What’s Behind the Spike in the Price of Mexican Limes?

- June 16, 2014 2:31 PM
Categories: Commodities, Guest Post | Tags: ,

Spend Matters welcomes a guest post from Corrina Savage of Mintec.

Mexican limes have been causing a bit of a stir in recent months as prices significantly sharpened since the start of the year. Although now showing signs of recovery, the price quadrupled in April. So what was the issue with Mexican limes?

Limes

The sharp price rise we have seen in recent months was due to a significant shortage in production from Mexico. Recent heavy rains produced a poor winter crop with production for 2013/14 estimated at 1.9m tons, down 6 percent year on year.

Mexico is the world’s third largest producer of lemon and limes following China and India, producing nearly 16m tons a year. They are also the world’s most important exporter, responsible for 467,000 tons of global exports a year. This price spike had the largest effect on the US, the world’s largest importer of lemons and limes importing 411,000 per annum, the majority of which come from Mexico.

With ideal conditions in the US for oranges and other citrus fruit, you may ask yourself why the US is so reliant on Mexico for their lime supply. In fact, the US once was self-sufficient, with California and Florida both producing limes. The end of the US lime industry came from a disastrous cocktail of hurricanes and disease. In 1992, hurricane Andrew hit, nearly wiping out all lime groves in Dade County, one of Florida’s major growing regions. At this time the lime industry was huge in the US, new trees were funded, and the industry made a full recovery by the end of the 1990s. However, during the recovery period Mexico was able to get a foothold in the US market and managed to import a large number of limes into the US at a cheaper price.

The killing blow to the industry though was disease, in particular citrus greening disease. You may be be familiar with this from our article on orange juice last month. The disease, which hit the US in 2005, is fatal to citrus trees. The major concern however was the effect on orange groves, a vastly more powerful industry than the lime industry. Consequently, it was ordered by the state of Florida agriculture department that all healthy citrus trees near affected trees be destroyed in order to avoid the spread of the disease. The destruction wiped out the entire lime industry from the US. Re-planting lime trees was not seen as economical as orange trees, and this coupled with fears that the disease would return saw farmers turn to other crops.

So now the US market is entirely reliant on limes from outside the US and mostly from Mexico, so changes to the Mexican market place can see US prices affected.

We are looking at a higher base rate for limes this year; however, the good news is the 2014/15 crop is projected to improve to 2m tons, which should ease some of the supply concerns.

Comments

  • Andrew Vandercamp:

    While much has been written about the weather and disease driving lime prices higher in Mexico, the media has failed to investigate the competitive landscape in Mexico amongst lime processors and a virtual price war driven by a major player in an effort to dominate the market place. I think this is worth a closer look.

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