U.S. avocado market remains strong following price spike, but likely to weaken in May

May 03 , 2019

With California's avocado season gearing up to the usual Cinco de Mayo consumption surge, category prices have soared due to a huge cut in season volumes, but according to a representative of a major supplier, they will likely weaken over the coming weeks.

Patrick Lucy, vice president of Del Rey Avocado Co., explains: "Last year, I believe the volume was around 350 million pounds and this year it's probably going to be around 175 - almost half of last year's."

Correspondingly, there has been a huge spike in prices. Lucy says: "The market had been a little bit suppressed, probably since the fall, but about five weeks ago, the prices started to shoot up."

He attributes this to the shortage of avocados, commenting: "We just couldn't keep up with the demand and it shot prices up about US$20...That was over about a two-week time frame and those prices have continued to hang in there."

Elaborating on prices, Lucy comments: "It went from US$30 to low $30s [FOB] to low to mid $50s in about two to three weeks."

According to Lucy, a contributing factor to this year's small harvest was growing conditions: "It started off a little bit slower this year, mostly due to weather because of the amount of rain California was getting.

"Farmers didn't really start picking until some time in the middle of March and the real volume started around the second week of April... Volumes should be steady at these levels, probably all the way into the end of July and then will fall off very fast."

He notes that the forecasted length of this year's season also contrasts with past years', in which the state's harvest extended into August and September.

Another variable that Lucy believes impacted the market was the unusual timing of one of Mexico's traditional festivals - "There was Holy Week so late this year in April, so close to Cinco de Mayo, so you had Mexico kind of shut down or only do a half a week's harvest kind of right in the middle of a Cinco de Mayo pull."

He views the atypical timing as having been favorable for the market, though, emphasizing that it "helped keep the market strong".

Yet, while supplies have hit quite a low compared to 2018's, Lucy emphasizes: "Fruit quality is excellent right now," and the avocados are currently a "pretty good" size.

He looks to how this year's small volumes could be beneficial to next year's harvest as well - "With it being a small crop, most growers are going to be able to go in once and take everything off the tree, instead of doing a couple picks, so they're thinking they'll be able to get everything off and get the trees nice and strong to set up a good crop for next year."

Regardless of its small domestic volume, the California avocado industry annually looks to imports from Mexico and Peru to keep consumers satisfied.

This year, Lucy explains: "We're expecting a pretty steady volume from Mexico for the next five weeks through the month of May. California will be coming with our volume that we can supply this year and you'll start to see Peruvian coming in mid-May to the end of May to help supplement the back-end of Mexico volume going down, so there should be stable supplies all the way through July and August."

As a result, he expects there will be a good volume of avocados available for the summer months.

Regarding the question of future market conditions, Lucy believes that, with the amount of fruit that will be coming in from both domestic sources and from abroad, "the prices that are around probably aren't sustainable to move the needed volume".

He sees the market as being positioned to gradually change over the course of May: "Most likely post Cinco de Mayo, there will be a little bit of a price correction when demand backs off a little bit...Probably around mid-May, you'll see a little bit of a price relief."

 

 

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