It really should not be a surprise due to the well-known significant reduction in the 2011 California avocado crop, but a $50 avocado market is still rare enough to turn most heads anyway.
“In my 25 years in the business, I’ve seen a $60 market a couple of times, but that was well before Chile or Mexico were allowed to ship to the U.S. This [$50 market] is unusual,” said Ross Wileman, vice president of marketing and sales for Mission Produce Inc. in Oxnard, CA.
Mr. Wileman is not predicting that the market will hit $60 this summer, but he believes it will come close. He said Tuesday, April 12, that the market on 48-size fruit was nearing $50 with no decrease in sight. In fact, he said that the double whammy of the Easter and Cinco de Mayo holidays coming less than two weeks part will put a big strain on supplies. “We are having trouble keeping any inventory in our warehouses,” he said.
Phil Henry, president of Henry Avocado Corp. in Escondido, CA, explained that the demand-exceeds-supply situation is a combination of the Chilean season ending, the Mexican volume winding down and California producers looking at an on-tree crop of only about 265 million pounds, which is half the volume of 2010.
Mr. Henry said that numerous factors — including weather and the alternate-season bearing tendencies of the trees — resulted in the much smaller crop this year. He indicated that there are many growers that just do not have the ability to nurse their trees through the alternate-bearing tendency to produce a full crop. For that reason, he said, the very strong market will make some growers financially healthy, but others with very little volume will not be able to take full advantage of the strong prices.
Mr. Henry said that as of mid-April, there was a $10-$12 f.o.b. price gap between smaller fruit in the 70-count range and the large fruit in the 48-count range. Consequently, growers were not picking the smaller fruit but instead were leaving it on the trees to size, further exacerbating the shortage situation.
Mr. Wileman said that many growers also believe the market will continue to get stronger over the next several months, so they are content to leave the fruit on the trees until the marketing situation is optimum. “Honestly, it’s not good for us. We are a company built on volume and serving the needs of our major retail customers,” he said. “That’s difficult to do right now.”
California’s 2010 crop of more than 500 million pounds was marketed from February to November. With half a crop this year, most shippers have truncated their marketing season and are planning to fill orders from April to September with May, June and July being their peak months. Chile, which also had a smaller-than-usual crop this year, is looking at a larger crop for the 2011-12 season. Because of the expected good market, Chilean growers will try to come into the U.S. market as soon as possible, which will probably be late August. Mexico has year-round supplies but is at the end of its current season, and volume will not be strong again until late summer or early fall.
The Mission Produce executive said that there could be some relief in June and July if Peruvian avocado growers get the clearance from the U.S. Department of Agriculture to ship their fruit to the United States without cold treatment. Peruvian avocados have been allowed into the United States since 2009, but the fruit must go through a cold-treatment process to gain entry, which has greatly limited the volume exported to the U.S. market.
Recently, Peruvian agricultural officials announced that the USDA was considering lifting the cold-treatment requirement. “If that happens, and I tend to think it will, shipments from Peru could help fill demand as soon as June,” Mr. Wileman said. “That would really help.”
Mr. Henry agreed and said that without the Peruvian shipments, the market will remain very strong through the summer. “We expect tight supplies through the summer, but the situation will change in late summer or early fall.“
He said that even with the strong market, retail support has been very good and retailers continue to promote avocados. “That’s the good news,” agreed Mr. Wileman. “Consumers are still buying them.”
However, as the market moves above $50 per carton, the retail price will surely begin to inch above the $2 per avocado level, which will likely cool demand.