Agave shortage: the hidden costs

07 August, 2014

Agave shortage doesn't just mean higher priced tequila. DI's guest writer Dale Sklar, tells us how the black market for agave is back and how the 'Coyotes' are once again prospering. 

About every 10-12 years, there seems to be an agave shortage in Mexico. Last time it started unexpectedly, almost out of the blue with three factors blamed on the shortage, a snow storm (almost unknown weather in Jalisco) which ravaged some agave plantations, rising world demand and limited supply, and a disease known locally as ‘Cida del agave’, which is usually caused by a fungal infection, often started by an insect bite which permits fungal entry afterwards.

When the Agave shortage last happened, about 12 years ago, prices shot up over the period of 18 months from around 0.03 pesos a kilo to over 17 pesos a kilo (i.e. still more than double present prices), and plantations were even hiring armed guards to watch over the agave to prevent midnight thefts from the fields. Many brands disappeared from the shelves, as producers couldn’t find agave at a commercial price, and a new player came about in the Tequila business. Known locally as ‘coyotes’, these were guys who would ‘find’ agave (no one asked too many questions!), and many made so much money in a short time, that they could be seen riding into Arandas town on new saddles and belts encrusted in solid silver. The Coyotes are coming back…

The 12 year cycle usually starts with the price going down in the plantations - only 2  years ago, it was said the low price of agave makes it cheaper to leave it rot in the plantations, than pay a man to cut it and bring it into the distillery. Then the talk changed, people saying that the agave shortage was a trick by the large producersto push up prices. Some said that the big distillers are all sitting on huge inventory of liquid and there’s plenty in USA in bulk.

Then all of a sudden the prices really did start increasing. As a measure of the increases, two years ago, a kilo of cropped agave sold for 25 centavos (0.25 pesos) a kilo, then a year later it had risen to 40 centavos a kilo, and another year later, the same product is selling at 6.5 pesos a kilo! (Still far below the 17 pesos of 12 years ago -so far!)

To make it even worse, despite the best efforts of the CRT (the official body regulating the Tequila industry and practices), when the price of agave increases massively, it is inevitable that agave from areas outside of the permitted zones of the 5 nominated Tequila states, will find their way north from Yucatan and Oaxaca into Jalisco, and (illegally) get made into Tequila. Usually this out-of-zone agave is a different sub-species, such as Agave Espadin, and Agave Henequen.

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