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Agave & Tequila
A Case Study in the Evolution of Opportunity
In 1974 Mexico’s government established the Appellation of Origin Tequila (DOT) to establish guidelines for agave production. The agave grower’s cycle from planting through harvest takes about a decade. This is one reason tequila is so expensive lately— forecasting demand with ten years lead time is difficult.
According to regulations of the Norma Official Mexicana (NOM), Tequila can only be produced from agave grown in the volcanic soils in and around the Jalisco region, much like Champagne can only be produced in that region of France. But unlike grapes from Champagne, agave production has seen wide variations in up and down cycles. Such swings are not uncommon in the growth stage of a product life cycle
Cacao: Ready For Investment
By Stephen Kaczor
Can a case be made for the investment potential of cacao trees in Latin America, where they originated?
Presently, half of the global supply of chocolate comes from Africa’s Ivory Coast. Asia produces less than Africa. Both origins provide logistical advantages for processing in the Netherlands, where most chocolate is processed.
Latin America is a more sensible origin for the USA, the world’s 2nd largest processor. The largest producers of cacao in the Americas are Brazil, Ecuador & Venezuela with a combined market share of 10%. Central America, South America, and Mexico provide interesting opportunities due to their proximity to world’s biggest market, favourable cost structures, and abundance of suitable rain forest with existing seed crops of the best variety for premium chocolate.
Macro level investment in cacao for generic commodity markets has limited appeal; however, interesting opportunities exist in the gourmet sector. From a French cacao broker marketing tribal cocoa spears from Panama to an American chocolatier sourcing cacao in Guatemala, innovative investors are working with locals to develop new opportunities for this tropical crop.
Vanilla
Vanilla has been one of the world’s favorite fragrances and flavors since arriving in Europe from Mexico. It is the second most expensive spice after saffron. Today, the food industry uses mostly imitation vanilla flavoring, but there is nothing like real vanilla beans from the orchid native to Mexico, now grown in tropical countries worldwide.
Agribusiness Opportunity in Latin America
By Stephen Kaczor
Latin America is home to hundreds of farming cooperatives and small regional growers associations. Often these cooperatives and associations are home to as much competition as cooperation. This represents a challenge when growers seek access to export markets for their produce. It also represents an opportunity for development that will create sustainable growth in the agribusiness sector.
Mexico’s proximity to the USA, coupled with its climate and the availability of low-cost farm labor, make it a logical source for meeting growing fruit and vegetable consumption in the USA. The value of U.S. agricultural imports from Mexico is roughly equal to the value of U.S. agricultural imports from all S. American countries combined. (Source: USDA Market News)
Panamanian Coffee Production
Coffee is one of the world’s biggest export commodities, the top agricultural export for a dozen countries and one of the world's ten largest legal agricultural exports by value. (Source: FAO Statistics Division.) According to John Talbot of the University of the West Indies, “Coffee is the second most valuable commodity exported by developing countries, a distant second to crude oil,” but well ahead of third place sugar and other agricultural, forestry and mining outputs.
“The number of people who depend on coffee for all or most of their living is in excess of 75 million,” according to Ric Rhinehart, executive director of the Special Coffee Association of America (SPAA). According to Rhinehart’s estimates, coffee is a $90 billion a year industry. His explanation of this figure provides valuable insights into the commodity. In 2008, Rhinehart states, approximately 18 billion pounds of green coffee beans were sold for $22 billion, at an average of $1.24/lb.
“Here is a place where the math gets interesting,” according to Rhinehart. “All that coffee gets roasted, reducing its weight to around 14 billion pounds. Of that, roughly 70% is sold for home consumption at about $4.50/lb, yielding about $45 billion.” The other 30% is brewed and sold at higher prices for another $45 billion, approximately. Combining sales of roasted coffee with brewed sales produces the $90 billion annual estimate.
