Though the shipping of Mexican avocados began in a big way in mid-October after about a two-week supply stoppage over in-the-grove prices, there was still a lot of uncertainty as U.S. distributors discussed the situation within several days of the resumption of picking and shipments.
In early October, growers and others in a handful of Michoacán avocado growing districts ceased picking and also prevented others from picking and/or shipping avocados. As a result, supplies dwindled and the market went through the roof with many quotes in the $70 per carton range and a terminal price soaring to $100 and above. Chilean exporters began air-freighting containers to the United States making a profit even though the freight was around $28 per carton. But even at close to eight million pounds in a given week that was a drop in the bucket in the U.S. market which has gotten use to consuming 40-45 million pounds each week. Crews were back in the groves on Saturday, Oct. 15, and the following week in huge numbers. There were reportedly 900 crews picking on that Saturday and 1,000 crews on the following Monday.
APEAM, the trade association representing Mexico’s avocado producers and exporters, predicted that 40 million pounds would be picked, packed and shipped out of Mexico to the United States during the first week after the work stoppage. A spokesman said that at that level, a normal marketing situation should return soon. Of course, a normal marketing situation means a price to retailers that allows them to promote avocados, which moves them at the 40-50 million pounds per week level.
U.S. importers are not so sure that there will be a quick return to normalization. Off the record, several discussed potential issues. One California distributor said that once the crews returned to the field “I heard a rumor…just a rumor…that the workers themselves weren’t too happy. That might be the next issue.”
Another shipper said that the stoppage ended with a very high market and growers getting about $1.50 per pound in the grove for their fruit. That is an excellent price but not sustainable. “The grove price has to come down and come down quickly,” he said. “What’s going to happen then.”
Those issues aside, and prior to the supply stoppage, this appeared to be another record-breaking year for Avocados From Mexico. Rob Wedin, vice president of fresh sales and marketing for Calavo Growers Inc., said the latest estimate for Mexico’s crop this year predicted about a 5 percent increase in supplies. Considering California’s crop is expected to be down by as much as 40 percent, it does appear that it will be difficult for total supplies to keep up with demand, which has been growing at about 15 percent per year. Chile has significantly increased its volume to the U.S. markets because of the high October prices, and Peru is expected to do the same next summer because of California’s limited crop. Still, total volume does not appear that it could keep up with a 15 percent increase in demand.
Wedin did point out that the supply stoppage put Mexican shipments about 60 million pounds behind the previous year. He does not expect that will be difficult to make up as those gains can gradually occur over the next 10 months.
Wedin told The Produce News on Oct. 19 that he expects it to take about six weeks before there is total normalization of the supply and demand curve. He noted that it will take about three weeks to fill the pipeline, which will take the industry into the heavy-demand Thanksgiving holiday. Normalization could occur for a couple of weeks after that but then the Christmas pull will take over, followed by the demand caused by the Super Bowl, one of the top two avocado consumption days of the year.
Speaking a couple of days earlier, just after picking had resumed, Doug Meyer, vice president of sales and marketing for West Pak Avocado Inc., Murietta, CA, laid out the same scenario of marketing events and predicted it would be after the Super Bowl before normalization. And then he added that’s only if you factor in a “new normal.” Because of the annual increase in demand, Meyer believes that marketers and buyers need to get used to a higher price.
In 2016, there was significant fluctuation in the market with prices below $20 per carton in much of March and April. By June, and then throughout the summer, a very strong marketed persisted, usually above the $40 mark. That could be close to the new norm.
Bob Lucy, president of Del Rey Avocado Co., Fallbrook, CA, was not certain that the volume could return and maintain strong pricing right off the bat. He was worried that the through-the-roof f.ob. pricing, that led to expensive avocados at retail, would tamp down demand and it would take promotional pricing to create demand anywhere near the 40-45 million pounds per week level. Lucy guessed that there would be several weeks of uncertainty before normalization could even come close to occurring. He did add, however, that underestimating demand in the avocado market has been commonplace recently as this past summer consumers proved they would buy a lot of avocados even at higher prices.
Wedin of Calavo said that one problem is that no one likes to promote or order high volumes of fruit in a falling market. Retailers don’t want to be on ad at $1.69, if a couple of days later $1.29 will be warranted warranted. For this reason, he thought promotions might be slow in coming.
Rankin McDaniel Sr., president of McDaniel Fruit Company, Fallbrook, CA, actually summed up the totality of the many avocado conversations this reporter had in the days following the return to picking. “It has been a very unusual situation,” he said. “I am hopeful that they (APEAM) are correct and supplies continue uninterrupted.”
But he did not want to venture beyond hopeful.