Volkswacht Bodensee - After the party, Mexican agave farmers face tequila hangover

Instead of bringing a long period of prosperity for farmers of the spiky succulent, the tequila boom has created a supply glut that sent agave prices slumping.

Mexican tequila exports surged from 224 million liters in 2018 to a record 402 million last year, according to the Tequila Regulatory Council, which oversees qualification for the internationally recognized denomination of origin label.

The United States, Germany, Spain, Canada, France, the United Kingdom, China, Australia, Colombia and Japan are the world's top 10 consumers of the spirit.

Fast-rising demand initially led to a shortage of agave, forcing tequila producers to pay 35 pesos -- around US$1.70 at the current exchange rate -- per kilo, said Francisco Javier Guzman, head of the Barzon Agavero organization of some 5,000 traditional tequila producers.

The problem is that the high prices lured more producers who planted agave "all over the place," according to Guzman, an 80-year-old farmer from the Los Altos region of the western state of Jalisco.

"Some people sold their factories, hotels, land and ranches to start growing agave," he told AFP.

- Celebrity endorsement -

The tequila boom was good news for Clooney and the other founders of Casamigos who sold their brand to British drinks giant Diageo in 2017 in a deal worth up to $1 billion.

Los Angeles Lakers star James meanwhile threw his name -- and money -- behind the Lobos brand of tequila.

Even tech billionaire Elon Musk joined the party with the launch of a limited edition Tesla Tequila.

The frenzy saw the number of registered agave producers leap from 3,180 in 2014 to 42,200 in 2024, while areas under cultivation more than doubled between 2018 and 2023, according to Mexican government figures.

The ensuing oversupply has seen agave prices crash to an average of eight pesos -- around 40 US cents -- per kilo, according to producers.

Traditional growers are urging buyers to pay about 60 US cents per kilo to at least cover their production costs, said Martin Franco, vice president of Barzon Agavero.

Their efforts are complicated by "coyotes" -- intermediaries who take advantage of farmers' desperation to buy agave for as little as 10 US cents a kilo.

The 25 percent tariffs that US President Donald Trump has pledged to impose on imports of Mexican goods unless the country does more to tackle illegal flows of migrants and drugs are another threat for the industry.

The United States consumes about 85 percent of tequila with the denomination of origin label, "so of course I'm concerned," Guzman said.

To counteract the coyotes, the Tequila Regulatory Council has launched a digital platform for traditional growers.

It enables them to seek orders from tequila companies at prices that guarantee "reasonable profitability."

At La Iberia, a bar in Jalisco's state capital Guadalajara filled with the sound of mariachi music, manager Martin Martinez estimated that tequila prices have doubled over the past six years.

He said that he had been forced to reduce his profit margins to avoid losing customers.

Sipping a drink in the nearly 150-year-old establishment, customer Salvador Magana said he had seen no benefit from the agave production boom.

"If prices went down, the liquor should have been a bit cheaper, but no," the 55-year-old lamented.

C.Bruderer--VB