Soaring demand for biofuel has sent global commodity prices through the roof, prompting farmers of blue agave, the cactus-like plant from which the country's national spirit is made, to move into more lucrative cash crops such as wheat and corn.

Picturesque plantations of agave – with its long spiky leaves and a heart like a pineapple – are being replaced with orderly rows of corn, a crop now selling for a record 18 cents per pound, as US consumers from across the border seek respite from the soaring oil prices that have pushed the price of petrol over $4 (£2) a gallon and turn to ethanol.

Global food price rises have also seen the cost of another rival crop, beans, rise by 60 per cent in the past six months to 59 cents per pound. By comparison, agave, which in 2002 was worth more than 80 cents a pound, is now retailing for less than two cents. As a result, many farmers of agave – pronounced "a-hav-ay" – are taking the difficult decision to let their over-ripe plants turn brown in the desert sun, claiming it is no longer economically viable for them to bother with the annual harvest.

"Corn is where the money is now," one large-scale farmer, Miguel Ramirez, told USA Today. "I'm going to get out of agave completely." Martin Sanchez, director of agriculture for Mexico's Tequila Regulatory Council, added: "We don't have numbers but we know it is happening: people are abandoning their fields of agave and flipping over to other crops."

Although tequila has been one of the global drinks trade's biggest success stories of recent years, industry experts are now concerned the move to lucrative rival crops could lead to an agave shortage, limiting the supply of the spirit, and driving up the cost of the shots and cocktails enjoyed by Western consumers.

Officials say producers planted between 25 and 35 per cent less of the crop last year, and expect a similar decrease in production for 2008. Because the plant takes more than six years to reach full maturity, it will be impossible to cope with any shortage when the full effects are eventually felt.

The tequila industry is prone to cycles of boom and bust. In the late 1990s, disease and a series of cold winters killed off many agave plantations, causing an international shortage that more than doubled the cost of a typical bottle. Since then, demand for the robust drink has soared, thanks for a boom in the market for premium products, which can retail for several hundred dollars a bottle. But the supply end of the chain may be about to give out.

"Because of the slow growth rate of agave, it is especially sensitive to the boom-and-bust agricultural cycle, only played out in a slightly longer cycle" said Larry Walker, the US correspondent of Drinks International.

A Mexican farm hand Raudel Lopez Sandoval agrees. "You tend an agave for six years, and then the price drops on you or you get hit with a freeze or something. It's a lot of investment to lose," he told USA Today. "Beans grow fast."

The highest quality agave is grown at altitudes of between 1,500 and 2,000 metres, in the regions around the town of Tequila, near to Guadalajara. After harvesting, its pulp is fermented with yeast before being double distilled and aged in oak casks.

Although tequila is legally required to contain at least 51 per cent agave, even cheap brands have recently moved to 100 per cent levels, thanks to the current glut on the market. Experts say any increase in price is most likely to have an impact on the budget market.

"This would principally affect low quality tequila, which will be altered so that it contains a lower percentage of agave," said Chris Mercer of the drinks industry website www.just-drinks.com. "If people get more money for other crops, they will stop growing agave and the price will rise. It's basic economics."

Tequila isn't the only drink being hurt by the ethanol boom. In Germany, brewers recently complained that farmers were moving out of the barley market, making it more costly to produce their traditional premium beers.

From the agave plant to the bottle: how tequila is made

The raw ingredient

Contrary to popular belief, blue agave, the raw plant at the beginning of the tequila-making process, is not a cactus but a lily. The indigenous plant grows in the highlands of central Mexico and has been cultivated in the region for 9,000 years. Budding tequila home-brewers must be willing to travel the distance, as agave is not, to date, something that can be scooped up at the supermarket or even the deli and – by law – it must be harvested only in the Mexican states of Jalisco, Guanajuato, Mlchoacan, Nayarit or Tamaulipas.

Preparation

Remove the pina, the large pineapple-shaped heart on the agave, which can weigh between 40lb and 70lb. Allow 15lb of pina per litre of 100 per cent tequila.

Cook

The pina is steam-cooked at high temperatures, in stone ovens heated up to a maximum of 95 degrees Celsius for up to 36 hours. That not only allows the fibres to soften without the agave turning to sugar, but also improves the flavour.

Wash

The ethic behind the wash is very much "waste not want not" as it is carried out to prevent the unwanted fibres from stealing any of the desired juices by re-absorption. What emerges is a delectably named juice known as honey water.

Mill and strain

This extracts the juices which are then mixed with water in a big fermentation tank and yeast is thrown in.

Ferment

The mixture is left to ferment for between one and 12 days in a treated tank. The fermentation process produces a liquid which is then fermented twice more. The second distillation process produces three components: the "head" which is discarded, the "end" which is recycled and the 'heart' which becomes the tequila.

Age

Tequila cannot legally assume its name without aging in an oak barrel when it becomes either blanco, plata, oro, reposado or anejos (white, silver, gold, rested or aged). However, colour does not necessarily reflect quality.

Bottle

For legal reasons, the labelling is key to the process, with every label having to be printed with either "hecho en Mexico" or NOM (Norma Official Mexicana), the producer's four-digit registration number and the tequila's age.

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