Tequila Industry Prioritizes Small Agave Producers

The National Chamber of the Tequila Industry (CNIT) has announced plans to prioritize the purchase of agave from small-scale producers. The sector has faced significant challenges due to a steep drop in agave prices over the past three years, driven by overproduction.  

The Jalisco Ministry of Agriculture recently held a dialogue with key stakeholders in the tequila production chain to face the challenges impacting the sector. Participants agreed to prioritize small-scale agave producers through the Agave Responsible Social (ARS) certification program. Roberto Ciprés, President, CNIT, stated that the initiative’s first phase aims to benefit 5,000 traditional agave farmers. "This certification safeguards the Tequila Designation of Origin and ensures a sustainable agroindustry for the future," Ciprés said.  

Representatives from the Ministry of Agriculture and Rural Development (SADER), CNIT, the Tequila Regulatory Council (CRT), The Jalisco Agri-Food Council (CAJ), and various agave organizations participated in the discussions. Key initiatives included prioritizing support for traditional small-scale producers, seeking new market opportunities for tequila, exploring alternative uses for agave, advocating for the adoption of standards for agave-based spirits, and protecting the Tequila Designation of Origin.

According to CAJ, there are approximately 5,840 traditional small-scale agave growers in the state, who have historically been the primary cultivators of the raw material essential for tequila production. During the meeting, the council proposed a formula to calculate a fair and objective price for purchasing agave from producers: production cost + financial cost + fair profit = target price. For production costs, the reference would be the agricultural cost published by FIRA (Agricultural Trust Funds), plus the interest generated over the seven years of production. From there, the proposal suggests reaching an agreement with the tequila industry on what percentage would constitute a fair profit for the suppliers of this key raw material, thereby establishing the target price, CAJ emphasized.

The Agave Price Drop: Causes and Impact  

The drop in agave prices is primarily due to overproduction and an oversupply of the plant. For several years, the sector has faced an excess of plantations as new investors sought to enter the tequila business. This spirit is one of Mexico's top agri-food export products, with the United States being the largest buyer. In 2024, the United States imported 334.9 million L, a 4.1% increase compared to the previous year.

The cost per kilogram of agave has fallen from MX$30 (US$1.7) to between MX$2.5 and MX$7 over three years. This decline is linked to increased tequila production and agave plantations in the five states with the Tequila Designation of Origin, including areas previously used for corn or beans, noted CNIT.

Ana Cristina Villalpando, Director General, CNIT, explained that to mitigate this issue, tequila industry stakeholders, agave producers, and the government are working on various measures, such as federal government support and financing from FIRA. Additionally, they are promoting the storage of tequila with private companies, allowing producers to continue operations and store finished products until market demand increases.

Industry Outlook

Tequila production in 2024 reached 495.8 million L, consuming 1.8Mt of agave. In terms of exports, the organization noted that 400.3 million L were shipped abroad, marking a second consecutive year of declining foreign trade. In 2023, tequila exports totaled 401.4 million L, a 4.2% decrease compared to 2022, following 13 consecutive years of annual growth.

This situation could worsen with the potential imposition of tariffs of up to 25% proposed by US President Donald Trump. Under this scenario, mezcal industry entrepreneurs have also expressed concern, as reported by MBN. Alejandro Noriega, Co-Founder, Experiencias Mezcaleras Puebla, noted that higher export costs to the United States would primarily impact small producers. "A significant drop in sales could endanger the livelihoods of over 265,000 Mexicans dependent on this industry," the entrepreneur emphasized.