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Avocado market remains unsettled, more consistent supplies expected

Ever since some Mexican avocado growers disrupted the flow of fruit in early October, the supply-demand situation in the United States has had some difficulty getting in balance. The result has been somewhat of an unsettled market and probably fewer retail promotions than might be expected.

Rob Wedin, vice president of fresh sales and marketing at Calavo Growers Inc. in Santa Paula, CA, has told The Produce News repeatedly over the past several months that uncertainty in the marketplace typically results in a reluctance to promote. Retailers just don’t want to be putting any product on ad when they are not sure whether price and supplies are going to move up or down.Rob-WedinRob Wedin

On Monday, Dec. 5, Wedin said demand has been improving steadily, but growers in Mexico, where the vast majority of U.S. avocado supplies currently originate, have been cautious in ramping up production. Those growers, who witnessed several large swings in the market earlier in the year, are guarding against an oversupply situation. At the same time, he said U.S. retailers have been a little slow in promoting the crop because of the recent experiences with lack of supply.

Josh Underseth, a salesman with Del Rey Avocado Co. in Fallbrook, CA, noted Dec. 6 that the market had been settling down before some rain hit this week, disrupting supplies for at least a couple of days.

“Just as it appeared we were getting back to normal, we missed a couple of days of picking and the market strengthened again,” he said.  “Right now, supplies are short.”

Underseth added that anytime supplies get short, rumors (in this case unfounded ones) circulate that the shortage is due to manmade efforts rather than Mother Nature. That perception also leads to an unsettled situation.

However, both Underseth and Wedin expressed optimism that the volume would pick up and there should be promotable volume for the Christmas holiday pull as well as for January, leading up to the Super Bowl. Super Bowl weekend is always one of the top three avocado-consumption weekends of the year, along with Cinco de Mayo and Fourth of July.

Wedin said Mexico has been sending around 30 million pounds of avocados to the market each week for the past three weeks. He noted that is below forecast, and below shipments of a year ago, but is still a sizable volume. Over the next few weeks, he expects volume and promotions to increase, with shipments reaching the 35 million-pound weekly level fairly quickly.

Looking at past records, he said in late November-early December 2015, Mexico’s shipments were in the neighborhood of 38 million pounds per week.

Besides a general caution limiting volume, he said many groves are into their second pick, which also can reduce the volume. In January of 2016, Mexico had one week in which it sent close to 60 million pounds to the United States, according to the Calavo executive. That volume led to a significant drop in the f.o.b. prices shortly after the Super Bowl. That is a situation Mexican producers are hoping to avoid this year.

Wedin expects volume throughout most of December and January to match up better with demand than it did in October and November. He said size distribution is much better this year than a year ago, and more normal with the smaller sizes in greater supply and the price curve reflecting that.

Last year, the reverse was true as there was a dearth of small fruit. In the first week of January, the larger sizes had an f.o.b. at the Texas border of around $35, while the smaller fruit was commanding numbers in the mid- to high $20s. It is this smaller fruit, which can be promoted quite heavily at favorable price points, that can ramp up demand and push volumes to a higher level.