Lime growers in the Mexican state of Michoacan, responding to unrest caused by drug cartels and crop damage from flooding, have banded together to set prices of the fruit they sell to packing companies and to control supply.
The tactic has helped dry up margarita consumption in Mexico City as the fruit had become the biggest contributor to inflation nationwide, accounting for one-third of last month’s increase in consumer prices. The move by lime growers, combined with drought in California and an overall growing demand for limes for margaritas, tacos and other dishes, has driven up prices to a three-year high.
The average advertised price of a lime in U.S. supermarkets was 56 cents last week, according to the U.S. Department of Agriculture. That’s up from 37 cents for the week ending March 28 and 31 cents a year ago.
Restaurants and airlines are feeling the pinch, with some airlines - for now - dropping the fruit from their beverage service.
“We temporarily pulled limes about two weeks ago, due to skyrocketing lime prices,” said Alaska Airlines spokesman Halley Knigge. She said the airline normally goes through about 900 limes a day.
United Airlines has had to make do with lemons on some flights, saying the California drought has limited its lime supply.
“We still serve limes, though they’re more difficult to source. So, on some flights we’re substituting with lemons,” said spokesman Rahsaan Johnson.
Members of the Citrus Growers Association of Apatzingan Valley in Mexico are limiting supply to guarantee a minimum price for producers, said Leonardo Santibanez, an association member and coordinator of its trade events. The policy emptied Michoacan’s main citrus market of limes on March 12 after association members told farmers not to harvest their crop that day as the group pushed for a minimum price of 80 cents per pound, he said.
The policy may be illegal, according to Miguel Flores Bernes, a former antitrust agency commissioner. Santibanez denied the growers were engaging in illegal activity.
“The shock of limes at a time when inflation is already high … is something we need to pay attention to,” Benito Berber, a strategist at Nomura, said in an emailed response to questions. Economists expect inflation in Mexico to end the year at 4.01 percent, above the 4 percent upper limit of Banco de Mexico’s target range, according to a March 6 central bank survey.
Manuel Ambrosio, a bartender at Bloo Bar in Mexico City, says he is reducing portions of lime juice in the drinks he serves customers to trim his losses after prices rose. Sales of margaritas, a popular mixed drink of fresh lime juice, tequila and salt, have plunged 30 percent as customers complain about the poor quality of the fruit that he uses to reduce costs, he said.
“These limes have no juice,” the 28-year-old said, squeezing a wedge from a pile of limes sitting on his bar. “This is the worst I’ve seen prices in four years.”
Since December, the price of limes in Mexico City’s main wholesale market has tripled. Squeezed in everything from margaritas to chicken soup, limes hold the largest weighting among fruits in Mexico’s inflation basket after apples.
In February, lime prices nationwide surged 68 percent from the previous month, contributing 0.08 percentage point to Mexico’s consumer price index, which rose 0.25 percent, according to the national statistics institute. The cost of the fruit soared 45 percent in January, pushing consumer prices up another 0.04 percentage point.
Leandro Alcantar, president the Citrus Growers Association of Apatzingan Valley, wasn’t available for comment.
Members of the association have been able to push up prices after lime infestations in the neighboring state of Colima crimped production, making Apatzingan the producer of almost all of the fruit consumed in Mexico this year, according to Santibanez.
Mexico is considering increasing lime imports to combat their high price, Economy Minister Ildefonso Guajardo said.
In addition to disease attacking Colima’s fruit, atypical rainfall hurt production in Michoacan, reducing supply, he said.
Santibanez said that the practices by association members are legal. He said price setting is only occurring in one step along the supply chain - the producers’ sale of limes to packing companies. The final cost to consumers remains fluid, he said.
Recent violence in Michoacan as armed vigilantes push drug cartels out of the area is also generating price speculation among producers, according to Alfredo Castillo, who was appointed by President Enrique Pena Nieto to improve security and economic and social development in Michoacan.
Roberto Pacheco, who owns 20 acres of lime groves on the outskirts of Apatzingan, said that he’s seen association members establish price minimums, as did Alejandro Martinez, another lime grower.
“Everything points to an accord among competitors,” Flores Bernes, the former antitrust commissioner who currently works as a lawyer, said by phone March 13. “If they are competitors, they can’t agree on prices, neither a ceiling nor a floor.”
One of United Airline’s largest caterers told the airline that the shortage has left it with 15 percent to 20 percent of its typical lime inventory. The airline expects to have a normal supply of limes by late May.
Not all airlines are changing their drink service.
Delta Air Lines and American Airlines both say they haven’t made any changes at this point. JetBlue has never provided fresh fruit with its drinks.
Information for this article was contributed by Nacha Cattan of Bloomberg News and Scott Mayerowitz of The Associated Press.
Business, Pages 25 on 04/09/2014