Red hot avocado market result of many factors

On July 6, the f.o.b. price on a carton of 48 size California avocados was as high as $56 with many different factors entered into that demand-exceeds-supply equation, which is expected to prevail through July.

In this early July marketing period, among the many reasons for that very strong market were a history-making heat wave in California in June, Peru’s decision to sell much of its crop to Europe and Mexican growers trying to create a more consistent marketing strategy than was employed for the 2015-16 season as they enter the 2016-17 marketing year.

Rob Wedin, vice president of fresh sales and marketing for Calavo Growers Inc. in Santa Paula, CA, told The Produce News on July 6 that the hot market was clearly the result of decreased supplies, which were caused by those factors above. He noted that about 35 million pounds of avocados per week were expected in the U.S. market from all points of origin over the next few weeks. That compares to 45 million to 55 million pounds per week that were being absorbed in the United States for much of the last several months. And summertime is a strong demand period for avocados with fresh guacamole an integral part of many picnic menus. Supplies are just not keeping up with demand.

California is doing its fair share as Wedin said the state’s grower reached their season high by shipping 21 million pounds the last week of June. He projected 15 million pounds per week through July, dropping to about half of that on a weekly basis in August. But California lost as much as 10 percent of its late fruit because of a freak heat wave that hit parts of the southern half of the state in late June. Wayne Brydon, field manager for Del Rey Avocado Co. Inc. in Fallbrook, CA, said that for several hours over a two day stretch temperatures rose as high as 110 degrees in some groves. “That’s just too hot and too intense especially in groves with lighter soils,” he said.

He noted that not only did those trees lose some of this year’s crop, but they dropped some of the fruit for 2017. “We’re still trying to get this year’s fruit off the trees so it’s hard to evaluate what it (the heat) did to next year’s crop, but there was definitely some damage.”

Brydon said with avocados having alternate-year bearing tendencies, next year’s crop was already expected to be lower than this year. A more accurate gauge of next year’s crop will be evident by September or October, but there were some losses, he said.

Meanwhile Peru sent a good portion of its fruit to Europe this year while Mexico limped through June with much less fruit than anticipated.

Robb Bertels, vice president of marketing for Mission Produce Inc. in Oxnard, CA, said Peruvian shipments to the United States probably won’t reach their projection which was less than the previous year to begin with. “Some of the packingsheds are starting to wind down,” he said on July 6. “We will ship our last fruit from there near the end of July, which means it will be marketed for the following three to four weeks after that.”

Adding to all of this uncertainty was the decision by Mexican avocado growers to take somewhat of a picking holiday during the Fourth of July weekend. On July 6, both Wedin of Calavo and Bertels of Mission confirmed that no fruit had been delivered to the packingsheds for the previous four days. Both firms were anticipating that the situation would change soon. “I understand there is a meeting today and hopefully they will resume picking after that,” said Bertels.

Wedin said the issue revolves around the orderly marketing of fruit. In April and May, Mexico shipped as much as 50 million pounds to the U.S. market, causing the price to plummet. Now the market price has skyrocketed and Mexico is producing at its lowest levels of the year. Growers are upset about this and are looking for ways to produce a more consistent supply, which would presumably lead to more consistent prices to the growers for their fruit.

To illustrate the effect the fluctuation in volume does have on grower pricing, Bob Lucy, president of Del Rey Avocado, noted the impact on his small 4.5-acre avocado ranch where he lives. “We did a little bit of picking in May and averaged 55 cents to 60 cents [per pound] for our fruit [at farm gate]. Right now we are averaging $1.11 per pound. The market price has gone up $10 to $15 [f.o.b] in a very short amount of time.”

Another factor that should have a small impact on volume over the next several months is the certification of Jalisco packingsheds so fruit from that Mexican state can begin entering the U.S. market. Calavo has a new packingshed in Jalisco and is hoping it can start selling some of that fruit to the U.S. market by the time that area’s second crop of the season comes into production in September. Bertels said Mission is hoping to ship some Jalisco fruit to the United States in August. Mexican agriculture officials are currently working through the USDA protocols to certify groves and sheds to import avocados to the United States.

In any event, Wedin predicted that promotional pricing for avocados will not be readily available again until at least September. By then Mexico should be into its new crop, which has yet to be estimated, but is believed to be a bit larger than the 2015-16 crop.