Avocado prices come down to earth; ad pricing back on tap

After months and months of stratospheric FOB pricing on avocados, big volumes were available in the U.S. market in July leading to much lower prices with promotional opportunities expected to stretch far into the future.

For most of 2022, growers and shippers alike have been reporting record prices, at least as far as a sustained market is concerned. For months on end, most of the fruit was returning FOB prices above $50 with prices skying into the $60s and $70s and beyond for the most popular sizes. Organic avocados were in the stratosphere, occasionally topping $100 a carton in wholesale markets. It was a simple case of supply and demand as Mexico’s 2021-22 crop packed out about 15 percent less than expectations, California had a below average 2022 crop and Peru didn’t come into the market with good volume until late June with its peak week coming at the end of July.

In fact, it was the combination of Peru’s shipments ramping up in July and Mexico’s heavy shipments of summer fruit that overloaded the supply side of the equation and resulted in a precipitous drop in the market price on almost all fruit.

Rob Wedin, executive vice president of sales for Calavo Growers Inc., based in Santa Paula, CA, said FOB prices started dropping as much as $8 a week beginning in early July and continued throughout the month. By the end of the month, the best fruit coming out of Mexico in the most popular sizes (40s and 48s) still had a pretty good FOB market in the low $40s but it dropped off quickly after that with most fruit trying to hang on in the mid-$30s. The market on Peruvian fruit was mostly in the $28 to $32 range. California fruit was dwindling fast and so it was still fetching a $50 bill for its most popular fruit, but it produced less than 5 million pounds during the last week of July with no week in August expecting to see even 4 million pounds from Golden State growers.

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

Reporting that Mexico’s volume for the 2022-23 season, which began on July 1, could be up as much as 25 percent over the next 12 months, Wedin predicted that the avocado FOB price would allow for promotional pricing well into the spring of 2023, if that volume forecast is accurate.

Hector Soltero, senior director of sales planning at Mission Produce, based in Oxnard, CA, also commented on the changing avocado supply/demand curve and potential promotions moving forward.

“The strongest promotion period in the fall for avocados is typically the start of football season in September,” he said. “During the 2021-22 season, football fans spent nearly $19 on avocados from September to February, and 57 percent of football fans purchased avocados. Because avocado prices typically decline during September and August, the industry can anticipate promotion opportunities, especially on pricing that hasn’t been seen at retail in a long time.”

Soltero agreed that the supply situation is changing with good volumes of fruit expected to be in the U.S. market over the next several months. He noted that Mexico will have solid supplies as it transitions to its main crop in late summer/early fall and Colombia will also be shipping its principal crop into the U.S. market beginning in mid-September. He added that Peruvian volume is expected to decline through the month of August and finish up in September.

Patrick Lucy, president of Del Rey Avocado Company, Fallbrook, CA, echoed the comments of the others when he reported in early August that the FOB price had come down significantly in July allowing for promotional opportunities. By Labor Day (September 5), he expects retail pricing to reflect the falling FOB price and robust promotional activity will follow. He said there should be plenty of ad support throughout the fall and winter on both bulk avocados and bagged fruit. Lucy said the addition of the state of Jalisco in Mexico as an approved source of avocados for shipment into the United States will offer even more opportunities for promotion.

Gahl Crane, sales director for Eco Farms Avocados, based in Temecula, CA, also expects many retail promotional opportunities moving forward. In fact, he said they have to be an important part of the equation to move Mexico’s increased volume. He reported that the number of U.S. retail stores promoting avocados in July was between 4,500 and 6,000 on a weekly basis. While that number was above what the industry experienced throughout the spring and early summer, Crane said more promotion is needed in the fall. He calculates that there needs to be 7,000 to 8,000 stores with avocados on ad each week to move the weekly volume, which is expected to top 50 million pounds per week on average throughout the last four months of the year.

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

Access the original article with this (Link)