Avocados
By Ed Avis
If your customers like guacamole, you know that avocado prices have spiked recently. Data show that in the week beginning July 1, wholesale prices for avocados arriving from Mexico were 129 percent higher than the same week last year.
The reason? Nothing to do with tariffs and everything to do with supply and demand, says David Magaña, vice president and senior analyst at Rabobank in Fresno, California.
“This year the crop from California was way off – shipments have been about half of what they were last year,” Magaña says. “And not only was it smaller, but it started later than normal.”
California’s crop accounts for 15-20 percent of America’s supply during the course of the year, but about 30 percent this time of year. Mexico provides most of the rest.
Avocado shipments from California
California’s smaller crop was due in part to the two-year cycle that avocados always face – this year is an “off” year – and to the heat wave the state experienced last summer, which damaged plants during the blooming season.
Because California’s crop was smaller and started later, Mexican growers picked up the slack by harvesting more avocados sooner in the season, Magaña explains. Now the chickens are coming home to roost: Since they harvested more early in the season, they have less avocados available to ship right now. Shipments last week were down 50 percent from the same week a year earlier.
“For the last month or so, the production has declined in Mexico,” Magaña explains. “In Mexico there is normal seasonal variation, and the lowest point in the year is July. But this year was really low because they had been harvesting more earlier to compensate for the lower California harvest.”
So right now buyers are being hit with lower supply from both main sources, California and Mexico. Magaña says Peru has increased its shipments to help capture some of that demand, but that can’t completely compensate. Peru normally provides about 20 percent of America’s avocados during this time of the year, he says, and now they’re providing about 25 percent.
Magaña stresses that the situation is very week-to-week. Overall, shipments from Mexico are actually up 2 percent year to date; they’ve only dropped in recent weeks.
Why is Demand Up?
Demand is up because so many people like avocados these days. Mexican restaurants don’t have the monopoly on guacamole anymore, and avocados can be found in countless other menu dishes, from sandwiches to salads to soups.
“The law of supply and demand suggests that higher prices would decrease demand, but the continued high prices tell us that most people continue to buy avocadoes. More people are eating avocados on a regular basis,” Magaña says.
When Will Prices Drop?
Prices currently stand at $84 per 25-lb carton from Mexico, which Magaña says are the highest he has ever seen for this time of the year. Those high prices should remain for at least the next three weeks or so, he predicts, until Mexico’s next harvest season begins in August and September, increasing supply.
“We can’t predict how much prices will drop, but we are expecting lower prices starting in late August and September and beyond,” Magaña says.
California’s shipments have picked up since earlier in the season – last week they were about the same as the same week a year ago – but they are reaching their peak now and will decline over the coming weeks. California’s new harvest will begin in early 2020.
That harvest should be better than this year’s, Magaña predicts.
“Weather conditions in California this year have been very good. They’ve had probably a record rainfall, so there is sufficient water,” he notes. “And it hasn’t been as hot this summer as last summer so far. The industry estimates that they will have a better crop next year. How big? I don’t know.”
If California’s crop greatly improves in 2020, and Mexico and Peru keep pace, you eventually should be able to serve your guacamole at regular prices again.