Retail promotions dip with high-flying avocado market but relief coming

The sky-high avocado market is putting stress on retail promotions of the fruit for the Cinco de Mayo celebrations and beyond but increasing volume from Peru in June and later from Mexico may help supply better meet demand, industry sources report.

The USDA reported fob prices for size-48 Mexican avocados in south Texas at $72.85-$78.25 in late April, up from $34.35-$38.25 per carton a year ago.

Read related: How high can avocado prices go? And then, how low?

Supplies of Mexican fruits shipped to the U.S. the week of April 24-30 were at half the level of the same time a year ago, with 649 40,000-pound truckloads of Mexican avocados crossing the border the week of April 24-30, down 52% compared with 1,350 truckloads the same week last year.

Mexico accounted for about two-thirds of the total avocado supply in the U.S. in late April, compared with about 25% coming from California.

Read related: California avocado crop size, prices up this season

The average fob price for all sizes and grades of Californian and Mexican fruit was reported by the USDA at $61.58 per carton on April 30, up 66% compared with $37.15 per carton the same time a year ago.

“The avocado market is currently strong due to several factors, especially the industry-reported reduced crop this year,” said Hector Soltero, senior director of sales planning for Oxnard, Calif.-based Mission Produce. In California, he said the trees are in their transition, or "off" year, meaning they are expected to produce less volume overall. 

“Additionally, Mexico’s lack of rain in early 2021 has affected the country’s crop production,” Soltero said. “However, the transition from the normal crop to the Loca crop in Mexico is expected between June and July to support the current need for supply in the industry.” 

Over the next few months, Soltero said the industry expects increased supply from Peru to the U.S., which is anticipated to relieve current supply gaps. Mission is preparing to begin harvest in Peru, with the first shipments planned to begin later this May.

“The industry anticipates fruit from Peru to be high in quality, great on sizing and about 8%-10% higher in volume compared to last year,” Soltero said. 

Along with strong demand and lighter supplies, the Easter Holiday week in mid-April, leading up to Cinco de Mayo harvesting pulls, placed the market in a light supply situation, said Peter Shore, director of business development and marketing for Santa Paula, Calif.-based Calavo Growers.

"We expect good demand with summer entertaining, graduations and holidays," Shore said. "Supplies are expected to improve in July when Mexico transitions to summer crop and Peruvian supplies enter the market.  California will be harvesting peak supplies during May and June with good volumes in July and August."

Shore said market conditions are expected to change in mid-to-late summer with improved supplies.

Jeff Morris, president of Fresh Innovations, LLC/Yo Quiero! Brands, Rome, Texas, said lighter volume from Mexico might be linked to a freeze in February 2021, which affected bloom and caused a small percentage of the future crop to be lost. 

"While the freeze was minor in nature, this did add to the impact of the overall fruit supply," Morris said. "Also, we are in an alternating season where trees were stressed due to yielding a lot of fruit in 2020. You couple that with higher costs across the supply chain (fuel, labor, herbicides, et cetera) and ongoing global demand, we are experiencing unprecedented historically high prices."

As a processor, Fresh Innovations depends on smaller, lower-grade fruit to process, Morris said. "However, with the lower-yielding crop, we are seeing a good amount of this fruit being sold for export at a premium."

Looking ahead, Morris said the company anticipates relief in supply and cost in August as the availability of the new crop of Mexican fruit comes into play.
"Projections are showing an abundance of fruit at much lower costs," Morris said.

"We will need to wait and see where costs actually end up given the current high supply chain costs we have been experiencing over the last year."

Overall supplies of avocados have been tight relative to the continuing growth in consumer demand for avocados, said Jan DdeLyser, vice president of marketing for the California Avocado Commission. Growers and the entire supply chain have seen higher input costs for water, labor and transportation.

“The avocado industry is fortunate that most consumers have continued to purchase the fruit, even at higher prices,” DeLyser said. “With California avocados, consumers in the West consistently say they are willing to pay more for avocados grown in California.”

Responding to strong market conditions and available supply, DeLyser said California avocado growers harvested more of their crop so far this year compared to last year. Peak availability weeks started in April, she said. 

“We expect peak supply to continue through July this season,” DeLyser said. “Some varieties and regions typically have supplies through the end of summer/early fall, so while some groves may finish earlier than is typical, we still expect some volume in the late season.”

While the latest California avocado crop forecast of 306 million pounds still holds, DeLyser said the weekly volumes are expected to be a little bit lighter than originally estimated through the remainder of the season. 

“Though it is too early to know, it is possible the end of summer period might have tight supplies leading into the fall when demand usually dips,” she said.

In an early May report about the avocado outlook, Rabobank analysts concluded that, for the second half of 2022, availability in the U.S. is likely to improve, given enhanced exports from the Mexican state of Michoacan and new exports from Jalisco, potentially bringing prices down to more average levels.

Read related: Henry Avocado expects long-term growth

Retail reaction

Retail avocado promotions in advance of Cinco de Mayo have fallen markedly compared with a year ago, and advertised promoted prices have jumped. 

The USDA reports the average retail promoted price for avocados on April 29 was 87 cents each, 34% higher than the average promoted price of 65 cents each a year ago. The number of stores promoting avocados on April 30, according to the USDA, was 23,238 stores, down 33% compared with 34,664 stores at the same time a year ago.

The retail insight platform Datasembly reports that average prices for avocados in Walmart retail locations rose from 84 cents each to $1.08 each on April 24.

Retailers in Canada have raised prices but don’t seem to be changing the amount of space devoted to avocados, said retail consultant Mike Mauti, managing partner of Toronto-based Execulytics Consulting.

Instead of typical pricing of three avocados for $5, retailers are pricing avocados closer to $2.50 each, he said.

Some retailers are also marketing “ugly” avocado fruit with blemishes or scars, he said. 

Retailers who prefer a particular size of avocados, such as 48- or 40-count, are unlikely to switch to much smaller fruit to get a lower price point.

“You probably don’t want to downsize too much from that, but rather make it up in price, and that looks like that’s what they’re doing,” he said.

Mauti said that elevated prices for other produce items probably make the higher avocado prices less notable.

“Avocados have become a staple for sure, and since everything is really up in the market, you get to a point when it doesn’t help to buy one thing over another just because everything is expensive.”