In the heartland of the tequila industry, in Mexico’s western state of Jalisco, a worsening shortage of agave caused by mounting demand for the liquor from New York to Tokyo has many producers worried.
The price of Agave tequilana, the blue-tinged, spiky-leaved succulent used to make the alcoholic drink, has risen sixfold in the past two years, squeezing smaller distillers’ margins and leading to concerns that shortages could hit even the larger players.
In front of a huge metal oven that cooks agave for tequila, one farmer near the town of Amatitan said he had been forced to use young plants to compensate for the shortage of fully grown agave, which take seven to eight years to reach maturity.
Photo: Reuters
He asked not to be identified, because he did not want his clients to know he was using immature plants.
The younger plants produce less tequila, meaning more plants have to be pulled up early from a limited supply — creating a downward spiral.
“They are using four-year-old plants, because there aren’t any others. I can guarantee it, because I have sold them,” said Marco Polo Magdaleno, a worried grower in Guanajuato, one of the states allowed to produce tequila under strict denomination of origin rules.
More than a dozen tequila industry experts interviewed by Reuters said that the early harvesting will mean the shortage is even worse this year.
Already, the 17.7 million blue agaves planted in 2011 in Mexico for use this year fall far short of the 42 million the industry needs to supply 140 registered companies, according to figures from the Tequila Regulatory Council and the National Tequila Industry Chamber (CNIT).
The shortages are likely to continue until 2021, as improved planting strategies take years to bear fruit, producers said.
The result is agave prices at 22 pesos (US$1.18) per kilogram — up from 3.85 pesos in 2016.
Those higher prices mean that low-cost tequila producers, which make a cheaper, less pure drink that once dominated the market, find it harder to compete with premium players.
“It doesn’t make sense for tequila to be a cheap drink, because agave requires a big investment,” CNIT president Luis Velasco said.
Small-scale distillers of quality tequilas are also feeling the pinch, and some have warned that drinkers are seeking alternative tipples.
“At more than 20 pesos per kilogram, it’s impossible to compete with other spirits like vodka and whisky,” said Salvador Rosales, manager of small producer Tequila Cascahuin, in El Arenal, a rural town in Jalisco.
“If we continue like this, a lot of companies will disappear,” he said.
Exports to the US of pure tequila jumped by 198 percent over the past decade, while cheaper blended tequila exports rose by just 11 percent, CNIT data showed.
Over the same period, Mexican production declined 4 percent, with blended tequila leading the fall.
As it sheds its image as a fiery booze drunk by desperados and frat boys, while moving into the ranks of top-shelf liquors, the tequila industry has seen a flurry of deals in recent years.
Last month, Bacardi Ltd said it would buy fine tequila maker Patron Spirits International for US$5.1 billion.
Last year, after years of speculation, Mexico’s Beckmann family launched an initial public offering of Jose Cuervo, raising more than US$900 million.
Britain’s Diageo PLC swapped its Bushmills Irish whiskey label for full ownership of high-end Don Julio tequila in 2014.
The question posed by many distillers is how to keep pace with tequila’s success.
“The growth has overtaken us. It’s a crisis of success of the industry,” said Francisco Soltero, director of strategic planning at Patron, which buys agave under various contracts.
“We thought that we were going to grow a certain amount, and we’re growing double,” he said.
Large sellers, such as Patron and Sauza Tequila Import Co, have said they have not experienced problems paying for agave, and forecast that their inventories will keep growing.
“If you sell value, the costs don’t worry you,” Soltero said.
Sauza, which mostly grows its own agave, does not foresee supply problems, CEO Servando Calderon said.
However, some think it is simply a matter of time before the higher production costs and scarcity pressures bigger players.
“We are sure this will have a strong impact on the big firms, such as Cuervo or Sauza,” said Raul Garcia, president of the National Committee for Agave Production in Tequila, a group that includes most agave producers in the country. “We don’t see that the problem will be resolved soon, and that’s what worries us.”
Demand is also being driven by other, fashionable agave-derived products, including agave syrup and health supplement inulin, which use the equivalent of 20 percent of the plants needed this year, the council said.
Rising prices are also leading to growing theft, driving out smaller producers, Tepatitlan-based blue agave producer Jose de Jesus said.
Criminals enter the area with large trucks in the middle of the night to steal agave, he said.
Last year, 15,000 plants were reported stolen, more than triple the number in 2016, the council said.
STIMULUS PLANS: An official said that China would increase funding from special treasury bonds and expand another program focused on key strategic sectors China is to sharply increase funding from ultra-long treasury bonds this year to spur business investment and consumer-boosting initiatives, a state planner official told a news conference yesterday, as Beijing cranks up fiscal stimulus to revitalize its faltering economy. Special treasury bonds would be used to fund large-scale equipment upgrades and consumer goods trade-ins, said Yuan Da (袁達), deputy secretary-general of the Chinese National Development and Reform Commission. “The size of ultra-long special government bond funds will be sharply increased this year to intensify and expand the implementation of the two new initiatives,” Yuan said. Under the program launched last year, consumers can
Citigroup Inc and Bank of America Corp said they are leaving a global climate-banking group, becoming the latest Wall Street lenders to exit the coalition in the past month. In a statement, Citigroup said while it remains committed to achieving net zero emissions, it is exiting the Net-Zero Banking Alliance (NZBA). Bank of America said separately on Tuesday that it is also leaving NZBA, adding that it would continue to work with clients on reducing greenhouse gas emissions. The banks’ departure from NZBA follows Goldman Sachs Group Inc and Wells Fargo & Co. The largest US financial institutions are under increasing pressure
TRENDS: The bitcoin rally sparked by US president-elect Donald Trump’s victory has slowed down, partly due to outflows from exchange-traded funds for the token Gold is heading for one of its biggest annual gains this century, with a 27 percent advance that has been fueled by US monetary easing, sustained geopolitical risks and a wave of purchases by central banks. While bullion has ticked lower since US president-elect Donald Trump’s sweeping victory in last month’s election, its gains this year still outstrip most other commodities. Base metals have had a mixed year, while iron ore has tumbled, and lithium’s woes have deepened. The varied performances highlight the absence of a single, over-riding driver that has steered the complex’s fortunes, while also putting the spotlight
Twenty years after he was a young, struggling actor in Toronto, Thomas Lo (盧瑞麟) is now the one giving young Asian actors their big breaks. He just had to go to Hong Kong to do it. The Chinese Canadian has been the creative director of one of the territory’s biggest TV broadcasting companies for only a few years, but is already making original English-language content to reach viewers around the world. “It was a bit of a full-circle moment for me,” Lo said. “You see more Asians, but you’re still seeing the same Asians on screen, right? We’re looking for more opportunities
RSS