Bloomberg Businessweek - USA (2019-12-23)

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BloombergBusinessweek December 23, 2019

beanssince1907.“Then,underpressurefromtheWorld

Bank,whichtheyoweda lotofmoneyto,Madagascarwas

forcedtoabandonthosepricecontrolsinthemid-1990s.”

That’swhenvanillastartedtosheditsinhibitions.Prices

dippedfora yearortwo.Then,in2000,a powerfulcyclone

flattenedthenortheasternpartofthecountry.It takesthree

yearsfora newlyplantedorchidtoproducebeans,sohar-

vestswanedforthenextfewyears,causingpricestospike,

thencollapse.Internationalbuyersreportedthat local

exporterswereaskingabout$600a kiloforcuredvanilla

ona Mondayandroughly$20bythatFriday.Warehouses

werestuckwithbeansthey

couldn’t sell foranything

closetowhatthey’dpaidfor

them,anda coupleofthebig-

gest,mostwell-established

vanilladealersinthecoun-

trywentoutofbusiness.

For thepastfouryears,

priceshavebeenridinghigh

again,flirtingwiththe$600

markin 2018 andrarelyfall-

ingbelow$400since.(The

goingratethisfallwasabout

$420perkilo.)Thespikeis

sometimesattributedto a

2015 announcementbyNestlé

SAthatthecompanywould

useonlyall-naturalvanillain

itsproductsinsteadofimita-

tionf lavoring.Othercom-

panies followed suit. The

trueimpactofthedecision

isa matterofdebate.Inthe

pastyear,consumershave

sued numerous food and

beveragecompanies, Nestlé

among them, claiming that

some if not most of their

vanilla flavoring still comes

from sources other than

beans. Spencer Sheehan, a NewYorkattorneywho’sfiled

suits against more than 25 companies, contends that the fla-

vor is often derived from the “other natural flavors” gener-

ically cited in the ingredients lists of various products. The

plaintiffs are seeking monetary damages, but none of the suits

has yet received class-action status from a judge. Regardless

of the validity of those suits, few in the industry say demand

for natural vanilla has changed enough to protect prices from

another dip. Almost everyone thinks a significant price plunge

is a matter of when, not if.

Because northeastern Madagascar is so impoverished when

vanilla prices aren’t high, banks and other financial institu-

tions don’t open a branch near many villages. Farmers are

more likely to bury cash under their houses than to put it into

anaccount.Themarketdemandsthatdrivetheexaggerated

price swings are wholly separate from their lives; almost no

one here actually uses vanilla, which is viewed as a prod-

uct only foreigners consume. The impermanence of cash

flow, along with the near-complete disconnect from forces

moving the market, means the farmers view international

commercefroma muchdifferent anglethan outsiders

might.“Consequently,moneyinnortheasternMadagascar

isnotperceivedasa straightforward, interest-based sum

accumulating over time in an orderly fashion,” according

to a study published last year in American Ethnologist, the

journal of the American

Ethnological Society. Annah

Zhu,theauthorofthereport,

wrote that money in the

vanilla-growing region is

instead treated as a “vola-

tile material that comes and

goes, imbuing the region

with fantastical undertones

of alternating abundance

and dearth.”

That sporadic abundance

has generated a new genre of

local storytelling, almost folk-

loric in nature, that catalogs

localexamplesoffinancial

decadence. It’scalled vola

mofana—roughly translated

as “hot money” spending—

and the tales that illustrate

the concept are difficult to

verify but easy to repeat.

It’s said that one vanilla

farmer was observed buy-

ing the entire supply of man-

goes from a roadside stand;

he paid the vendor 10 times

the asking price, then joyfully

smashed every piece of fruit

on the road. People say cha-

meleonshavebeenspotted skittering wild through villages

with money glued to their backs. One vanilla farmer reput-

edly boiled all his money in a pot and ate the soggy, globular

mass. We heard about farmers who had smoked cash, rolling

tobacco in it as if the bills were cigarette papers. Zhu, in her

journal article, reported that at a festival, a man stepped up to

a carnival booth, bought a handful of rings to toss at a cluster

of bottles, turned around, and threw every ring in the oppo-

site direction. “This is how you play with money!” he yelled.

I wasn’t sure whether to believe these stories or not. Most

were said to have happened several years ago to people

who’ve since faded into anonymity. And most of the farmers

we met seemed frugal, intent on building wealth rather than

squandering it. Yet almost everyone has a story like this to

Inspectors examine and log the farmers’ beans