GLOBAL MARKET OVERVIEW AVOCADO

From Fresh Plaza | 8 November 2022

Overview of avocados in the U.S. market, complemented by charts from Agronometrics. Original published on November 4, 2022. 

The exotic avocado has increasingly become a staple on the shelves and in the diets of many countries, as its popularity has continued to rise over the years. Domestically grown avocados have seen a particular increase in interest in European countries such as Italy and Spain. This year, however, many growing countries are facing issues due to adverse weather conditions; in Spain, some regions face losses of up to 60%, whilst in South Africa the season has been called ‘unbelievably bad’ by growers, due to the effects of the war in Ukraine, curtailment of exports to Russia and the increased production and shipping costs that continue to plague the sector. Those in other countries like Belgium and Spain fear the increase in cost due to these issues could put consumers off buying the exotic product. The outlook in the US and Australia, however, is much more positive; Australia has seen an increase of 56% in production and a staggering 268% increase in exports over the last year, whilst in the US, avocado consumption seems unaffected by fluctuation in price, for now at least.

Netherlands: Importers need to switch faster to Mediterranean countries

“There is still a lot of growth potential in avocados, but we should not assume that it will happen automatically,” notes one importer. The end of the Peru season means there are few large sizes available on the market at the moment. However, there are more than enough small sizes, as Chile and Colombia are experiencing a similar size-breakdown. Mediterranean countries are having an off-year, so spring 2023 could be another firm pricing market. Although that will partly depend on what Colombia and Chile will do. Because of the strong local market, Chile has stopped exporting to Europe earlier for two years in a row. As a result, we as importers have to switch faster to Mediterranean countries. And as we know with avocados, sourcing close to home is not necessarily the cheapest way,” notes an importer. Colombia has the potential, as an overseas origin, to keep the price market ‘quiet’ in the first months of the year until Peru is back on the market. However, this is still ‘work in progress’.”

Belgium: Uncertain demand

At the moment, avocados are arriving in Belgium from different parts of the world, so volumes, a trader says, are still little to complain about. “Volumes are generally there, but not everything is of the same quality. Some producing countries have had problems in the harvest, so the fruit from Colombia, for example, is a bit smaller, and in Spain the drought is affecting avocados. However, stable product is coming from Africa, although quality is sometimes debatable there too, and Mexico is now in full swing. These are good avocados and volume-wise this is also much more compared to last year.”

On the demand side, however, situations are a bit more uncertain. “Avocado is a well-established product these days, so it will keep going for now. For many, it now seems to be a regular part of the diet. However, with current inflation and prices, we will have to wait and see if this will continue through the winter. Exotic products, which avocados remain anyway, will then be the first to be abandoned for the majority. Moreover, increased costs, across the spectrum, also mean that shelf prices may not invite consumers to buy more avocados.”

France: A dynamic market

If the avocado market is a very variable market, it is currently rather dynamic in France. The avocado season from Peru is coming to an end and will leave a hole in the market with Morocco and Spain starting shipments. According to an importer of the wholesale market of Rungis, “Sales are currently good due to a good demand.”

Italy: Increasing interest in Italian grown avocados

With the Peruvian Hass avocado season over, the Italian market is about to switch to other origins. A wholesaler in northern Italy says: “The Peruvian Hass avocado season, which dominated until a week ago, with prices of 10-11 Euro, is finished. Volumes of the Hass variety from Morocco, Israel, Spain and Mexico are now expected. A price increase of at least 20% is predicted for the Hass variety, which, however, shows declining volumes. This situation brings greenskin avocados back into play: Pinkerton from Kenya, Zutano and Ettinger from Israel. Paradoxically, greenskin avocados were more expensive than the Hass variety for months, but now they seem to be cheaper again.” On the Spanish greenskin avocados, the wholesaler was informed that there will be a shortage of product, due to unfavourable weather conditions, and that the available fruits will not be easy to trade.

