A sharp hike in the cost of vanilla beans threatens to drive up prices of popular products such as vanilla ice cream.

The classic spice is now more expensive than silver, at a record high price of $US600 ($820) per kilogram.

The dramatic surge was triggered by extreme weather events impacting vanilla bean crops, coupled with a massive increase in demand from large multinational corporations, industry insiders told The New Daily.

The good news is that it does not appear to be affecting consumer prices – at least not yet.

Difference between vanilla extract and vanilla essence

The vast majority of products with vanilla – as many as 90 per cent – in fact do not contain extract from the vanilla bean at all, according to Heilala Vanilla CEO Jennifer Boggiss.

“These vanilla products actually have a synthetic vanilla flavouring or essence,” she said.

True vanilla bean ice-cream will contain vanilla bean extract. Photo: Getty

“There is a big difference – vanilla extract is extracted from the vanilla bean.

“There are various other forms of vanilla flavour – from natural plant-based products (for example, from clove or plum), to vanilla essence made from synthetic chemicals which mimic the flavour of vanillin.”

Vanilla essence retails about $2 per 200ml, whereas vanilla extract is priced upward of $11.50. Concentrated extract is more than $7 for just 50ml.

Ms Boggiss said pure vanilla extract is the second most expensive spice after saffron and one of the most labour-intensive.

Talia Susman, the general manager of one of Australia’s largest importers of vanilla beans Vanilla&Co, said vanilla essence can be used as a substitute for vanilla extract in some cases but at the expense of flavour.

“The taste of real vanilla compared to essence is quite different and has a beautiful aroma,” she said.

Why vanilla bean extract is so expensive

It takes three years to produce a vanilla bean from the planting of a cutting.

Ms Boggiss said that when the plant flowers, it has to be hand-pollinated within four hours of blooming.

“Nine months later, you get a green mature vanilla bean and pick it,” she said.

“Then you start the fermentation process, an extensive sorting and curing process, and a three-month sundried process.

“Lots of love and care goes into it.”

About 75 per cent of the world’s vanilla is grown in Madagascar.

Two cyclones devastated the country last year and it has reduced the volume of vanilla bean crops.

Cyclone Enawo alone was reported to have wiped out 30 per cent of Madagascar’s vanilla crops.

Vanilla theft has become a big business in Madagascar.

BBC reported that some farmers are even going to such lengths as to “stamp their names or serial numbers” on individual vanilla pods while on the vine as a means to deter theft, as the markings are visible even after the pods are dried.

Consumer prices safe for now but could see impact

Wholesale costs of vanilla bean have risen by about 500 per cent in the past four years.

In one example, Ms Susman said that four-and-a-half years ago, she sold one kilogram of vanilla online at $135. Now the same amount costs $790.

“There are more consumers than ever looking for authentic, traceable and ethical ingredients,” Ms Boggiss said.

“Large multinational companies are now demanding real vanilla, so there has been this huge demand.”

She admitted the cost hikes could have a flow-on effect on consumer prices, but believes any impact will remain small.

“I can’t see consumer prices being impacted in a big way,” she said.

“I think the idea that the price of ice creams will increase has been a bit sensationalised.

“The amount of vanilla in ice cream is really small – only about 1 per cent – and many just use vanilla essence or natural flavours.

“But it will have an impact.”

Ms Boggiss said price-conscious consumers could use a blended product as an alternative.

“These combine extract and natural flavours,” she said.

“It’s really close in taste to pure extract and can sometimes save you 50 per cent of the cost.”