Owning lime-producing farmland can protect against inflation.
Limes are among the most popular tropical citrus fruits on the market today. They are similar to lemons, oranges, and grapefruit, but they have carved out several unique use cases that separate them from their genetic cousins.
To start, limes are commonly used in a variety of traditional cuisines. Lime juice and zest are integral to Mexican, Vietnamese, and Thai recipes. South Indian food relies heavily on pickled limes. Persian and Iraqi culinary techniques use dried limes extensively. Limes are also a key ingredient of the traditional American dessert, key lime pie.
Limes also shine as highball cocktail ingredients. A freshly squeezed lime is a must-have for many traditional and tropical cocktails, from margaritas to daiquiris, and even the ubiquitous gin and tonic.
Additionally, lime extract is a common essential oil frequently found in perfumes, cosmetics, cleaning products, and more. Lime oil has astringent and antibacterial properties, making it an ideal ingredient for acne and inflammation treatments.
All of these use cases contribute to global lime demand, which has posted double-digit growth for several decades with no sign of weakening. With inflation reaching all-time highs and upcoming changes in the world agricultural market, limes may be among the best options for agricultural investment in the near term.
Limes: The Clever Investor’s Play Against Inflation
Produce experts consider the lime a bellwether agriculture product. Because limes have a wide variety of use cases, they are an ideal commodity to illustrate market-wide price pressures, especially as grocery store prices have risen by an average of 3 percent since August 2020.
At the same time, the month-over-month inflation rate in the United States reached a 13-year high of 5.4 percent in October 2021. As the purchasing power of the U.S. dollar deflates, investors need to find inflation-resistant assets guaranteed that will increase in value faster than inflation.
During times of high inflation, the traditional advice that investment columnists typically give is to invest in real estate or gold. Between the two, land has historically outperformed nearly every other asset class when it comes to long-term profits. Farmland is an especially valuable type of real estate because it also produces inflation-resistant income. Limes are a perfect example.
Lime Prices Rise with Demand and Supply Chain Pressure
Limes are an excellent hedge against inflation because unlike the value of dollars, lime prices are climbing even when supply is rising. This might seem counterintuitive, but it is supported by rising demand and supply chain pressures.
Lime demand understandably took a hit with the closure of hotels, bars, and restaurants during the worst days of the COVID-19 pandemic. Yet the bar-friendly citrus fruit has already made a significant comeback during the first half of 2021, with average prices nearly doubling compared to the same period in the previous year in the United States.
At the same time, a full-blown global cargo shipping crisis is keeping citrus prices high across the board. A lack of shipping capacity and cargo containers around the world has caused spot rates for new shipments to climb to tens of thousands of dollars, more than quadruple the rates carriers charged before COVID.
This means that even as lime production increases, supply chain bottlenecks prevent limes from getting to grocery shelves as quickly as they used to. The result is a multi-year supercycle where continued high demand will support elevated prices. While not ideal for purchasers, this scenario is creating an optimal environment for farmland owners, as returns are set to exceed any rise in inflation.
Lime Production Is Moving Beyond Mexico and Brazil
Two countries have traditionally dominated lime production for the past few decades. Mexico is the world’s number-one lime producer, with Brazil taking a distant second place. Both countries built their industrial farming infrastructure in the 1970s, with primary production taking place at alternating times of the year.
But these producers rely on infrastructure that is half a century old. While regional development and investment continue, Mexican and Brazilian lime producers face steeply diminishing returns. Quite simply, lime demand keeps rising, and the world’s biggest exporters cannot keep up.
As a result, several other countries are entering the industry. For example, Spain is a major lime exporter for European consumers, for which limes remain an uncommon tropical fruit. (in fact the fruit’s name translates to “green lemon” in several European languages)
Egypt, Vietnam, and China have also invested in lime production. However, the world’s fastest-growing lime exporter is not located in Europe, Africa, or Asia. That title belongs to South America.
Colombia: The World’s Fastest-Growing Lime Exporter
In a remarkable shift in supplier dominance, Colombia has quadrupled its lime exports since 2015. The vast majority of the country’s lime-producing infrastructure was also built during this time, which means the country’s lime trees are quickly reaching optimal production age.
As Colombia’s lime trees mature, the industry is set to continue to flourish. Newly consolidated local supply chains and high-efficiency packing plants allow Colombian producers to outperform the world’s biggest exporters on a unit-by-unit basis. Colombian limes also benefit from soil and climate conditions similar to those of nearby Brazil, which means the country can produce high-quality fruit but at a fraction of the expense of developed countries due to its low-cost labor model.
Capitalize on a Burgeoning Industry: Invest in Lime-Producing Farmland in Colombia
Investors who want to keep their wealth hedged in an inflation-resistant, high-income asset with minimal risk have a lot to like about Colombian lime farming, and through our innovative LOTs model, Farmfolio gives individuals access to one of the most exciting growth opportunities in today’s commodity market. To learn more about our newest lime opportunity, click here or schedule a call to speak directly with one of our farmland specialists.