In Sicily, Bacon avocados are being harvested and the Hass avocado harvest is expected to be later than last year. “The weather conditions were favourable both in spring and summer. Due to the lack of dropping between August and September, a large yield is expected for the Hass variety, but the fruit sizes will be smaller than in previous years,” they report from a producers’ cooperative. Despite the strong and growing interest in the Italian avocado (especially from retailers, with whom commercial agreements are being closed), what scares producers is the current economic situation, which creates uncertainty.

In the year ending August 2022, more than 6,800 Italian households bought avocados at least once (26%). The fruit can be purchased in fixed weight, i.e. packaged, but the preference is for variable weight (over 5.3 million households). The preferred channel for buying avocados is the supermarket (14%) but discount stores are growing: in the space of 24 months they have increased from almost 6% to over 10%.

Spain: Harvests 25 to 30% lower than last year

The Bacon variety avocados are being harvested in Spain at the moment with prices from 1,70 to 1,90 Euro per kilo, as well as the first Fuerte, both smooth-skinned avocados. Some small growers have also started prematurely picking the first Hass avocados encouraged by the good prices at the moment – 2,50 to 2,90 Euro per kilo on the fields – but the balance between the dry matter and the oil levels show they are not yet ripe and the sector warns about the consequences that may bring to consumption. The harvest of Spanish Hass avocados will then begin between the weeks 48- 49 with more consistent volumes.

Spain expects a harvest around 25 to 30% lower than last year, although in Velez-Málaga, one of the most important producing areas in the country, the drop in the production could exceed 60%.  Since there are fewer avocados on the trees, the prospect is that there will be an abundance of large sizes. As soon as Peru ended its season prices on the European markets have risen to at least 4 Euro per box and there is less availability of large sizes. The European markets are now sorted mainly by Mexico, which focuses more on the US market; Chile, whose production is low this year due to the drought, and Colombia, which doesn’t have a big availability at the moment. Meanwhile, Morocco is also starting to harvest with lower volumes. The supply in Europe is not big and there are mainly small and medium sizes 12-14. Therefore, the European markets will not have big volumes until the week 48, when more origins will clash in the markets, including Spain. Spanish growers will demand higher prices due to the lower harvest while both growers and packers face a 35% increase of costs in one year and retailers are reluctant to increase prices on the shelves fearing a consumption stagnation.

South Africa: “An unbelievably bad season” for avocados

The South African avocado season is nearing its end, a season complicated at the start by the outbreak of the war in Ukraine and curtailment of avocado exports to Russia, a major receiver of the greenskin avocados not sent to Hass markets.

This year some of those greenskins for Russia and Eastern Europe were sent to non-traditional markets, which put pressure on Hass prices. Moreover, the season opened for with a full European market as a result of large Spanish and Israeli crops, plus Peru’s volumes which coincide with those of South Africa, and Europe received a doubling of its usual amount of avocados. It is hoped to be an anomaly.

Production and shipping costs have gone up to such a degree that returns are far lower, even were selling prices to remain unchanged.

The late area of KwaZulu-Natal normally let its fruit hang, waiting for a favourable entrance time, and this year some growers had to let their fruit hand for six weeks to 2 months longer than usual before harvest.

Then came the strike by port workers and containers standing around; as a result, some of those containers were diverted or re-imported to avoid quality issues.

For the late avocado growers it has been a shorter export period than they’d wished. Since the start of the avocado season in February until now growers have talked of the difficulties of this season. In early March already an avocado grower called it “an unbelievably bad” season.

An export crop of around 15.5 million 4kg cartons has been mentioned; the final figure is yet to be released. Hail last December had reduced the crop. Locally, Class 1 avocados are selling for an average R18.50/kg (just over a Euro per kg). The domestic price has strengthened over the past few weeks.

Europe remains the largest receiver of South African avocados, but negotiations to open other markets among them Japan, India, China, the USA are under way.

North America: Demand remains strong and stable

Supplies of avocados are currently available from multiple regions – Mexico, Chile, Colombia and the Dominican Republic. Though one shipper notes that last year at this time, Mexico was slightly more dominant in its supplies.

