Mexican Produce
Fresh Mexican Produce stand; avocado
Editor's Note: For a more recent article about avocado prices, click here
By Ed Avis
Mexican restaurants use a lot of avocados, primarily in guacamole but also in many other dishes. So it’s no surprise that the recent giant price increases in avocados have hit Mexican restaurants hard.
“Avocado prices are through the roof,” says Allan Stone, business manager of El Jefe Mexican Kitchen and Tequila Bar in Stevensville, Maryland. “They’re the highest they’ve ever been.”
Stone is right. In mid-September, the average wholesale price of a 25-lb carton of medium Hass avocados from Mexico was $90 per carton, more than triple the cost from five years ago, according to Roland Fumasi, an analyst at Rabobank in Fresno, California who specializes in the fresh produce market.
“That is absolutely a record,” Fumasi says.
Record avocado prices are a major concern, according to el Restaurante’s latest reader survey. Seventy-eight percent of respondents to the survey said their food costs are up this year, and in follow-up phone interviews, many specifically mentioned avocado prices.
Why are avocado prices so high? There are several reasons, ranging from natural growing patterns to demand in Asia. And maybe even activity by cartels.
Natural Patterns
Avocados are “alternate bearing crops,” which means they tend to produce a lot of avocados one year, and fewer the next year. This happens because avocado trees store nutrients for future years even as they produce this year’s crop, so if one year produces a big harvest, fewer nutrients are available for next year’s crop.
This phenomenon can be triggered by external events, such as weather conditions. Consequently, an entire growing area can get on an alternating cycle. This past growing season saw a 44 percent drop in the California avocado harvest, and that is at least partially due to the alternating cycle, Fumasi says.
California only provides about 15 percent of America’s avocado crop, however, so the reduced crop in California doesn’t account for all of the price increase. Most of the rest of the avocados used in the U.S. come from Mexico, and that country’s shipments to the U.S. have been relatively steady.
Global Demand
Another key factor in the increase in avocado prices is rising demand for the fruit around the world.
Asia, for example, has developed a taste for avocados, Fumasi says. The rapidly expanding middle class in Asia has more money to spend on non-traditional food, and the avocado is considered a desirable Western food.
Europeans also are buying more avocados. Mexican food has gained a foothold there, bringing along guacamole and other dishes that use avocados.
Growing demand typically causes producers to increase supply, and supply has increased over the past five years. In 2012, Mexico shipped 967 million pounds of avocados to the U.S.; by 2016 that figure climbed to 1.7 billion pounds, and projections for 2017 equal that number, according to the Hass Avocado Board.
That hasn’t been enough to soak up all the growing demand.
“Mexico is expanding acreage, but it takes 5 to 7 years before you get an avocado tree where it’s hitting production,” Fumasi says.
Cartels?
Activity by organizations that control the flow of avocados to the U.S. also may affect the prices.
For example, several media outlets reported that in September some Mexican avocado growers were withholding shipments north in order to negotiate better prices, and Hass Avocado Board data shows that indeed shipments in early September were down about 40 percent from that period in 2016.
And a report from the U.S. Department of Agriculture’s Foreign Agriculture Service indicated that international prices were affected when harvesters went on strike in October 2016. “Small and medium producers blocked several roads in Michoacán, preventing the mobilization of trucks,” the report said.
Bottom line: United efforts by Mexican growers are probably also contributing to price increases.
There also have been media reports of drug cartels pushing into the avocado trade because of the profitability, but that seems to have been brought under control by farmers creating armed patrols. Nevertheless, that kind of activity can only raise prices.
Is Relief in Sight?
Ultimately, supply and demand sets the prices of avocados. If demand keeps growing and supply can’t keep up, prices won’t drop. However, if enough acreage is added in Mexico, and/or California has a better crop next year, the situation could improve.
“We’ve been saying for the past few months that supplies will be tight until the next Mexican crop has come online, which it has,” Fumasi says, adding that prices of Mexican avocados dropped to about $52 a carton in early October. “That’s the way it works with crops that are quickly perishable. But even at $52, you’re still talking about more than twice the typical price over the past five years.”
And in the big picture, it will take more than a good crop here and there to moderate prices.
“With global demand expanding as rapidly as it has, we may be up into a higher than normal price range for a while,” Fumasi says.
Ed Avis is the publisher of el Restaurante. Reach him at edavis@restmex.com