by Tim Linden, The Produce News
After a very difficult marketing situation during the first part of the season, dwindling supplies from Mexico have quickly created very strong demand for California avocados and the market continues to gain strength.
Rob Wedin, vice president of fresh sales and marketing for Calavo Growers Inc. in Santa Paula, CA, told The Produce News May 25 that with Mexico’s production declining significantly in May, even better-than-expected production from California has resulted in upward movement on the price. In much of April, even the largest and most popular avocado SKUs were selling for only about $25 per carton. By late May, those same SKUs were in the mid-$40s per-box range prior to Memorial Day, and Wedin said the expectation is that the price will climb higher in June.
Robb Bertels, vice president of marketing at Mission Produce Inc. in Oxnard, CA, said the same report came from the production meeting his company held the previous day. With regard to the market price, he said, “We don’t believe we have reached the peak. The marketplace volatility created by declining supplies from Mexico has upset the whole system. Prices are being pushed up and we think that will continue.”
Gary Clevenger, chief operating officer at Freska Produce International LLC in Oxnard, CA, noted the same supply issue when interviewed on May 20. He said the California field price had shot up in mid-May as a result of demand. While a lot of California fruit is pre-committed to various packers by the thousands of growers who produce it, the daily or weekly field price is quite volatile and very reflective of the demand situation. In April, filed prices were very low but were seemingly rising daily come late May.
Bertels said the U.S. demand for avocados has proven to be around 50 million pounds per week. Mexican producers had a few very large weeks in the first couple of months in the year, when their shipments alone topped 50 million pounds. That depressed the market as California was starting to ship.
But looking forward, the Mission Produce executive said it is hard to see how the 50 million pound number will be reached in late June and early July.
“That’s when it looks like there are going to be some gaps,” he said.
Wedin noted that California growers do have great marketing opportunities right now and they are taking advantage of them. In late May, those growers were sending about 18 million pounds per week to the market. Mexico was around 30 million pounds and expected to drop to closer to 25 million pounds per week for much of June. He expects California production to peak at around 19 million to 20 million pounds and stay in that arena through maybe mid-June.
In July, Calavo has estimated that California’s production will drop into the 15 million-pounds-per-week level and August will see a further decline.
Wedin noted that lack of rain in Mexico has delayed the new crop from Michoacan, with most packers not expecting to have new-season fruit until after July 1. That means the 50 million-pound-per-week threshold could be very difficult to reach through at least early July. Consequently, the demand-exceeds-supply situation could continue deep into the summer, which is when demand is typically at a peak.
By around May 20, California had shipped close to 40 percent of its estimated 2016 volume of 390 million pounds. Another 100 million pounds should be shipped by the end of June, leaving a very manageable volume for the final few months of the season.
Of course, each of the marketers noted that the situation can change quickly. If prices continue to strengthen, growers from all points of origin will try to take advantage and get some fruit in the box and into the U.S. marketplace.
Peru avocado exporters are largely relying on Europe this year because of strong markets there, but they might increase their shipments to the United States if warranted.
In any event, it appears as if a very significant volume of the 2016 California crop will be shipped under strong marketing conditions — a situation that did not seem possible just six weeks ago.
Source: The Produce News