Packer Insight - Shippers running out of Mexican avocados
( File photo )

See updated news: Avocado harvest resumes Mexico.

If a grower’s strike in the Mexican state of Michoacan doesn’t end soon, Mexican avocados will all but disappear from store shelves and menus by Thanksgiving, according to importers.

Since Oct. 29, packinghouses have been shut down in Michoacan, including the two Mission Produce facilities and a Calavo Growers plant.

When harvesters will be allowed to return to the groves —a group of growers demanding higher prices from packers have blocked roads accessing those ranches — is unknown, importers say. But if the situation continues much longer, the industry won’t be able to shield their customers, and eventually consumers, from the aftermath.

“I would say it’s fairly easy math as the system runs out of fruit,” Jim Donovan, senior vice president of global sourcing for Mission Produce, Oxnard, Calif., said on Nov. 8.

The week of Nov. 19 — Thanksgiving is Nov. 22 — will most likely be when the U.S. supply of Mexican avocados is gone, if harvests don’t resume, he said.

The U.S. Department of Agriculture on Nov. 8 reported supplies of Mexican avocados were too light to issue f.o.b.s. At the Los Angeles terminal market Nov. 8, prices for two-layer cartons of Mexican avocados were $47-48 for 36s and $45-46 for 40s — for fruit that the USDA described as being of lower quality. Prices listed for avocados that did not have that comment were mostly $58-59 for 36s and $53-54 for 40s. Offerings were described as very light.

Since the blockades went up, U.S. importers have taken steps to stretch supplies. Between what’s in transit, in ripening facilities and distribution centers across the U.S., major importers had about a two-week supply, Donovan said. Cancelling orders and focusing on the most loyal customers, and picking up some supply from Chile can also keep the market supplied, even if at a substantial deficit.

“We are definitely running out of inventory,” Rob Wedin, vice president of sales and marketing for Calavo Growers Inc., Santa Paula, Calif., said Nov. 8, estimating that by Nov. 13 will have shipped all of its stockpile of Mexican avocados.

And without a Chilean program, Calavo Growers won’t be supplementing its supply with other imports.

Chilean exporters can only go so far to remedy the lack of avocados. According to the U.S. Department of Agriculture, Mexico exported about 32 times the volume that Chile sent to the U.S. In recent years as Mexico became a bigger supplier to the U.S., Chile has picked up exports to other markets, including Europe.

Even so, there are some reports that importers are flying Chilean avocados to the U.S. to meet growing demand.

The situation is extreme enough that Calavo invoked force majeure for the first time, a legal measure allowing it to break agreed-upon contracted prices as supplies dwindle and markets to rise.

 

When imports resume

Wedin said when harvests return, there will still be a week-long ramp-up before supplies could return to normal, even if companies skip the ripening process, thereby saving 3-4 days. That’s Calavo’s plan, he said, and other steps include moving all imports to cartons for bulk displays, avoiding delays caused by bagging and other handling.

Donovan said the damage to the market remains to be seen, but when similar strikes happened in 2016, Mission Produce had to regain the trust of some foodservice operators and retailers. Buyers require stability and reliability, he said, and rebuilding a program after a supply gap is harder to do when it happens more than once.

“Crops have to come off the trees eventually,” Donovan said, “and when they do, it’s difficult to get the customers excited about pushing them with retail ads or getting them onto menus.”

The USDA, its Mexican counterpart SAGARPA, Mexican avocado exporter group APEAM and other organizations have been meeting with growers to remedy the situation. According to Bloomberg, growers are seeking a minimum price range of 17 to 20 pesos for a kilo, which is 84-99 cents.

According to a report that originated in Mexican media, growers say the low prices can be traced to illegal avocados trucked into Michoacan, packed and then exported, undercutting legal avocados grown in Michoacan. That is the only state allowed to export to the U.S.

Wedin and Donovan said there are strict protocols for fruit headed to export markets. While they said they couldn’t rule out counterfeiting is happening at all, it cannot be happening at the levels that would affect the market.

“We do not believe fruit is coming in from other states,” Donovan said. “This program is highly regulated with SAGARPA and USDA oversight, with work plans … There’s a lot of checks and balances.”

 
Comments
Submitted by Adam Smith on Fri, 11/09/2018 - 05:05

I seems like the easy market solution to the problem is to pay the market price. Then there would be no lost markets or expensive remedies. Is it just that the distributors are committed on principle to making the producers unprofitable?

