A few years ago, tequila was on fire. High-end bottles flew off shelves, celebrity-backed brands flooded the market, and Mexico’s agave fields stretched endlessly under the sun. But like all good parties, this one had to wind down. Now, agave farmers are facing a brutal reality—oversupply, plummeting prices, and a market that’s suddenly not as thirsty as before.
From Gold Rush to Glut
The early 2020s saw tequila explode in popularity, especially in the U.S., where it overtook whiskey as the most valuable spirits category in 2023. Farmers scrambled to plant more agave, hoping to cash in on the boom. The number of agave producers skyrocketed from just over 3,000 in 2014 to more than 42,000 by 2024. Fields expanded rapidly, and distilleries ramped up production to meet insatiable demand.
But nature doesn’t work on market cycles. Agave takes six to eight years to mature, meaning the surge in planting from years ago is now flooding the market all at once. As of late 2023, Mexico had more than 525 million liters of tequila in surplus—nearly an entire year’s worth of production just sitting in storage.
The Price Collapse and Farmer Backlash
With too much supply and not enough demand, prices nosedived. In 2020, a kilogram of agave fetched a healthy 30 pesos. By late 2024, farmers were lucky to get 2 to 8 pesos per kilo. Some stopped tending their fields entirely, unwilling to harvest crops that wouldn’t even cover production costs.
The situation has sparked protests, with farmers calling for better regulations and contracts that protect them from these brutal boom-and-bust cycles. Many blame the Tequila Regulatory Council (CRT) for failing to manage production levels or warn against overplanting.
U.S. Demand Slows, Trade Threats Loom
To make matters worse, Americans—who drink 80% of Mexico’s tequila exports—are cutting back. After years of skyrocketing sales, U.S. tequila consumption dipped by 1.1% in early 2023. And looming trade threats aren’t helping. The possibility of a 25% tariff on Mexican tequila could further choke exports, leaving even more bottles stranded in warehouses.
A Way Forward?
Despite the crisis, the industry isn’t standing still. Major brands like Patrón and Diageo are still investing, but they’re shifting focus to sustainability and premiumization—essentially, making tequila better, not just producing more of it. Some distillers are working with farmers to adopt sustainable practices and secure better contracts.
The tequila industry has always been cyclical, but the stakes feel higher this time. If demand doesn’t rebound quickly, thousands of farmers could be left in financial ruin. For now, the world’s agave fields are a sobering reminder that even in the spirits business, too much of a good thing can come back to bite you.