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Agave shortage with higher prices expected to last five more years

September 30, 2013

The tequila industry’s agave crisis, which has seen prices rocket 500% in two years due to a shortage of supply, is likely to continue for another five years, according to Jesús Hernández, master distiller of Olmeca.

Talking to Drinks International in Jalisco, Mexico, Hernández said prices had risen “from 1 peso/kg to 5 peso/kg in the last two years” and the continued shortage will see “tequila become more expensive in the next 4-5 years”.

He said: “100% agave tequila will be impacted because it requires more agave to produce but Mixto [commonly 51% agave] producers won’t be able to make money. The low price tequila will disappear. During the last crisis of 1999-2003, a lot of the lower priced brands disappeared.”

An Olmeca jimador harvesting agave

The long (7-8 years) growth period of agave means that a reluctance among farmers to plant in the mid-to–late 2000s, when agave prices were very low, is only now taking effect.

At that time, prices paid for agave had dived in reaction to a surplus of agave flooding the market – that itself a consequence of excessive planting during the 1999-2003 crisis, a period of shortage and therefore high market prices.

Olmeca, which controls farming of around 70% of its agave supply – through long-term rent rather than ownership – has planted every year since 2000 to help insulate the brand from market fluctuations.

Tahona

Olmeca’s Tahona wheel

Though Hernández said the quantity planted by Olmeca is dependent on the market: “When prices are high and people are planting a lot, we plant less, and if there is not much being planted then we will plant more.”

Hernández said the tequila regulator, CRT, had tried to close the supply-demand gap over the last 10 years but that improvements in farming could also reduce agave growing time from seven to five years.

He said: “The cultivation techniques have changed for the better. More and more, agave producers are taking technical advice. If you do a good job on maintenance – clearing the weeds and putting triple nutrients in the soil – you can gain up to 20% more sugar in the agave. You can now grow agave in five years.”

Early impressions, according to Hernández, are that the region’s producers have increased planting this year, which could mean a healthy supply of ripe agave in around 5 years – and an end to the region’s latest agave crisis.

Source: Drinks International

http://www.drinksint.com/news/fullstory.php/aid/4059/Agave_crisis_to_last_five_more_years.html