A recent price disruption has Americans clamoring for limes, but historic pricing shows that the citrus fruit may not be going anywhere.
FORTUNE — Americans may have had to enjoy Cinco de Mayo margaritas sans lime this year, but the widespread shortage of the citrus fruit may be a bit more fleeting than originally thought.
As previously reported, the potent combination of severe weather in Mexico, the spread of the citrus-greening disease huanglongbing (HLB), and the extortion of lime farmers by drug cartels has made it pretty difficult to export the round, green fruit to the United States. The ripple was felt across Mexico’s neighbor to the north as a vast majority (97 percent) of limes are imported from Mexico.
Prices have soared 400 percent over the last year, resulting in limes selling for upwards of $100 per 40-pound box, compared to the $15 to $20 cases just a year ago. The shortage is partly caused by heavy rain last season in central Mexico while another lime hub, Colima, experienced the spread of HLB. Florida has also reported cases of citrus greening while California is gripped by severe droughts, making it difficult to compensate on lime crops.
Now, The Knights Templar, a drug cartel formerly part of the now-dismantled La Familia Michoacána, is reportedly threatening farmers in the lime-producing state of Michoacán. Turmoil and violence have swept the region as business owners, including lime farmers, rally together to fend off the drug cartel. Mexican government officials have deployed military to quell the fighting and are urging the vigilante groups to ceasefire by May 10.
But a drug war aside, the lime crisis may not be as dire as we think. According to analysis by the data analytics group of the business software company SAP, the numbers tell a different story — one that suggests that people are forgetting the seasonality of pricing. By crunching data from U.S. Food and Drug Administration (USDA) Market News, SAP found that prices are historically higher in the spring due to low production in the winter, which means a price drop is on the horizon — and already beginning — as production picks up this summer.
Nic Smith, senior director of analytics at SAP, acknowledges that the relationship between the seasonality of limes and pricing is an area that could use further analysis. But differentiation in market pricing, Smith notes, is an interesting glimpse at how different regions are grappling with price disruption. As the map illustrates, Chicago and Detroit are experiencing lower prices compared to cities like Philadelphia and Boston, where cases go for as high as $120.
But Chicago restaurant and bar owner Mark Domitrovich says he’s still paying more than $100 per case at the moment.
“The customer is a bit oblivious to the price hike so we haven’t changed our procedures too much,” the owner of Frontier, Lottie’s Pub and The Pony says. “We’ve made modifications to the size of the limes but we tend to just absorb the cost rather than trying to explain it to the customers.”
Chicago restaurant veteran Ben Schiller says he’s seen poorer quality in some of the limes at his restaurant The Berkshire Room, including limes that are smaller in size and lower juice content. But pricing continues fluctuate and he sees it more as a temporary blip than a long-term crisis.
Schiller is one of many buyers taking the crisis in stride, holding out and only ordering as much as needed, according to a USDA Market News specialist who was granted anonymity because she was not authorized to speak publicly on behalf of her organization.
As much as we find limes irreplaceable — sorry, lemons — for items such as guacamole and the margarita, the food and beverage industry is getting creative with substitutes like pineapple and grapefruit until price hysteria subsides. Those actions have led to a significant decrease in demand, despite the headlines.
In other words, the story has completely changed from two weeks ago, the USDA market specialist tells Fortune. More shipments are crossing the border and prices continue to drop each day, she says.
Typically lime prices in the summertime, the heaviest season, tend to be around $6 to $7 per crate. As of Wednesday, market experts say they’ve seen some of the lowest prices on limes since the price disruption began. Though Cinco de Mayo calls for an uptick in orders, demand is likely to waver after the holiday. But coupled with buyers tired of paying high prices mean we may get to say farewell to lime austerity sooner than we thought.
But will prices return to last year’s $15 to $20 per crate? Experts remain uncertain what normal will be following the hit the lime market has taken. But limes are not the only crop American consumers should worry about.
Prices for all fruits and vegetables are expected to rise between 3.5 and 4.5 percent, according to recent USDA Market News report. In February, USA Today reported the highest average retail cost for beef on record since 1987, while pork was up 6.8 percent and poultry shot up 4.7 percent over the last year.
Meanwhile, droughts in Brazil have resulted in higher prices and lower production of Arabica coffee, the popular bean used in gourmet blends. Coffee prices have more than doubled since January as global demand grows, according to a Wall Street Journal report.
As the agriculture business continues to reel from severe weather, “normal” prices have yet to be determined. Nonetheless, you can expect to see the citrus staple reappear — at (somewhat) normal prices — this summer, just in time for an ice cold Michelada.