The Hass-Horn: old challenges with a new economy, new competition
By avocado expert Avi Crane
The 2011-12 California avocado harvest ‘officially’ started in mid-January 2012, when the California Department of Food and Agriculture released all sizes of Hass for harvest without the requirement for maturity testing*. However, until this past week, the harvest of California Hass was not enough to supply the demand in the Southern California area.
California Hass reached 40% market share last week only due to the Holy Week Holiday. Mexico remains the majority supplier of Hass in the North American market as we head toward the high consumption Cinco de Mayo promotions. The market remains strong as supply is well below demand; possibly below 80% and the arrival of serious volumes of Peruvian Hass is yet to materialize in the market.
The foremost challenges facing avocado growers in California and most other producers in the state are:
- Competition for water with urban users
- Competition from imported avocados
- Tight labor market for harvesting services
- Expanding government regulatory demands on production and labor
- Urban expansion
- Economy-capital constraints
The writer of this column has been involved with the challenges California avocado growers - and other growers in southern California - have faced for three decades. Despite a few successes, the main trend is less water for agriculture and at a higher price. With the lack of political clout, this trend will only accelerate as the competition for the limited water supply in the state continues. Based on information I have from the major avocado producing industries around the globe, only in California do irrigation costs exceed 80% of all avocado production.
This is the greatest challenge facing the Californian avocado industry and it will determine its future size and viability. This writer has been to avocado groves both small and large where the trees suffer from lack of sustainable irrigation regimes. From research and experience, I have learned that if the Hass avocado is subjected to water stress during the 15-day period after fruit set, the fruit is damaged and will, most likely, not size beyond 180 gm. The situation is manifested even more when there is a heavy fruit set.
Until Agricom shipped its first loads of avocados to the U.S.A. in 1986, California avocado growers had an exclusive market from 1914 when avocados from Mexico were banned (avocados from Cuba were allowed in until the 50s but the volume was not large). In the early 90s, the United States Department of Agriculture (USDA) allowed access for Mexican Hass into the state of Alaska.
Starting in 1996, the USDA began permitting access for Mexican Hass into specific states for a limited period. Over the next decade, the market window and destinations expanded. In 2007, all limitations on the sales of Mexican Hass were lifted by the USDA; however, producers and exporters were still required to follow a strict protocol.
During this period, California avocado growers achieved record returns for their crops. Prices for California avocados have continued do to be strong during the past five years. Much of the credit for the strength of the avocado market can be attributed to the work of the grower funded California Avocado Commission - and its president from 1987 to 2010, Mark Affleck - which executed aggressive and innovative marketing programs while, at the same time worked closely with the USDA to assure that the importation of Mexican Hass, and later Peruvian Hass did not pose a phytosanitary threat to avocado trees in California and Florida.
The end result was that the gradual expansion of market access for Hass from Mexico, allowed markets with historically low avocado consumption, due to lack of year round supply, to expand due to efforts of the Mexican avocado industry in promoting Hass.
Demand for avocados in the U.S. surged from 16 million cartons in 1986 to 56 million in 2012. The end result has been year round supply of Hass for North American consumers and profitable returns for avocado producers with reasonable production cost. Therefore, this author does not consider imports as a threat to the California avocado industry. The growers have seen record prices and the marketers have enjoyed record profits from the packing and sales of Mexican, Chilean and Peruvian avocados.
Harvest costs and availability
Producers of avocados, citrus, strawberries and other crops in southern California have faced a tight labor market for several years, despite the recession. While in the past, the daily harvest was capped by the number of bins in circulation, today the critical factor is harvest labor. Some producers, with below par yield and difficult terrain, have harvest costs equivalent to US$3 per carton. Labor issues will limit the daily harvest levels for California avocados- even in a high yield season.
Government and urban expansion
While the USDA has subsidized row crops producers for generations, there is little government financial assistance to Californian avocado growers. However, county, state and federal governmental agencies have continued to generate regulations that increase production costs for growers, and have been very successful in building a bureaucracy to enforce these regulations. After water and harvest costs, regulatory compliance is the largest production cost for southern California producers.
The recession has limited the urban expansion in southern California. However, avocado groves are mostly located near urban areas. While this threat may currently be dormant, it will continue to be a threat in the future, especially with groves with marginal or no profitability.
Growers and packing houses, like the rest of the small business sector, are having difficulty in obtaining loans for operating purposes or expansion. The demand by California avocado producers for pre-season advances (loans), fast payment and fixed prices has become the norm. The packing house’s line of credit it stretched between its operating capital requirements, the capital needed to execute its import program and the needs to source California avocados.
*Regulated by the State Avocado Inspection Service, California avocado packing houses have ongoing maturity testing of avocados by State inspectors until the State has determined that at least 80% of the on-tree crop of a size has reached the minimum dry weight (in the past oil) as determined by empirical research conducted by the industry. The Hass Avocado Board is currently discussing a Federal regulation to test imported avocados for maturity. (The author of The Hass Horn served as Chairman of the California State Avocado Inspection Committee from 1994-1996).
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