As someone who knows a bit about how agricultural commodities work and lot about how cocktails work, I’ve been following the recent ascent of lime prices, which has been causing bartenders considerable pain. If you love Margaritas, Daiquiris or or any other drink that depends on lime for its citrusy zing, you may be feeling the squeeze yourself.
What’s going on? In brief, Mexico, which produces 98% of the limes consumed in the U.S, is now seeing a shortage of limes thanks to a perfect storm of poor winter weather, plagues and threats from organized crime. As a result, we’ve seen lime prices spike from an average of $14 to $25 a case to an unprecedented $100 (or more) per case. You can read more on the backstory here or watch a video here.
If we were taking about the price of burgers, it would make sense to talk about cattle futures as a hedging mechanism. But lime futures don’t trade on U.S. commodity markets — or anywhere else in the world, that I know about. (Feel free to educate me if you know of a market where they are traded.)
In the meantime, what does the spike in lime prices mean to your next cocktail? It means one or more of the following scenarios:
- Scarcity. In other words, if bartenders can’t get limes, you might not be able to get some of your favorite drinks for a while. For example, it’s been widely reported that Toby Cecchini has taken his famed Gimlet off the menu at his Long Island bar in Brooklyn (after all, the key ingredient is a housemade lime cordial).
- Substitution. Your favorite drink might taste a little different for a while, as bartenders make creative substitutions. Some are switching to a mix of lemon and lime juices or grapefruit. Others are turning to acids beyond citrus, such as phosphates and lactarts. I would expect vinegar-based shrubs to follow as well. Upside: who knows what innovative cocktails this forced creativity may yield?
- Deflection. Some bars will discreetly “adjust” cocktail menus to showcase drinks that don’t include lime. Negroni, anyone?
- Inflation. You might have to pay more for your drinks. I’d especially expect to see this happen at places like large Mexican chain restaurants, where taking classics like the Margarita off the menu would cause too much outcry. Downside: once menu prices move higher, they rarely are adjusted lower when ingredient prices moderate.
- Degradation. Aka crappier drinks. Keep an eye out for sour mix, prefab lime cordial and frozen lime juice as substitutions for fresh lime. And that lime wedge garnish on on the side of your glass? Say goodbye to that too, for a while.
- Finally, some bartenders will simply eat the rising cost. Martin Cate announced last week that his San Francisco tiki bar Treasure Island will NOT make any changes to the menu, and will NOT raise prices. Since tiki/tropical drinks use a lot of limes, this is big deal.
[Shameless plug: if you find this explanation interesting and will be in the NY area on Wednesday, 4/2, I'll be reading from The Secret Financial Life of Food (and talking a bit about the "limepocalypse") at DISH, a food and beverage-themed literary event at Housing Works in Soho.]
photo credit: flickr/Troy Tolley
Butter and Egg women unite!
Last week I had the opportunity to talk about my new book with the ebullient Nicole Taylor, one of my favorite radio hosts. Her show, Hot Grease, airs on the awesome Heritage Radio Network.
A comment from the show: “I think that commodity prices are not going to be based entirely on American eating habits… It’s my belief that we’re going to see commodities being traded on a more global basis.” [26:00]
The team over at Columbia University Press has done a bang-up job this week introducing my new book, The Secret Financial Life of Food: from commodities markets to supermarkets. If you haven’t been over to the CUP blog this week, here’s what you missed:
Trading Places Video: Remember the film Trading Places, with Eddie Murphy? Watch a YouTube clip of financial bigwigs Randolph and Mortimer Duke (played by Don Ameche and Ralph Bellamy) explaining to Billy Ray Valentine (played by Eddie Murphy) how their commodity brokerage works. (I quoted a portion of this scene in the introduction to the Produce Futures chapter)
Book Giveaway! Best hustle if you want to win a free copy of The Secret Financial Life of Food – CUP will be picking a winner TODAY at 1:00 pm ET. (hint - e-mail firstname.lastname@example.org with your name and address.)
3 Predictions for the Future of Food-Based Futures: Although my book focuses on the history of food-based futures, most questions I’ve been asked center around the future of futures. (And with food prices on a breakaway tear, who can blame people for wanting to know what’s next?) So I’ve gazed into my crystal ball to offer three predictions for what’s next.
Enjoy! And while you’re surfing, don’t forget to buy a copy of The Secret Financial Life of Food (or two, or three….) for those on your holiday list who enjoy reading about food, finance, or history.
Let the countdown commence! The Secret Financial Life of Food is officially scheduled to drop on Nov. 20 - one month from today!
Last week, ZesterDaily.com ran a Q&A with yours truly: The Economics of Food with Author Kara Newman – the very first piece of press coverage about the book! My favorite part? Writer/editor Ruth Tobias brilliantly looped in the recent scare over a possible bacon shortage.
Q: Given the recent scare over a bacon shortage, I found the chapter on pork bellies quite enlightening. Can you elaborate on why pork bellies are no longer traded, and what it means for the average consumer and the ethically conscious consumer?
A. At the most basic level, traders buy and sell based on scarcity and anticipated demand. When that scarcity diminished thanks to better technologies in agriculture and refrigeration, as well as improved bacon-making techniques, trading eventually stopped. It’s now a more stable market.
I’ve asked economists: What does it mean for consumers that we don’t have pork-belly futures to kick around anymore? And the answer across the board is: “Not much.” Pork-belly contracts were a vehicle that outlived their usefulness, like egg futures and onion futures and many other contracts before them. Without the pricing mechanism that the futures market provides, prices might edge slightly higher at supermarkets — and for a little while, that might make pork from smaller producers a bit more attractive. But the average bacon lover probably hasn’t noticed even a blip at the checkout counter.
Read the full Q&A on ZesterDaily.
“Like” the book on Facebook.
Pre-order your very own copy of the book.
My new book, The Secret Financial Life of Food: from commodities markets to supermarkets, officially drops on November 20. Still a few weeks away (sigh). In the meantime, the folks at Columbia University Press have put together a light-hearted quiz to help reinforce some of the concepts in the book.
Take a look….How much do YOU know about the secret financial life of your food? Test your knowledge with this fun 10-question quiz!