| | |  Business News | August 2008 
Corn Demand Hurts Tequila Industry
 Chris Hawley - USA Today
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| | Agave farmer Cruz Reynosa sits on "pineapples," the trimmed hearts of blue agave plants, at his farm near Tequila, Mexico. Many of Reynosa's neighbors are increasing the amount of acreage they are devoting to corn and other crops because of higher prices for food crops worldwide. (Chris Hawley/USA Today) | | |
Zapotlanejo, Mexico — Here in the heart of Mexico's tequila country, where every town has a distillery and the air smells like sweet fermenting molasses, a sign proudly marks the entrance to Miguel Ramírez's farm: "Rancho Ramírez: Producer of Agaves."
But behind the fence, the blue agave plants, the raw ingredient of Mexico's famous tequila, are getting harder to spot. They are being replaced by row after row of leafy cornstalks.
That switch to abandon slow-growing agave plants to cash in on corn, beans and other food crops selling for record prices worldwide could limit the supply of tequila and drive up the cost of a shot or a margarita.
The move is part of an international trend from Idaho potato farmers to Bolivian coca growers as they cut back on their trademark crops in hopes of making big money on corn and grain.
"Corn is where the money is now," Ramírez said, admiring his new crop. "I'm going to get out of agave completely."
Martín Sánchez, director of agriculture for Mexico's Tequila Regulatory Council, said the corn gold rush was probably inevitable. White corn in Mexico is selling at its highest in at least a decade — 18 cents a pound this month — while agave sells for as little as 2 cents.
"We don't have good numbers, but we know it is happening: People are abandoning their fields of agave and flipping over to other crops," Sánchez said.
In many fields east of Guadalajara, overripe agave plants are turning brown and dropping their spikes. Prices are so low that the plants are not worth harvesting, said Antonio Aceves, a farmer in the town of Tototlán, who cut his agave fields to 25 acres from 74 this year.
Aceves said the seeds of uncertainty in the agave market were sown in 1997, when a frost killed millions of young agave plants. By 2002, agave prices rose to a stunning 80 cents a pound. Distillers such as José Cuervo, Sauza and Herradura were paying up to $100 for a single "pineapple," or agave heart.
"You practically had to guard your field with an army," Aceves said. "A lot of people got rich, and suddenly everybody was planting agave."
The big tequila makers, determined to avoid another shortage, began growing agave on rented land and contracted with brokers to cover any shortfall, said Rafael Aldana, an officer of the farmers' co-op in the town of El Arenal.
An agave plant takes five to seven years to mature, so farmers now have a glut of agave and no buyers. "Nobody wants them," Aldana said. "I'll probably lose them all."
In a field near the town of Tequila, farm hand Raudel López Sandoval navigated past the needle-sharp spines of an agave and stabbed a pole into the dirt. He grabbed some beans from a plastic container on his waist and tossed them into the hole.
"Beans grow fast," he said. "You tend an agave for six years, and then the price drops on you or you get hit with a freeze or something. It's a lot of investment to lose."
The price of beans in Mexico has risen 60% since December to 59 cents a pound.
At his feed store in Tototlán, Guadalupe Salorio said sales of corn seed went up 20% this spring as agave farmers switched crops.
The rise in the price of food crops is attributable to several factors: people in developing countries like China and India are eating better, high oil prices are increasing the cost of fertilizer, and the United States and Europe are diverting corn and vegetable oils into alternative fuels like ethanol.
As of June, world food costs had risen 62% since early 2006, according to Oxford Economic Forecasting, a British consulting firm. The worldwide price of cereals like corn and wheat was up 120%.
Tequila officials, meanwhile, believe there could be an agave shortage on the horizon, Sánchez said.
"When the price of agave is low, people get demoralized and abandon their crops," he said.
During the last agave shortage in 2001-02, some premium tequilas cost a few dollars more a bottle. Some distillers added other types of alcohol to their tequila to stretch supplies. Tequila has to contain only 51% pure agave to carry the name.
Distillers are already preparing for leaner days by stockpiling finished tequila, he said. Some growers have stopped weeding and spraying older agave plants, devoting their attention to younger plants, in case the price bounces back when the agaves mature.
Rafael Murillo is one of the optimists. On a hill outside Tequila, he whacked away weeds around some 3-year-old agave plants.
"The mature agaves are a lost cause," Murillo said. "But I'm not going to become a corn farmer yet. These little ones still have a future."
Hawley is Latin America correspondent for USA TODAY and The Arizona Republic. |
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