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Mexico’s tequila industry suffering

ZAPOTLANEJO, Mexico – Here in the heart of Mexico’s tequila country, where every town has a distillery and the air smells like sweet fermenting molasses, a sign proudly marks the entrance to Miguel Ramirez’s farm: “Rancho Ramirez: Producer of Agaves.”

But behind the fence, the blue agave plants, the raw ingredient of Mexico’s famous tequila, are getting harder to spot as farmers abandon agave plants, which take six or seven years to mature, to cash in on corn, beans and other food crops. The move could limit the supply of tequila and drive up the cost of a shot or a margarita.

The move is part of an international trend from Idaho potato farmers to Bolivian coca growers as they cut back on their trademark crops in hopes of making big money on corn and grain.

“Corn is where the money is now,” Ramirez said, admiring his new crop. “I’m going to get out of agave completely.”

Martin Sanchez, director of agriculture for Mexico’s Tequila Regulatory Council, said the corn gold rush was probably inevitable. White corn in Mexico is selling at its highest level in at least a decade – 18 cents a pound in August – while agave sells for as little as 2 cents.

“People are abandoning their fields of agave and flipping over to other crops,” he said.

Meanwhile, the price of beans in Mexico has risen 60 percent since December to 59 cents a pound.

The rise in food crops prices is attributable to several factors: people in developing countries such as China and India are eating better; high oil prices are increasing the cost of fertilizer; and the U.S. and Europe are diverting corn and vegetable oils into such alternative fuels as ethanol.

As of June, world food costs had risen 62 percent since early 2006, according to Oxford Economic Forecasting, a British consulting firm. The worldwide price of cereals, including corn and wheat, was up 120 percent.

Antonio Aceves, a farmer in the town of Tototlan who cut his agave fields to 25 acres from 74 this year, said the seeds of uncertainty in agaves were sown in 1997, when a frost killed millions of young agave plants.

By 2002, agave prices rose to 80 cents a pound. Distillers such as Jose Cuervo, Sauza and Herradura were paying up to $100 for a single agave heart. Such big tequila makers began growing agave on rented land and contracted with brokers to cover any shortfall, said Rafael Aldana, an officer of the town of El Arenal’s farmers’ co-op.

Tequila officials, meanwhile, believe there could be an agave shortage on the horizon, Sanchez said. Distillers already are preparing for lean days by stockpiling finished tequila. Some growers have stopped caring for older agaves, devoting their attention to younger plants, in case the price bounces back by the time they mature.

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