Part 2: The boom-and-bust cycle of tequila

Erin Smith

With the long lead times that it takes to grow agave plants to boost mezcal and tequila production it may not be surprising that the category overall has gone through a couple of boom-and-bust cycles in its nearly 500-year history.

“There have been a number of shortages over the past century or so. The most recent shortage was in 2000. That had to do with an inelastic supply and a higher than expected demand,” says Jesse Estes of El Nivel.

According to Estes when a supply shortage occurs, prices spike and lure farmers that normally grew other crops to plant agave instead. “Fifteen years ago there was a spike in the price and tequila got as high as 20 pesos per kilo, which was very high. When the growers see the price spikes, farmers then switch crops and ten years later you have an over-supply. Then people stop planting because prices fall.”

According to Estes supply and demand are currently in balance. But there may be a shortage in the not too distant future, particularly for mezcals.

“I think the boom to some extent is already happening. With mezcal there is big dilemma. We want the category to do well, but it is becoming clear that the increase in demand creates a big strain on local producers.”

Wild agave varieties used in mezcal production may be particularly vulnerable to supply shortages because they tend to take significantly longer to mature before they are ready to be harvested. “Wild varieties like Tobola, for example take a long time to grow and it has a really low yield in terms of the sugar content and the volume of mezcal that it produces. Even if we plant more now we have to wait 12 to15 years, sometimes longer.”

 

 

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