Lime Prices In Mexico Skyrocket YoY due to Supply Shortages

Fresh Lime

Mexico

Published Jan 26, 2022

The wholesale price of fresh lemon in Mexico has seen a substantial increase of 153% YoY. The increase is largely attributed to production shortages, the country's economic inflation, and logistics constraints. The fall in production is due to a significant 49% harvest reduction in Michoacan, the main lime-producing region in the country, which was severely affected by frosts in November 2021. Additionally, the country’s current economic recession has brought considerable price inflation, pushing lime prices in Mexico through the roof. The upcoming 2022 harvest is expected to alleviate prices by mid-February-22. However, the price surge has already affected the US lime market as well.

By Week 2 of the year, lime prices in Mexican markets range between USD 3.5 and 5/kg, and by Week 3, the Persian lime with seed averaged USD 3.75/kg, while the Colima seedless variety averaged USD 3.95/kg. Over the same weeks last year, the Persian lime with seed averaged USD 1.90/kg, for a 153% YoY increase, which has caused national concern as there have been around four years for lime prices to climb this high.

At the end of the year, Mexican lime prices usually have a slight increase due to the expected shortage in the market, as yearly production is scarce. However, in November 2021, the Ministry of Agriculture and Rural Development of the federal government warned that unexpected frost in the state of Michoacan caused the national production to fall by 4%. Consequently, in Week 37, the price had a 70.5% WoW increase in Mexican markets, reaching USD 2.5/kg.

Source: SNIIM

Substantial Drop in Production in Michoacan Made Prices Climb

In December-21, lime production in Michoacán, the state that concentrates 30% of the national production of this citrus, was reduced by 48.2% compared to what was reported the previous year, a total of 66.1K mt less. Due to weather conditions, the state’s lime output was dramatically decreased as crops received unexpected frosts in key lime-producing areas, causing severely damaged crops. The damage in Michoacan production had more significant national consequences, as the country’s lime output was reduced by 4% in November, which was 12.2K mt less than the harvest produced in the same month last year.

The drop in production happened at the same time when lime in Mexico is traditionally scarce, as lime-producing regions in the country have all finished the production cycles. Thus, the usual surge in prices seen at that time of the year was severely worsened by crop damage. Additionally, logistics constraints throughout the country and increasing demand for the export of the product have also influenced the price.

Other Factors for the Price Increase

Besides the fall in lime production, other important factors have influenced lime prices in Mexico and have supported the surge. In 2021, due to the economic recession caused by the COVID-19 pandemic, the price of many agricultural products had also skyrocketed, as the workforce in agriculture migrated to other productions, such as avocado, chili peppers, and berries. Additionally, Mexico closed the year with an 8% increase in inflation, which affected prices from all basic products of national consumption, as in the case of limes.

On the other hand, there is still a substantial increase in global demand for limes due to its high vitamin C content, as a reinforcement to protect the immune system against COVID -19. This increasing demand has caused Mexican limes to have a strong export demand through the end of the year, mainly in the US, where 90% of limes are exported. Consequently, lime producers and exporters prioritize the export market as profit returns are higher than the domestic market, causing a more significant gap in the domestic market.

US Lime Prices Affected

The surge in Mexican prices has also affected US wholesale prices for the last weeks of 2021 and the first ones of 2022. Between weeks 24 and 41, prices of non-organic limes in the US market were slightly higher than last year’s, but in these last weeks, the average prices of limes were substantially higher than those of 2020. According to the USDA Agricultural Marketing Service, in week 52 (last one of the year), the average price of conventional limes in the US was USD 4/kg, 51% higher than the same week in 2020. Mexico accounts for 98% of the lime supply in the US market.

Lime prices in Mexico are expected to decrease by the end of February 2022 when harvest in the Colima region, which accounts for 10% of the total national production, wil be in the market. So far, there is no decrease in production announced for the Colima harvest, so the market should see a decrease in prices. However, the economic recession and logistics constraints particularly attached to the Colima estate will not allow prices to fall into 2020 levels. An average 100% increase in lime prices is expected all through the first semester of the year, and export volumes are forecast to be affected.

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