The chile crisis: Declining production amid labor, water challenges

HATCH — Under the relentless heat of a beaming sun, around a dozen workers wearing long-sleeve shirts and straw hats slowly moved from plant to plant in a chile field, plucking red pepper by red pepper to fill burlap bags with chiles.

It’s the busy season for the contracted workers from Mexico, and the Hatch-based Grajeda Farms is already shipping chile around New Mexico for the fall roasting season some wait all year for.

Chile has a cultural stronghold in New Mexico, and the state is leading the nation in chile production. But what really is the appetite for the product?

Chile production has significantly declined in the last few decades, as harvests have smaller and smaller yields.

New Mexicans may not even be aware the industry is struggling. That’s what economist Jay Lillywhite thinks. He is the associate dean of research and director of New Mexico State University’s Agriculture Experiment Station.

He said the chile industry is in a transition.

“We’ve seen some significant decrease in acreage. We’ve seen some issues with yields, and then, just in general, challenges with production,” Lillywhite said.

If the chile industry is going to survive, he said, major issues like labor shortages and the water crisis need to get solved.

“We’ve got to get some things figured out, I think, if it’s going to stick around,” he said.

The numbers

Twenty years ago, farmers produced more than 100,000 tons of chile in New Mexico, translating into $50.3 million in production value, according to data from the U.S. Department of Agriculture. Taking inflation into account — $1 in 2004 is worth $1.66 in 2024 — production value from 2004 would equate to more than $83 million today.

The current production value is less than half of that.

In 2023, production stood at 46,750 tons, according to data from the New Mexico Department of Agriculture. At an average price of $890 per ton, the industry produced $41.5 million in 2023.

That’s nearly $10 million less than production values five years ago in 2019.

Travis Day is the executive director of the New Mexico Chile Association. He said the drop in acres, from 34,000 acres in the 1990s to 8,500 acres today, doesn’t tell the whole story.

“It really only tells half of it,” he said. “You know, there’s been a lot of research and development done at New Mexico State University, and the development of different varieties of chile that are able to see a lot higher yield come out of the fields than they did back in the ‘90s.”

He said things like cross breeding are creating chile varieties that are resistant to disease or drought. He also said this year’s season is looking really good, better than seasons in the past four or five years.

“It’s kind of a sigh or relief, for right now at least,” Day said.

Even with the historical drop in production, Lillywhite said the private agriculture industry has a major economic impact. Every dollar the chile industry generates results in around 45 cents of economic output revenue in other areas, he said, such as tractor dealers or mechanics.

“So I have a worker (who) works at … the tractor repair place. That worker goes to the grocery store and buys groceries. They wouldn’t go to the grocery store and buy groceries if they weren’t fixing the tractor that was being used on the chile farm. So that all traces back,” he said.

There are about 25,000 farmers and ranchers in New Mexico, Lillywhite said, though it’s harder to calculate exactly how many chile farmers there are. A report from an economic modeling technique called input-output analysis estimated there were nearly 360 direct chile industry jobs in 2023, but Lillywhite said that number is probably inaccurate because it doesn’t take into account part-time or seasonal workers — which make up a majority of harvesting crews.

He added that other impacts, such as on the tourism industry, are harder to measure.

“Do people come to New Mexico because we’re famous for Hatch chile and they want to come see where it’s grown, or they want to have green chile cheeseburger?” he asked.

The issuesLillywhite said labor is a major issue in the chile industry.

“I don’t think you would talk to any chile farmer, especially green chile, that wouldn’t have some concern about labor,” he said.

In January, the Mexico government enacted a decree that expands agricultural labor rights for workers. It requires free and habitable living conditions, medical care and childcare services as well as a stronger emphasis on written contracts.

Fabian Grajeda works for his family’s chile company, delivering chile to cities like Albuquerque and Santa Fe. He said Grajeda Farms hired 30 workers from Mexico in early May to harvest chile this year, and they keep working until January or February.

The pay went from $3 a sack – which is about 40 pounds of chile – to $17.60 an hour, he said, due to the heightened labor standards.

Grajeda said larger companies were the cause of the more intense standards, stuffing a bunch of workers into one building with bunk beds. Now, he said, the rules require five people to a house and each one gets their own room.

