Tequila puts agave on the hog cycle
Back in the late '90s, tequila made such a big splash in U.S. pop culture that it drove up the price of agave, the spiky plant used to make Mexico's national liquor. The events that followed tell an age-old story in agriculture. Dan Grech explains.
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Scott Jagow: I don’t know that tequila is a Fourth of July tradition, but I’m sure a few shots will be downed today. Tequila became very popular in the late a€˜90s. That drove up the price of agave, the plant used to make it. Dan Grech has more from our Americas Desk at WLRN.
Dan Grech: The soaring demand for tequila led agave prices to hit the roof — up to $70 per plant.
Mexican farmers rushed to cash in. They planted four times the amount of agave the industry typically requires.
Now, seven years later, the agave is ready to harvest, but prices have plummeted to $4 a plant.
Purdue University agricultural economist William Masters says this boom-bust cycle has a name: the hog cycle.
William Masters: Farmers would notice high prices for hogs, they would raise a lot of them, and by the time they brought them to market, prices would be really low. So then there would be a period of low investment, prices would climb again, and the tragedy would repeat itself.
It appears set to repeat itself in Mexico as well. With so many agave farmers going bankrupt, tequila producers now say that in a few years, there could be another agave shortage.
I’m Dan Grech for Marketplace.