commitments. If this trend continues, it could gradually help absorb the existing oversupply and return the market to more sustainable levels.
We estimate that Madagascar’s 2025 vanilla crop exceeded 4,000 MT, making it one of the largest on record. Both relatively new plantations and established ones continue to deliver high yields. Projections for a similarly sized crop from the 2026/27 campaign have been revised downward slightly.
We are beginning to see the first signs of farmers choosing not to pollinate vanilla flowers in response to persistently unattractive market conditions. These tend to be more experienced farmers who practice crop rotation and avoid becoming overly dependent on any one crop when prices fall to unsustainable levels, as they have with vanilla.
The same principle applies to vanilla exporters. Those diversified into other agricultural products, such as coffee, cocoa and cloves, or into businesses such as construction, trucking and manufacturing, are generally better positioned to weather the downturn than those relying exclusively on vanilla.
Madagascar: Production, Exporters and Quality
The Malagasy government has recently issued well over 100 export licenses, and we expect further licenses to be granted. We believe, however, that only a small proportion of these companies will ultimately export meaningful volumes. We are also concerned that many newcomers lack the expertise required to properly cure and condition higher-quality vanilla, particularly gourmet or black vanilla, which requires an extended period of curing and conditioning before it is ready for export.
Overall, the quality of the 2025/26 crop was good, although we believe it could have been better. Vanillin levels in higher-grade vanilla were somewhat disappointing, while lower grades showed higher-than-usual concentrations. This is typical when prices are depressed, as collectors and exporters become less willing to invest the additional time and care required to prepare grade 1 vanilla.
For newcomers to the industry, preparing grade 3 (cuts) is also considerably easier, less expensive and less risky than producing properly conditioned, bundled grade 1 vanilla. As a result, much of the vanilla that might otherwise have been selected for grade 1 preparation ended up being processed as grade 3 quality.
Growing Demand for Grade 3 Quality
Over the past two seasons, we have seen substantially stronger demand for grade 3 quality than for grade 1, despite both being available at historically low prices.
As noted in our previous report, this disparity can be explained by a combination of quality and price. The vanillin content of grade 3 cuts has been surprisingly strong, regularly exceeding 1.0% when measured by HPLC. By comparison, grade 1 vanillin levels have tended to be closer to 1.6% than the 1.8% or higher traditionally associated with this grade.
During the previous campaign, the price premium for grade 1 over grade 3 was difficult to justify based on their respective vanillin yields. Put simply, why pay twice the price for approximately 25% more vanillin? This helped drive the surge in demand for cuts during the 2025/26 campaign.
Another important factor is the growing acceptance of ground vanilla, sometimes referred to as vanilla powder, as a viable alternative to vanilla extract for industrial applications. Ground vanilla is produced both locally in Madagascar and at milling facilities in Europe and North America. Good-quality grade 3 cuts are a preferred raw material for this market.
All indications suggest that demand for grade 3 will remain strong. We have consequently seen a moderate increase in initial price offers for grade 3, compared with only a slight increase for grade 1. Should this trend continue and the price premium for grade 1 narrow to less than 50% over grade 3, we would expect demand for grade 1 to recover accordingly.
Quality Control and Moisture
We continue to encounter too many examples of excessively moist vanilla across all grades. Some exporters are attempting to minimize weight loss, or desiccation; to improve margins that are already extremely thin.
Despite the current challenges, we believe maintaining consistent and rigorous quality standards is essential if Madagascar is to preserve its dominant position in the global vanilla market. This becomes particularly difficult when prices are at unsustainable lows, as proper curing, conditioning and quality control are both time-consuming and costly.
Ultimately, compromising quality to preserve short-term margins risks undermining the reputation of the entire Madagascar vanilla market.
Gourmet Vanilla
We do not expect significant price changes for gourmet (black) vanilla at the outset of the campaign. Buyers with immediate requirements should consider sourcing from the previous campaign, where properly conditioned stock remains available, ensuring greater stability and reducing risk.
As we have noted before, relatively few exporters are prepared to invest the time and expenses required to produce stable black vanilla with the correct aroma profile.
Regardless of how attractive the beans may appear, we firmly believe that black vanilla should not be considered genuinely ready for export before January at the earliest, or approximately six months after harvest. This period is essential to complete the curing and conditioning process and for the stability and quality of gourmet vanilla to be properly assessed.
Only once this process is complete should black vanilla be vacuum-packed for storage or export. Vacuum-packing beans before they are fully cured is likely to result in an unstable product with an inconsistent and potentially unpleasant aroma profile.
2026/27 Campaign and Price Outlook
Madagascar’s export season opened on October 9, 2026, and is scheduled to close on June 30, 2027.
For the reasons outlined above, we expect the 2026/27 crop to be somewhat smaller than initially forecast. Nevertheless, it will still be substantial. Although it is too early to make a reliable estimate, we currently place the likely crop size in the range of 2,500–3,500 MT.
Opening prices are approximately 10–20% higher than at the end of the 2025/26 campaign, depending on grade.
At current price levels, however, an increase of 10–20% should not be interpreted as evidence of a sustained market recovery. As these adjustments can move in both directions, we expect continued price fluctuations throughout the season as market activity evolves.
Despite these short-term movements, we expect Madagascar vanilla prices to remain at historically low levels, barring unforeseen developments such as adverse climatic events or significant government intervention.
Uganda
Ugandan vanilla remains competitive with Madagascar, with an increasing number of end users supporting this origin, particularly in the European Union.
Production appears to be holding relatively steady at approximately 400 MT annually from its two harvests. We expect Uganda to continue expanding production over time as it strengthens its position as the world’s second-largest producer of Bourbon-type vanilla.
Papua New Guinea and Indonesia
Although they remain relevant suppliers, Papua New Guinea and Indonesia have lost some ground in the global vanilla market.
Both origins offer distinctive flavour and aroma profiles, allowing them to serve market segments that are less directly tied to Madagascar’s pricing. As a result, they are not necessarily compelled to follow Madagascar prices down to unsustainable levels.
Nevertheless, the substantial price differential between origins is difficult for some buyers to ignore, forcing them to reduce their requirements for these alternatives. We anticipate somewhat lower production from both origins and hope to provide a more detailed assessment in our next report.
Conclusion: A Buyer’s Perspective
In our opinion, the strategy for buyers is becoming increasingly clear. Although a meaningful recovery remains somewhat distant, there are early indications of the market beginning to move towards a more balanced position.
It may take several more seasons for the vanilla market to return to sustainable levels. In the meantime, the current environment presents buyers with an opportunity to secure long-term supply commitments at historically attractive prices; provided they carefully assess their requirements, suppliers and contractual exposure.
The vanilla market has a long history of sudden and sometimes dramatic changes in direction. When those changes occur, they often do so with little warning. Buyers who take a measured, forward-looking approach now may be better positioned when the market eventually turns.
Aust & Hachmann (Canada) Ltd
The market reports that we issue are based strictly on our opinions and observations. We believe we have presented a reasonably accurate portrayal of the global vanilla market in very general terms. The reports date back almost 20 years and are all available on our web site:
https://www.austhachcanada.com/reports/
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