It’s worth it, he said.

“These guys put in lots of work,” Grajeda said.

It can still be difficult for farmers to find migrant workers who want to do the laborious work.

Day said the long-term solution to the labor shortage is a mechanized harvest. He said the concept of a machine picking chile has been talked about for decades, but it’s finally becoming a reality.

He said a farmer created a prototype during the COVID-19 pandemic that harvests chile. It bruised a lot of product at first, Day said, because chile isn’t meant to withstand bouncing around in a machine. But new varieties of chile with thicker pods are coming out as well as crops with taller tree-like shapes that make it easier for the machines to pick from the plants without damaging them.

“It’s working extremely well,” he said. “We’re not there yet, but eventually we’ll see a lot more machine-harvested chile in New Mexico.”

Another issue not unique to the chile industry is the drought and lack of water. While some farmers are looking for solutions on a federal level, Day said new, more resistant chile varieties are a way farmers on the ground can get around the issue.

“None of our guys can make it rain any more than it’s going to, and so we want to be sure that we’re maximizing the water that we are getting,” he said. “And really, a lot of that is developing some varieties that are a little more drought tolerant, a little more hearty when it comes to the lack of available water.”

Day said the state could provide more funding for innovation to catch technology in New Mexico’s agriculture industry up to speed.

Imports and exportsNew Mexico has fought to maintain its chile reputation.

Marshall Berg is the CEO of Best in the West, a chile processing and brand company. He said the chile market in the U.S. took a large hit in the 1990s when the North American Free Trade Agreement was enacted, contributing to the major drop in acreage over the past few decades because NAFTA made importing chile from Mexico more accessible.

Those lost harvested acres went to Mexico, he said, and a lot of chile in the U.S. still comes from Mexico.

“We’ve never been able to make that improvement again, get that market back,” Berg said.

As for exports, Berg said a lot of chile marketed fresh goes out of state — “hundreds of thousands of pounds, millions of pounds.”

Exporting is the hardest part of the state’s chile industry, Berg said.

Getting chile to other states typically requires freezing the product, which Berg said is expensive. And there’s not a large frozen Hispanic aisle in grocery stores, he added.

So Berg’s company gets chile to a stable form, so it never has to be frozen.

“We’re on the verge of chile really expanding nationwide because of that shelf stability,” he said.

Berg said processed New Mexico chile has gone down in quality over time.

“We’re trying our hardest to restore some quality, but it is hard when you’re trying to expand and keep quality at the forefront, it costs a lot of money and it makes a premium product less accessible to more people,” he said.

Lillywhite said a sign the industry is taking a turn for the worse in New Mexico is if chile processors leave the state.

Authenticity issuesHatch is the chile capital of the world.

Right?

Kind of — allegedly.

Berg explained that chile farming works on a rotational basis, so farmers can only plant it in a field once every six or seven years. Otherwise, disease destroys the soil for chile-growing, he said.

That’s what’s happened in Hatch, Berg said. So while the marketing push for Hatch chile erupted about 30 years ago, he said, not much chile is actually grown there anymore.

“A lot of that soil has been overgrown with chile in the past decades, and it’s not able to support chile crops in that area anymore,” he said.

Grajeda Farms and growers for Bueno Farms told the Journal they rotate their fields in Hatch every one or two years, and it’s fine.

However, Berg said most chile now is grown in the northern and southern parts of the Mesilla Valley, like Deming or Socorro.

Hatch’s name recognition is at the point it won’t be forgotten anytime soon.

“It will always be a good, huge chile-selling spot, and for most people, that’s kind of all that matters,” Berg said.

He said most of Hatch’s chile is processed outside of New Mexico and even outside of the country, causing authenticity issues for people who think they’re buying New Mexico chile. Other states are also falsely branding their chile as Hatch or New Mexico-grown, according to New Mexico Certified Chile.

Berg said his company uses a seal from the New Mexico Department of Agriculture that ensures products came from New Mexico farms. Grajeda said his company does as well and advised chile buyers to keep an eye out for the seal.

“It’s unfortunate that people buy things called Hatch when it’s not supporting the industry that really came up with that idea, marketed it and put quality products out in the world,” Berg said.