“This year, Peru had an incredible campaign. The Mexican crop last season ran out of gas suddenly and with some time left on the clock; then, Peru came in,” he says, noting that California had also been supplying product at that time. “Peru filled that gap very nicely and stuck around. There’s still Peruvian fruit in the marketplace even though there’s very little on the water.”

avocado volumes by origi 18

Source: USDA Market News via Agronometrics.
(Agronometrics users can view this chart with live updates here)

That event has, in turn, opened up the opportunity for both retail and foodservice to hedge against Mexico, which it currently continues to do. “Normally this is a 100 percent Mexican period of time,” he says. “On inventory, Mexico is hovering around 90 percent with a normal to large crop.” That is quite a difference from what growers and shippers were dealing with last year. “That’s when we had a more challenging crop. There was plenty of fruit at the time, but it was much more complex in terms of finding sizes and quality. This year, no problem,” he says.

As for demand, the shipper notes it’s fairly level. Even with prices climbing throughout the second half of the Mexican season earlier this year – particularly so in May and June – demand held up. One potential factor could have been COVID in that consumers were searching for healthy foods and in turn, that has helped build avocados into a daily or weekly essential item for a segment of consumers. “Prices at one point were double what they were the year before and consumption declined maybe 15 percent. There was definitely a degree of inelasticity at work,” Billings says.

Right now though, consumers are increasingly focused on seasonal, often Thanksgiving-related commodities. “So lowering the shelf price of avocados – what’s going to happen? People are thinking about Thanksgiving and there is nothing to draw their attention to avocados,” he says, adding that on average, avocado pricing has come down but every day shelf prices have stayed relatively high. “The positive side of inelastic demand is that even if the price goes up, you continue to sell. But as price goes down, you’re not selling that much more.”

Lead time is also a factor here. The shipper notes associations such as Avocados from Mexico have been working to promote the reliability, promotability and overall stability of Mexican avocados. “That said, it’s going to be 30 or even 60 days out before we see any kind of real aggressive buy in on increased promotion, reduced shelf pricing, etc.,” he says.

Looking ahead, he does expect the commodity to gain traction. “As we get into November, especially past Thanksgiving, avocados represent a promotional opportunity that could be very profitable and it’s budget worthy for sure,” he says. “But if the change in velocity won’t offset the change in price, where’s the motivation? That’s what everyone’s grappling with right now.”

Australia: Exports increase by 268% in 2021/22, production up 56%

Australia has seen a massive spike in production over the past two months, according to the peak industry body. Avocados Australia recently released its annual Facts at a Glance report for the 2021/22 financial year, showing the nation produced just over 122,197 tonnes of avocados in, which was 56% more than the previous year. The gross value of production (GVP) for Australian avocados was estimated at $403 million. Queensland continues to produce the majority of Australian avocados, with 48% of production. Western Australia produced the next largest share at 39%. In Australia, avocados are produced all year round due to the range of climates and conditions in they country’s eight major avocado-growing regions, while domestic consumption in 2021/22 was 4.76 kg per person. In 2021/22 Australia exported 11,626 tonnes, representing an increase of 268% over the previous financial year, and 9.5% of the total 122,197 tonnes produced in Australia.

Meanwhile, the Australian avocado industry is also set to increase exports to Japan this year, with plans to increase its export volume year-on-year. The Australian avocado industry has invested in a marketing campaign scheduled to promote Australian avocados to Japanese shoppers. The campaign commenced in mid-September and will continue through to November. It will include social marketing and in-store retail promotions. According to an industry representative: “Japan is the largest avocado market in Asia, and it has lots of growth potential for us. Australian avocados were very well received in Japan last year and our exporters made substantial inroads into developing partnerships with Japanese importers. Despite a lighter crop in Western Australia this year we are expecting a three-fold increase in the quantity of avocados that will be exported to Japan. We expect next year to be even bigger, and this is all part of a long-term strategy to grow our exports and support the Australian avocado industry.”

The News in Charts is a collection of stories from the industry complemented by charts from Agronometrics to help better tell their story.

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