2018 got off to a rough start for tequila lovers. In January, reports that we were facing down an agave shortage started coming out. The shortage meant less tequila and higher prices, and prospects would continue to look bleak until around 2021, experts from the Tequila Regulatory Council told Reuters. It appeared that the booming tequila market was going to be gutted, a victim of its own success.
The more alarmist takes on the tequila shortage have quieted down some as people worry about shortages of other spirits like Japanese and Irish whiskey. But the tequila problem hasn’t been fixed in the long run. Agave shortages and surpluses have been regularly happening in the tequila market for decades, and it won’t be long before another shortage comes around. If history is any indication, the next shortage will happen around 2028-2030.
“Right now, we’re at the end of a shortage,” Antonio Rodriguez, the director of production at Patrón, tells Supercall. This one was particularly bad, he says, and the price of agave reached its highest in history at around 25 pesos per kilo of agave. A bottle of tequila requires about five kilos. Rodriguez says that there’s now “enough agave (that) the crisis is pretty much over” in the short term. In the long term though, the agave market looks a little less stable.
The amount of tequila that can be made and the cost of that tequila depends on the quantity and cost of agave. Agave is an agricultural product that goes through the same price increases and decreases that markets for fruit, vegetables or meat do. It’s the basic principle of supply and demand. When supply is low and prices are high, farmers plant more. That new agave all matures and becomes market ready at the same time, making supply high and causing the prices to dip, so farmers plant less in those years. And on it goes, making a graph of agave prices look like a monotonous roller coaster of peaks and valleys.
“Agave takes roughly seven years to mature,” Alexander Lowry, the director of the master of science in financial analysis program at Gordon College, tells Supercall. “What happens is you get people with very short memories.”
Because of blue Weber’s growth cycle, the shortage and surplus cycle vacillates in seven- to 10-year intervals. For example, growers planted a lots of agave in the past couple years because of the shortage. So much agave, according to Rodriguez, that there’s likely to be a surplus around 2021-2023. Farmers will plant less during the surplus, leading to a shortage seven years later when there’s less agave.