The Hass Horn: U.S. avocado supply outlook – second quarter 2014
By avocado expert Avi Crane
During this short period, the increase in avocado consumption has unmistakably demonstrated that the market for avocados in the USA was artificially retarded during the 80 years that the USDA banned the importation of avocados produced in Mexico.
With the stable increase of imported avocados, mainly from Mexico, domestic producers of Hass avocados have enjoyed record industry returns.
Today, the considerable industry funds available for on-going advertising and promotion efforts by the Hass Avocado Board and its allied promotion boards will guarantee to the retail and food service industries that consumer demand for avocados in their stores and restaurants will continue to increase in the coming years. Avocados from Mexico will spend over US$40 million during the next 12 months on consumption building efforts. Total avocado industry expenditures during this period will exceed US$50 million.
Today’s avocado market
As anticipated in the last Hass Horn, demand continues to exceed supply. Current FOB price levels on most sizes are at record levels for March. Avocado inventory levels are at a manageable level today- as they have for several months. The annual demand surge for the Super Bowl has brought the weekly demand for avocados to even higher levels in both high consumption markets and developing markets. Higher FOB prices have resulted in an increase in avocado retail POS prices. For the most part, demand has not been impacted in the traditional avocado markets. However, any additional increase in FOB pricing will surely result in decreased retail and food service demand.
U.S. Hass avocado industry size curve
Week 12 (2014)
Second quarter supply outlook
As the two charts below show, the supply of avocados during the second quarter of 2014 will be below demand. The market will be "missing" over 100 million pounds during these three months. The average weekly supply during this quarter will be 78% of demand at the current price levels. The outlook for the third quarter is even worse.
Second quarter 2014: demand vs. supply in pounds
The market share for Mexican avocados will decrease to 74% (down from 83%) in the second quarter of this year. A majority of the harvest will be in the Tancitaro municipality of Michoacán. The harvest of the 2013-14 avocado crop will be mostly finished by the end of this quarter. Avocado producers will allocate their remaining on-tree crop to the domestic and export markets based on return. Shipments to the U.S. and Canada will decrease each week, as they have done historically.
California avocado producers will see a higher market share during this quarter. However, due to the lower crop for 2014, the market share will not reach 2013 levels. At its recent board meeting, the California Avocado Commission (CAC) discussed a total crop of 280 million pounds - down from the pre-season estimate of 325 million pounds. The annual grower surveys will take place in the coming weeks. The author of this column forecasts that the avocado crop in California for 2014 will be 250 million pounds. The period of a potential cold weather event has passed. However, growers that rely on wells for irrigation face challenges this year (and maybe in the future). In addition, there will be issues with labor availability and, for some growers, cash flow demands may result in an early harvest. Finally, the avocado trees in Southern California are starting their full bloom. The bloom will be strong and the on-tree crop could be impacted during this period of leaf renewal should temperatures be above average.
This 2013-14 avocado crop in Chile is almost finished. The strong domestic demand and the challenges of shipping late-season/high oil avocados will result in very little exports to the USA during this period.
Last season, the Peruvian avocado industry proved that is has the capacity to export a quality avocado to the North American market. Shipments of avocados from Peru are projected to start in May with major volume at the end of the quarter and the third quarter of 2014. The industry is projecting 100 million pounds to the USA in 2014 - a 100% increase from last year. Peru has a strong avocado presence in Europe.
However, the above average crop in South Africa and the extending of the Israeli Hass harvest will impact pricing in the European markets. Based on the analysis of projected supply from Mexican and the USA, there is a need for 140 million pounds of Peruvian Hass from May to September this year. Competitive pricing in the USA market vs. Europe will determine the total volume of Peruvian Hass that will arrive in the USA in 2014.
Second quarter 2014/week 14-26 Hass volume projection by source/pounds
Avi Crane is business development manager at Green Earth Produce and can be reached at firstname.lastname@example.org.
Related stories: The Hass Horn: the impacts of Mexican weather on U.S. avocado supply