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September could see promotional avocado volume

This has been a very interesting and unprecedented year for avocado prices as they dipped very low during the spring but have been riding high on the wave throughout the summer. August appears to be a relatively tight month, but September should bring promotable volumes of fruit and lower pricing as well.

“It could start in August,” said Dana Thomas, president of Index Fresh Inc. in Bloomington, CA, “but definitely by September we should have promotional pricing.”unripe-avocados

He said while supplies from California and Peru will be mostly exhausted by late August, Mexico’s volume should on the rise leading to lower pricing than has prevailed since May. During May, June and July, the market on the larger fruit was consistently well over $40 per carton, and spent some time in the $50s. And in fact, marketers say there were sales of certain sizes on some days that were as high as $60 per carton.

Rob Wedin, vice president of fresh sales and marketing for Calavo Growers Inc. in Santa Paula, CA, relayed that he has been in the avocado business for 43 years and has never seen such a prolonged period of high prices. “I have seen the market hit $60 in the past but I have never seen a market this high for this long.”

Speaking on July 21, Wedin said his average on all sizes for the month of July so far was $45 per carton.

Like Thomas, Wedin expects the market to drop lower once Mexico begins shipping in volume, and they have yet to do that. In fact with volume from California waning -- and expected to be much less in August than July -- Wedin was not certain Mexico would answer that volume call in August. He said Mexico shipped a low of about 16 million pounds in an early July week, with that number jumping to 29 million pounds during the middle of the month. By August, he anticipates Mexico will be in the 25 million to 30 million pounds per week range, but that is still a far cry from the 50 million pounds per week that the U.S. market has proven it can absorb. The Calavo executive does not expect Mexico to hit that number until probably October. However, he revealed that Mexico’s avocado authorities have yet to officially estimate the size of the 2016-17 avocado crop. Until that is truly known, he said it is virtually impossible to say with certainty what will be shipped on a weekly basis.

Thomas was equally hesitant to look too far ahead, but he was confident in his prediction that promotable volumes will return as summer fades.

The drop in price would be welcome news to consumers, who continue to learn more about the commodity's health benefits. Marry Spencer, editor at Health & Fitness Shop, details some of the benefits in a recent article.

Another industry veteran, Rankin McDaniel Sr., president of McDaniel Fruit Co. in Fallbrook, CA, essentially echoed the comments of the others in an independent interview on July 25. “Demand has exceeded supply, especially on 48s and larger, and that continues to be the case. On the smaller sizes (60s and smaller), the pricing structure has dropped significantly as supply and demand are getting closer to level.”

He said California has moved the vast majority of its fruit and will wind down through August. While Peru has shipped fruit to the United States in July and expects to continue to do so in August, McDaniel said that for the most part those shipments are for pre-arranged programs and have not had much of an impact on the spot market price. He said the major change in the marketplace will occur as Mexico ramps up through August and is able to send a larger piece of fruit to the United States. For the flora loca crop, which Mexico shipped in July and will continue to ship through August, the size profile has been smaller than the 48s that tend to drive the U.S. market.

McDaniel noted that Chile’s 2016-17 season will also be underway shortly and that could also bring extra supplies to the U.S. market. But like Peru, he said most of the Chilean shipments to the United States are for pre-sold programs and have minimal impact on spot market pricing or supplies.

Bruce Dowhan, corporate vice president of The Giumarra Cos. in Escondido, CA, told The Produce News on July 25, that he expects the undersupply of large fruit to continue for another six weeks -- until early September. He said promotable supplies of the smaller fruit would probably hit the U.S. market in early August but it would take another month for a full array of sizes to rise to the demand level. “We are very close to promotional volumes on 60s and smaller right now,” he added.

McDaniel agreed with that assessment but noted that it is sometimes difficult to convince retailers to change their size programs to match supplies. Each retailer has their own reasons for their size preference and some just aren’t flexible. However, McDaniel said it often comes down to price. If the smaller fruit is available at a significant price reduction, that can do wonders in helping to create flexibility in marketing strategies.