Vanilco floats lower call option to woo buyers

In a bid to attract global companies towards natural vanilla, Vanilla India Producer Company (Vanilco) has launched $40 (a kg) call option, in addition to the $60 and $80 call options already in vogue.

Vanilco has placed high hopes on the new option as the global market for cured vanilla beans is currently moving in the range of $35-40 a kg.

According to Vanilco Managing Director and CEO Paul Jose, the new strike rate has a maturity period of six months, which is double the 3-month maturity period that other options have.

The company will charge a premium of 10 per cent, and the buyer can opt for the option only by paying the premium in advance.

However, he will be insulated against a price rise for the next six months. Jose said this should be an attractive option as the trend indicated a price rise in the near future in the global market.

The company has also planned to increase the maturity of options by one year by March 2007.

Although Vanilco launched first call options in the international market in March last year, they could not evoke a good response on account of the high prices quoted.

"As the global market has been moving below the $40 a kg level for the last seven-eight months, the earlier options could not attract much buyers," Jose said.

The two lakh-plus domestic vanilla growers have had a tough time for the last two years as the prices have plummeted to the rock-bottom level.

Earlier in 2003, the price of cured beans had soared to $500 a kg when Hurricane Huda devastated the whole crop in Madagascar, the world's largest producer of natural vanilla.

Jose said Vanilco, to start futures trading, was also in talks with various global and local commodity exchanges. "We expect to start futures trading by next March as a number of international and domestic exchanges have shown interest in commencing trading," he said.

Meanwhile, with harvesting just about to begin (by October), local vanilla growers are keeping their fingers crossed as Vanilco is seriously considering backing out from procurement.

Jose said the company was not in a position to procure now as the stock position was rather high at present. Last season Vanilco had procured 132 tonne, but it had decided to withdraw from the market till the time the Union government took steps to drive up domestic consumption.

"Unless the government introduces certain measures to bail out the crop, we will not procure this time. During his recent visit to Kerala, Jairam Ramesh assured that steps would be taken to make natural vanilla mandatory in vanilla ice creams but nothing has happened so far," he said.

The country consumes 650 tonne synthetic vanilla a year, while the annual consumption of natural vanilla is even less than 1 per cent of this.

The prices of green beans had dropped to Rs 100-120 in the domestic market last season, and it would have a tougher time ahead as the commodity's production was likely to double to 1,200 tonne this season, he said. This is in contrast to the global scenario, where the markets are showing clear signs of recovery.