Learn what’s driving the cost of limes and how to leverage this green gold to combat inflation.

With inflation reaching a multi-decade high and a rapidly evolving world agricultural market, limes may be among the best options for agricultural investment in the near term. At the beginning of 2022, Produce IQ reported that the price of a carton of fruit skyrocketed nearly 118% in a single week. The new price of $61 far exceeded historical values for the past decade. Amidst challenges like labor shortages and climate change struggles, the astronomical prices of this year’s production highlight the reasons savvy agriculture investors are increasingly focused on alternative growing regions like Colombia.

The Star of Citrus Fruit: Limes

Limes are among the most popular 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, these nutrient-rich, tart green fruits are commonly used in a variety of traditional cuisines. Their juice and zest are integral to Mexican, Vietnamese, and Thai recipes. South Indian food relies heavily on pickled limes, while Persian and Iraqi culinary techniques use the dried fruit extensively. Limes are also a key ingredient in the traditional American dessert, key lime pie.

why are limes so expensive 2022

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The sweet and sour taste of the fruit also elevates highball cocktails. Freshly squeezed juice is a must-have for many traditional and tropical cocktails, from margaritas to daiquiris, and even the ubiquitous gin and tonic.

Beyond its culinary uses, the fruit’s extract is a popular essential oil frequently found in perfumes, cosmetics, cleaning products, and more. Its oil has astringent and antibacterial properties, making it an ideal ingredient for acne and inflammation treatments.

All of these uses drive a $4 billion dollar industry and contribute to global demand, which has posted double-digit growth for decades with no sign of weakening.

Why are limes so expensive in 2022?

If you frequently add this green fruit to your shopping cart, you already know that lime prices are rising. Some of the reasons for this unprecedented increase include the substantial global demand for the fruit, which is currently far outstripping the supply: quality issues resulting from cooler weather and supply chain issues, and the fact that as a result of inflation, produce simply costs more money across the board.

The cost of limes have also risen as farmers remain on high alert for criminal gangs in Mexico. Harvests there have been disrupted by criminal groups involved in organized crime throughout the nation, specifically in the Western states where the produce industry thrives.

Lime Prices Rise with Demand

Even as the number of limes sold is rising, prices continue to rise rather than dropping in response to the increased supply. Although this scenario reverses traditional economic logic, international supply and demand issues seem to support its validity.

Produce trade 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 made a swift comeback in 2021. Its supply in the U.S. increased by 25-30 percent over the previous year, without resulting in lower prices. Instead, the average cost nearly doubled, illustrating the inability of the industry to keep up with global demand for the fruit.

Supply Chain Pressure Impacts Quality and Product Availability

At the same time, a full-blown global cargo shipping crisis keeps 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 pre-pandemic rates.

This means that even as production increases, supply chain bottlenecks prevent fruit from getting to grocery shelves as quickly as it once did, increasing spoilage and decreasing the quality. In turn, consumers have become trapped in a multi-year supercycle where continued high demand will support elevated prices. While not ideal for purchasers, this scenario creates an extremely profitable environment for farmland owners, with returns set to exceed even unprecedented inflation.

Inflation Across the Produce Industry

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 over 10 percent since April 2021. The USDA recently projected the highest annual food price increases since the 1980s. Consumers of eggs, meats, fats, and oils have experienced the largest increases, up to 32 percent. Fresh fruits and vegetables are also witnessing significant cost hikes of 8.5 percent and 6.4 percent, respectively.

Underlying inflation and the strength of the U.S. dollar is not the only reason for these produce cost increases. For example, the Mexican yellow squash supply has been affected by cooler weather and rain. As a result, rather than dropping in February as usual, both yellow squash prices and zucchini prices remained elevated into the spring as these two veggies remain correlated closely to one another. Lettuce prices have also risen dramatically as this year’s harvest delays have resulted from a disease called lettuce downy mildew.

Disruption in Mexico, the World’s Leading Supplier

Mexico is the world’s largest producer of limes, with Brazil taking a distant second place. These two countries predominantly supply the world’s top two consumers: Europe and the U.S. In 2020, these two powerhouses imported 53 percent and 16 percent of the world’s limes, respectively.

However, the U.S. hasn’t always been reliant on lime imports. In the 1990s and early 2000s, Florida citrus producers experienced crippling harvest delays because of poor weather and aggressive foliar disease. Hurricanes and citrus canker rendered entire fields useless for years, particularly in and around the Everglades agricultural area. As a result, nearly all the limes we consume in America now come from Mexico. In fact, the U.S. consumes over 80 percent of Mexico’s lime exports.

In recent years, Mexican production has also been threatened by climate change, disease, and organized crime. In 2021, unexpected frosts in key Mexican growing regions caused a significant harvest reduction, causing prices to more than double and buyers to look for new suppliers.

Amid an already limited crop supply and rising inflation, cartels are increasing controls over farmers during the bumper crop season – when crop yields are highest.

“The lime trade is a billion-dollar industry and, for any criminal group, it’s very easy and extremely profitable for them to go to the farmers and tell them what they need to pay for protection. It’s classic mafia,”said Romain Le Cour, security and violence reduction program officer at the think tank México Evalúa.

why are limes so expensive 2022

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Shifting Supplier Dominance

With Mexico servicing the American market, that leaves the world’s second-largest producer, Brazil, to supply the European market. 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 and a still broken global supply chain. While regional development and investment continue, Mexican and Brazilian lime producers face steeply diminishing returns, in addition to facing the security concerns mentioned earlier. Quite simply, the world’s biggest exporters cannot maintain the quality and product availability that the world is demanding.

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.

Vietnam and South Africa have also invested in lime quality and product availability. 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 and is projected to see continued export growth of 20 percent per year. The vast majority of the country’s lime-producing infrastructure was also built during this time, which means the country’s lime orchards are 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. Recent nationwide infrastructure developments and a low-cost labor model mean the country can produce high-quality fruit but at a fraction of the expense of developed countries.

Plus, Colombia’s rich soil and equatorial tropical climate produce high-quality juicy, richly colored fruit. A range of altitudes and moderate temperatures create ideal farmland regions that can generate fruit year-round, unlike Mexico and Brazil.

Capitalize on a Burgeoning Industry: Invest in Lime-Producing Farmland in Colombia

As the inflation rate in the U.S. continues to break records, climbing to 9.1 percent in June 2022, investors must find inflation-resistant assets to diversify their portfolios. While experts traditionally recommend gold or real estate to hedge against inflation, 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 income from the crops.

Investors who want to keep their wealth hedged in an inflation-resistant, high-income asset with minimal risk have a lot to like about Tahiti lime farms in Colombia. Complete the contact form below to connect with Farmfolio and learn more about how we can help you take advantage of this rare moment for investors, with limes priced higher than ever before.

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