09 January 2007

Tequila flows like never before while subsidies trickle in for struggling agave farmers

Agave reception

Tequila once again surged in popularity as distillers increased their output by 15.7 percent in 2006, making it a record production year. Exports grew by an even bigger number, 17.8 percent and another legendary tequila brand, Herradura, slipped into foreign hands. The region around Tequila, Jalisco was also named a UNESCO World Heritage Site last year.

But all isn't well in Mexico's tequila country. Farmers still receive only a fraction of the sky-high prices agave fetched during the salad days of the late 1990s. The price of agave has bottomed out at around one peso per kilo after reaching as high as 16 pesos per kilo. Prices have hovered at that low level for several years now.

To ease the hardship, the Mexican government unveiled a plan to give agave growers 200 million pesos in subsidies. Agriculture secretary - and former Jalisco governor - Alberto Cardenas Jimenez announced the relief, but commented that the previous high price drove many growers to plant agave and attracted many speculators into the industry. Agave arriving from outside of the designated growing area - Jalisco and certain municipalities of Nayarit, Michoacan, Guanajuato and Tamaulipas - is also aggravating the situation.

Somewhat ironically, the Jalisco government's rural development secretariat forecasts the supply of agave will plunge by the end of the decade after the glut works itself out, which would, of course, put the same boom-bust cycle in motion again.

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