Submitted by Sam gitlin on Fri, 11/09/2018 - 07:00

Ever hear of supply/demand?

Submitted by Tom on Fri, 11/09/2018 - 07:25

As soon as the cartels start backing up with cocain and heroin the trucks will start rolling again,soon

Submitted by Jimmy on Tue, 11/13/2018 - 13:05

Nice! I am guessing that you wouldn't attach that comment if it was American farmers holding out for fair treatment. It is still amazing that people don't want Mexican agriculture workers to come here, but also don't want them to earn fair compensation in their own country.

In reply to by Tom (not verified)

Submitted by GUTIERREZ JAVIER on Fri, 11/09/2018 - 07:25

The week of Oct. 19 — Thanksgiving is Oct. 22

I guess thanksgiving came early this year.

Submitted by Chris Koger on Fri, 11/09/2018 - 09:17

The best part of early Thanksgiving is carving the Jack-O-Turkeys.

I had October on the brain, apparently. Thanks for pointing that out.

Chris Koger

In reply to by GUTIERREZ JAVIER (not verified)

Submitted by S Compton on Fri, 11/09/2018 - 17:09

Maybe the avocados will come from the US. Can you freeze guacamole?

Submitted by Chris Koger on Fri, 11/09/2018 - 18:07

You can freeze guacamole. 

Also, the California avocado season is over until January, with light supplies .

 

In reply to by S Compton (not verified)

Submitted by Dan Allen on Fri, 11/09/2018 - 20:17

84 cents per pound comes out to 8.76 per case, so given the average fobs, what they are asking is by no means unreasonable.

On the flip side, they need to understand that every commodity in produce is going to have seasonal glut periods where markets are depressed. Some growers may leave product in the field if prices are below labor costs, but avocados are nowhere near that point. And unless you are at that point, stopping when supply is great is cutting off your nose to spite your face. There are other ways to raise returns... I mean they could negotiate contract price floors, without stopping shipments right?

Of course if Cartels are involved it could be more complicated...

Submitted by Vincent Mark on Fri, 11/09/2018 - 22:00

The price per kilo doesn’t account for size or grade. When you buy per kilo avocados you get one kilo of everything off the tree which includes avocados that are too large, too scarred, low quality etc... besides that it’s two dollars per kilo which is approximately 11.3 per 25 lb lug so if you simply packed avocados without sorting it would be a base price of 23 dollars per box without packing/ customs brokerage/ USDA inspections/ senasaca inspections/ freight. What the growers are asking for year round translates to approximately 50 fob or more depending on the size proportions in the huerta

In reply to by Dan Allen (not verified)

Submitted by Dan Allen on Sat, 11/10/2018 - 10:16

Understood. Thanks for the insight. It’s difficult for us to all see the grower/packer side of things. I suppose it is somewhat ridiculous to set a floor price for unsorted/un-culled product.

In reply to by Vincent Mark (not verified)

Submitted by Steve Sprinkel on Sat, 11/10/2018 - 12:50

Buyer's job is to get everything for less and "fairness" has its limits.
Producer must fight for their pennies! Strike is so good,
The raw ungraded argument is sort of cogent but the percentage of saleable fruit coming off an avocado ranch is usually pretty high and I have picked, hauled, packed and sold it all, I say as a former Carpinteria grower. And when supplies are light grading is relaxed, I say as a grocery store owner and hands on produce department hawk.
The reason why I like strike is I am still selling my Romaine lettuce for the same price as 20 years ago. My Romaine I say because I grew it. We should all strike. Get those prices up there somehow. Cooperate and set sustainable price standards.
Buyers job is to squeeze. Sellers job is to wriggle free.
Call me a commie rat, go ahead. We all know people set prices to squeeze. Both seller and buyer squeeze.

Submitted by Adam Smith on Sat, 11/10/2018 - 19:20

Thanks for the informed perspectives in the comments. Good discussions.
Enjoy your Jack-o-turkeys!

Submitted by EdwardGarciaLabo on Sun, 11/11/2018 - 15:01

My brother in law has been a part of this. His family had a large business in Michoacan and because of government(cartel) influence has had to practivally shut down the avocado farm, they like many farmers and families who rely on imports and Tourism are impacted to Life altering decisions. Thank you, US consumers, for not only being a strong consumer of avocado but also the one who consumes 30% of all drugs ON THE PLANET. US drug addiction+Geopolitical turmoil=Very sad story