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California avocado deal begins with good prices, volume

A jump in the f.o.b. price as well as a need to get some fruit off the trees has resulted in a near doubling in the volume of California avocados the third week of March, with more volume expected moving forward.

Bob Lucy, president of Del Rey Avocado Co. in Fallbrook, CA, said that the 4 million to 5 million pounds of fruit California was sending to the market in early March doubled to 9 million to 10 million pounds during the week of March 18, and he said it will steadily increase as the season progresses to a peak in the neighborhood of 16 million to 18 million pounds per week.

Although California avocado growers have a crop that has been estimated at a robust 515 million pounds, which means early marketing was important, the season was slow in getting started because the fruit wasn’t sizing and the prices were a bit low to justify picking small fruit early.

“If you have a 70-size fruit on the tree and you can wait it for it to become a 48, it makes perfect sense to do so,” said Mr. Lucy.

Early in the season, most growers size pick, leaving the small fruit on the tree and only picking the 48s. However, it is a subjective game while standing on a ladder and Mr. Lucy said that the eye can sometimes trick the picking hand.

“We’ve seen a lot of 60s coming in [to the packingshed] that the grower thought were 48s,” he said.

But warmer weather and some rain has helped the fruit size a bit so the volume is increasing.

Mr. Lucy said that Mexico also withheld some volume from the market in early March, which caused a $3-$4 rise in the market on two different occasions.  

“Right now (March 20) we are getting $30 for 48s and $28 to $30 for 60s,”he said. “But then there is a big drop off. We are only getting $18 to $20 for 70s.”

As a point of reference, growers get about 4 cents per pound for every $1 at retail. So a $30 market returns a very satisfying $1.20 per pound to the grower, while a $20 market returns only 80 cents per pound, which may or may not be profitable depending upon the tonnage the grower is getting per acre as well as the cost of water.

For this reason, Mr. Lucy said that growers want to leave the fruit on the tree, but there are reasons preventing this.

Trees that get to be too tall (30 to 40 feet high) need to be cut way back (to 5 to 6 feet) and basically be re-grown. There are a number of trees in this category every year and those trees have to be cut back in February, March or April regardless of the size of the fruit on the tree.

In addition, an avocado tree starts to set its bloom for next season in March, and an overburdened tree doesn’t set a good-sized crop the following year.

Thus, Mr. Lucy said that has created some excess smaller fruit inventory at this point in time and a depressed market for that fruit.

“Right now [the industry] has a big inventory of smaller fruit,” he said, adding that this fruit has to be moved through the marketing channels before the price will rise.

Looking ahead, Mr. Lucy expects that avocados will be at promotable volume for many months. He believes the California crop is going to eventually come in below the estimate because of the smaller fruit that has been harvested early in the season.

If fruit is allowed to size, it creates a larger-volume crop in terms of tonnage. Because the fruit was slow to size, the Del Rey executive said a total tonnage drop should be expected.

But he said that a California crop of even 450 million pounds, which would be close to a 10 percent decrease, is a good-sized crop. Add the weekly volume of 15 million to 16 million pounds to the 20 million to 30 million pounds that Mexico typically sends to the United States on a weekly basis, and a good situation materializes for retailers and consumers.

Mr. Lucy expects to see promotional prices at retail in the 79- to 99-cent range for the mid-sized fruit all summer long.