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A Behind-the-Scenes Look at the Current Agave Crisis

The tequila industry is booming, but agave’s fluctuating prices make for an unstable business for those who farm it. Here, four agaveros share what it's like to weather the ebb and flow of the market.

Last year, while drinkers in cocktail bars, clubs and frat house basements mixed, shot and sipped more than 273 million liters of tequila, the price of agave quietly quadrupled.

But this is nothing new. In the modern agave market, price swings are endemic. In the 1980s, as premium tequila entered the global market and distillers scrambled to grow their share of the success, prices shot up; in 1999, they spiked again due to an unexpected frost during another boom in consumption; and last year, the exponential growth of the premium tequila market overlapped with the explosion of the agave syrup sector.

In general, peak prices draw a flood of new farmers into the field like prospectors for green gold. But the market always adjusts; six to seven years later, when that glut of new agave comes to maturity, prices on the open market plummet again, cutting margins for agave farmers dangerously low, and driving many out of business.

During the last crisis, the number of farmers was nearly slashed in half over the course of seven years, from 15,000 in 2000 to 8,000 in 2007, a statistic that runs in tandem with peaks and valleys in pricing. In 2000, prices on freshly harvested piñas rose to over 25 pesos per kilo before dropping down to three pesos per kilo seven years later. Last April, agave was selling around four pesos per kilo; it hit over 16 by the end of December and has risen even higher since.

Though agaveros and tequileros are forever dependent on each other, these extreme price swings have created discord as both sides race to maximize profits when they can. Specifically, when prices spike, it’s common for agave farmers to break their contracts with tequileros and put their plants on the open market to find a higher bidder. (Many even sell unripe agave to desperate or undiscerning buyers.) On the flip side, when prices start to drop, tequileros will bid almost below the point of profitability for farmers, a problem made worse by the fact that agaveros who go bankrupt often leave their plants in the field rather than pay to harvest them, which gives pests and diseases a chance to multiply unchecked.

As such, there are issues of both economic justice and environmental sustainability wrapped up in these swings. And while the Tequila Regulatory Council has taken steps to count agave plants in the field and improve supply and demand forecasting, there is an underlying mistrust between agaveros and tequileros that has consistently undermined efforts to stabilize the market.

To complicate the situation further, these swings also tend to benefit the biggest growers and tequila brands by eliminating competition from upstarts who are not positioned to survive. As a result, “those actors, the government and the system in general don’t want to change this repeating pattern,” says Dr. Ana Valenzuela, a biologist whose work on sustainable agave production has made her a leading voice in the industry.

We can see the effects as tequila brands come and go firsthand, but the perspective of the farmers whose work behind the scenes is critical to the the future of the spirit is often ignored. So, this past August, when agave prices were peaking, I traveled through Jalisco to talk with different farmers on how the current state of the agave—and, by extension, tequila—market is impacting them.

I meet with small farmers who are thinking of planting agave; with Iliana Partida, whose family has worked for generations to hedge their bets against market swings; and with César González, who recently secured a contract with Patrón, which he hopes will stabilize his business for years to come. Here’s what they had to say.

Agave Farmers

Independent farmers Juan Carlos (left) and Santiago Ramos (right).

Juan Carlos and Santiago Ramos | Independent Agave Farmers

Usually, Juan Carlos grows corn, but he recently planted one hectare of agave on some extra land he has in Amatitán, in Jalisco. “Right now, we’re getting high values,” he explains excitedly; he hopes they’ll stay high until he is ready to harvest six to eight years from now.

Going back to Mayan times, agave was a staple, planted alongside beans, corn, pumpkins and chiles as part of the sustainable milpa crop rotation system. Now, farmers like Carlos treat the practice like a lottery ticket. If things go well, the agave crop could start them on the path to building a new business, but many of them fail along the way.

Down the street, in the Livestock Association, Santiago Ramos is waiting to see what happens to the price. He raises pigs, but he sometimes plants agave when he thinks he has an opportunity to make some money on the side. He also knows how important it is to plant at just the right time.

“There’s a lot of people who don’t know anything about agave, so they just plant,” he says. “All they consider is the high price.”

Ramos prefers to stick to bets he understands better; there’s some variability in the pork market, but it’s a smaller range and a more predictable living. “I’ll plant in two years when the price is low,” he explains. “Right now, I don’t have the capital.”

Agave Farmers

Iliana Partida (left) and roasted agave in an autoclave oven at her Hacienda de Oro distillery (right).

Iliana Partida | Owner, Partida Tequila

Iliana Partida’s extended family has roughly 500 hectares of agave scattered through the surrounding countryside, and they plant every year regardless of the price.

Her grandfather started planting agave in the 1960s after a few years of earning money in the United States. At the time, there was a communal distillery in Amatitán where growers could distill the agave they couldn’t sell on the open market to cut some of their losses. But, with each grower weighing in on every decision, the facility was not nimble enough to thrive. So Partida’s grandfather split off and opened a new distillery with 16 partners. Then, in 1999, taking profits from the agave shortage, he opened his own distillery, which has been handed down through two generations. Partida now distills for her family’s two labels, as well as for 25 other tequila brands at her Hacienda de Oro distillery.

When prices are low, Partida uses the family’s agave holdings to make as much tequila as she can under her El Ultimo Agave label. Then, when prices spike, she stores the excess tequila in holding tanks and aging barrels and sells all of her agave to the highest bidder. Right now, with prices high, El Ultimo Agave has a ten-year supply on hand and Partida is focused on selling agave.

“I think there’s always going to be cycles,” she says. “My job is to make that stable—planting agave every year.” But, she adds, with so many players, including giant distillers like Jose Cuervo who can swing the market singlehandedly, “there’s nothing that can control the price.”

Don Manuel, another farmer who works with Patrón (left). Hacienda Patrón surrounded by agave in Atotonilco (right).

César González | Contract Farmer with Patrón

César González’s grandfather started planting agave in 1955, dropping hearty plants onto his more remote and rugged parcels of land. Then, as the tequila industry’s global distribution started to grow, the family increased their agave holdings.

“In Mexico, we use the name ‘roller coaster,’” says González, reflecting on the years his family spent hustling agave on the free market and working on short contract with several brands at a time.

“You are working against the distillery,” he remembers. “Always, you are fighting about the price.”

But then, in 2011, González got a contract from Patrón, which guarantees a minimum price. To his benefit, however, the contract has no upper bound, which means that he knows he will never lose money when the market is low, and also that he won’t miss out on peak profits when the price is high.

Some large brands, like Jose Cuervo, prefer not to use contracts, instead growing part of the agave they need themselves and then buying agave on the open market when prices are low. (This allows them to overproduce tequila that they can store until the price fluctuates again.) And still other companies write contracts that set minimum prices so low that growers lose money at the bottom-end of the market and, by setting the cap below market value, at the upper-end as well.

In an erratic agave market, César is in a rare position. He is one of only 11 growers contracted by Patrón.

“In this moment, I don’t have any agave on the free market,” says González. “For me, this is good.”

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