The Hass-Horn: avocado market challenges ahead this U.S. summer

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The Hass-Horn: avocado market challenges ahead this U.S. summer

By avocado expert Avi Crane

The summer months have been great promotional periods for the Hass avocados for several decades now. Availability was an issue when the U.S., the only supplier of Hass in the market, had a short crop. Since 2006, Mexican Hass has had year round access to Texas and all other states besides California and Hawaii.

In February 2007, after a 93-year-old prohibition was lifted, consumers in the State of California were legally allowed to consume Mexican avocados.  The summer of 2012 will see the most avocados available to retail, food service and wholesale customers ever. Despite this increase, this writer anticipates that supply will barely reach the monthly demand of 125 million lbs. However, due to the size curve of the Hass crop, U.S. packers are expected to push retailers to promote 60s at a unit price of around US$0.59 and 70s at a unit price of  around US$0.49.

Peru eyes up U.S.

Hass from the U.S. (California) and Mexico (Michoacán) will be the primary sources during the summer period. The long anticipated arrival of Hass from Peru has begun, but with volume levels and sizes that are not conducive to retail promotions. Until now, Peruvian Hass exports have been directed almost exclusively to the European market. That market is currently oversupplied with avocados and there are reports of Peruvian Hass importers accruing substantial losses. Industry sources project that 60 million lbs of Peruvian Hass will be imported into the U.S. through September.

For the following reasons, this writer does ‘not’ believe that the Peruvian Hass imports will reach this level in 2012;  1) The California market (25% of all Hass consumption in the U.S.) will be dominated by U.S. produced Hass during the Peruvian Hass export period; 2) The main retail Hass demand is for sizes 48 and smaller. The Peruvian Hass is projected to be 50% 40s and larger and; 3) Despite a last-minute promotional program, Peruvian Hass will likely have to be discounted in order to get buyers to switch from U.S. and Mexican Hass.  Retailers received vast incentives from the various trade promotion associates to carry their source (U.S. Hass -  CAC; Mexico - MHAIA and APEAM). For example, the CAC budget FY11-12 is in excess of US$14 million.

Californian yields up

Due to the uncertainly of the Peruvian avocado deal this season, any impact on the U.S. market will have to wait until the next month. Meantime, California-based avocado marketing companies are focused on the packing and sales of growers in that state. The current Hass crop in California is projected to be 150% of 2011. The mild weather the past eight weeks and the low return for small fruit have allowed growers to hold off harvest.

Despite this, the 14 avocado packing houses in California packed 375 truckloads last week - including 250 loads of 60s and smaller. This writer projects that the current crop is larger than industry estimates.  Regardless, any normal or above normal temperatures in the U.S. Hass growing areas in July-August will result in a forced harvest that will be significantly above last week’s 375 trucks and will strain the capacity of the packing houses (assuming a sufficient labor force is available for harvest).

In Mexico, the harvest of the remaining old crop in July in Michoacán is projected to be larger than 2011, as is the “Flora Loca” crop that will be harvested from the end of July through mid-September.  At that time, the first arrivals of the 2012-13 Chilean Hass crop are expected. The window for the Peruvian Hass in 2012 is tentative at this time.

Size matters

The overall curve available in the market is in sync with demand by size. However, the U.S. (California) Hass harvest is 67% 60s and smaller, while the Mexican (Michoacán) Hass harvest is 69% 48s and larger. There is weakness on all sizes at this time. The difficulty in securing transportation and the cost of transportation is not helping the situation. This writer expects demand by size/price to quickly stabilize resulting in a two-tiered market of 48s and larger/ 60s and smaller. The volume of Peruvian Hass entering the market will have an impact on the 48 and larger market.

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