Think avocado prices are high? Blame demand...and an international crime ring! ( MGN )

(Bloomberg) -- Chile’s location far from the demand centers and trafficking routes had protected the country from a continent-wide crime wave -- until now. This year, demand from European millennials and rich Chinese has pushed the price of avocados so high, even Chilean gangs are getting in on the act.

Theft of the so-called green gold has become big business.

The crime has reached such a level that Crescente Molina, who produced 100,000 kilograms (220,000 pounds) of avocados last year in central Chile, has had to take drastic action.

"We already pulled out avocado trees in the areas most vulnerable to theft because this is no longer profitable," even as prices soar, Molina said by phone. "We have replaced them with citrus trees, which are not as appetizing to thieves."

Avocados are the staple of every Chilean table for breakfast, lunch-time salads and afternoon snacks. Now soaring demand, the effects of a long-term drought in Chile and heavy rains in neighboring Peru have pushed prices of the fruit to record highs. Trips to the gym or work can be spiced up with furtive deals on the informal avocado market, with people selling them from the back of their cars. A quick search on Yapo.cl, Chile’s Ebay, turns up more than a 100 sellers.

Prices leaped 9 percent in Chile last month and 23 percent from the beginning of the year, the National Statistics Institute reported last week.

While thefts have always existed, it has gone from people breaking into fields at night to organized armed groups assaulting producers in broad daylight, said Francisco Contardo, general manager of Chile’s avocado producers’ association. During the harvest season, from August to February this year, 10 bands were dismantled and 50 people were charged with theft.

Now Chile has copied the avocado police of Mexico and California’s “guac cops,” so-called because of guacamole, appointing its first avocado-focused prosecutor to address rising theft.

Creative Thinking

One of Chile’s most popular sandwiches is the Italian, a hot dog seasoned with large amounts of mayonnaise, tomato and avocado -- the colors of the Italian flag. Sushi wrapped in avocado is as common as fast food.

"We grew up eating avocado on toast for breakfast and on salads for lunch," Contardo said. Now demand is getting even stronger. "Chileans know that, besides from being really tasty, it is a healthy product, so they are looking to add it to all of their meals."

Chileans are finding creative ways to take advantage of soaring prices. A campaign by retail giant Ripley Corp SA last month offered to accept avocados as payment for some of its products. One client, Camilo Briceno, took them up on their offer, paying for a $475 mobile phone with 58 kilos of avocados.

Briceno, who sells avocados on social media, says business is booming. He is selling up to 500 kilos of avocados a day to supermarkets and personal home-deliveries.

Triple Whammy

Avocado prices have spiked recently because of last year’s heavy rains in Peru. As a result, shipments of Peruvian avocados that satisfied Chile’s demand during winter have faltered this year.

That came after a severe drought in 2014 and 2015 forced producers in regions such as Petorca to the north of Santiago to rip up as much as 40 percent of their orchards, according to the fruit exporters association. Total production in Chile reached 225,000 metric tons last season, 10 percent higher than the previous, but still lower than the 2009-2010 peak of 293,000 tons.

Demand from abroad is also soaring. Back in 2015, Chile exported 48 percent of its harvest. This year it was 71 percent.

“The avocado season in Chile has ended," Contardo said. “We’re going through a period of great scarcity."

Price Prospects

Prices should dip when Chile’s harvest starts in August, even if most are sold abroad. Long-term though, prices are set to gain.

While Europe is still Chile’s largest exporting market, with almost half of the country’s production shipped there during the last season, producers are turning their eyes to China. About 10 percent of Chilean avocado exports were shipped there in the last season after local producers launched campaigns to present the product in six different cities.

The producers’ association estimates that Chinese demand will be about 60,000 tons in coming years. About a third of that could come from Chile, according to a publication by the World Avocado Association.

"Avocados have gone from being an ingredient in a salad to being seen as super-food thanks to its nutritional characteristics," Contardo said. "With consumers growing more concerned about what they eat, avocado is a premium product has become a staple in any household."

 

Copyright 2018, Bloomberg

 

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