“Within a month, Mexico will be the only game in town”

As growing regions wind down for their avocado seasons, the focus will turn to sizing and pricing of avocados.

Domestically, California is slowly wrapping up its avocado production. “They’re about 95-96 percent done with the estimate,” says Keith Slattery of Stonehill Produce Inc. in Capistrano Beach, CA. “We’ve got about three to four weeks left.” He notes that this week, projections are for 6-7 million lbs. of fruit to move and then next week, 5 million and continuous weekly tapering down from there.

Offshore, Peru is in the same position. “There are about three to four weeks left there as well. So within a month, Mexico will be the only game in town,” says Slattery.

Smaller fruit size
That said, it’s a different year for Mexico than last season. “The fruit on the trees are a lot smaller this year for a few reasons,” says Slattery. “Last year’s crop was really heavy. The weather in Mexico has been a huge factor as well. It is the rainy season but they need the sunshine for the fruit to grow and they haven’t had the heat yet.”

In turn, the sizing of avocados from Mexico looks different right now. “Currently it’s close to 50 percent of 70s and 84s, so small fruit,” says Slattery. “The industry is going to be forced to switch down. So 48 users are going to have to switch to 60s, 60 users are going to switch to 70s. Otherwise there’s just not going to be any option.”

He adds that generally the demand for size 48s is approximately 34 percent of the industry and the pack outs right now are only running at about 18 percent. “It’s basically depleting industry inventory now and within two weeks, there are no options. It’s either take a smaller size or you’re not going to have product,” he says, noting that this is the biggest challenge right now–getting the industry to accept the smaller sizing.

Meanwhile demand has been fairly strong for avocados and hovering in the low 50 million lbs./week. “We got as high as close to 60 million lbs. but even with the price, demand is surprisingly and relatively high,” says Slattery.

Steep price difference in sizing
Indeed pricing has seen a fair amount of volatility within the last three to four months. Right now 48s are at about $65, 60s at about $50 and 70s at $30. “There’s a huge price difference right now which will force people into those smaller sizes,” says Slattery.

However prices are likely to strengthen when Mexico becomes the sole supplying country. “In a few weeks, we could see upward of $80 for 48s and I wouldn’t be surprised if we saw 60s in the $60-$65 and 70s closer to $40,” says Slattery. “The hard part for the packers is they’re paying 65-70 pesos/kilo and with such a small pack out on the 48s and 60s, they have to raise that price. It’s not working for their price model. We’re projecting that three weeks from now when Mexico is in control that we may see 80-85 pesos/kilo which is going to keep prices high.”

He does add that sizing will catch up on avocados but that’s still likely four to five weeks away. “We may be dealing with the size issue for the next month to two months. They need to catch up and until that happens, I don’t see any price relief in sight,” says Slattery.

For more information:
Keith Slattery
Stonehill Produce Inc.
Tel: +1 (949) 488-9613)
slattery@stonehillproduce.com 
www.stonehillproduce.com

Mexican supplies of avocados continue to be strong.

“We’ve seen record harvest out of Mexico in the last three weeks. Last week, 84 million lbs. were being harvested, of which 70 million lbs. came into the U.S. Supply is not an issue,” says Keith Slattery of Stonehill Produce Inc. in Capistrano Beach, CA.

Mexico has the market largely to itself currently. “California did have heavy winds come through last week and damage was sustained in certain growing regions. It’s still too early to assess that loss on this year’s California crop,” says Slattery. “California has been released to harvest but lack of size and low grower field pricing has delayed the season from starting.”

Larger, heavier fruit
Back in Mexico, “Fruit size has been pretty consistent on the pack-outs. But because they are behind on the harvest, especially at the lower elevations, we will continue to see the fruit size up with large fruit plentiful throughout the season,” says Slattery. “The oil content is extremely high right now so cold-chain management is key to extending shelf life.”

As for demand, it’s been strong as well. “In the last two weeks, it’s been about 60 million lbs. a week. We need it to move the crop,” says Slattery. He notes that supply won’t be an issue in the foreseeable future through to the end of the Mexican crop at the end of June. “Demand is stronger than usual right now.”

Helping that demand are retailers actively promoting avocados. In those past few weeks, approximately 10,000 stores have been promoting avocados to help movement of the fruit. Slattery adds that retail confidence is extremely high given the low pricing right now for avocados. “For four to five months, they’ve had historically low replacement costs that have allowed them to promote heavily. It’s around $1/avocado. Anytime you can promote it at that, it helps move volume,” he says.

Foodservice still steady
And foodservice has stayed somewhat steady at least in its demand as well. “In the initial shut down, we lost foodservice but it came back fairly quickly with takeout to maybe 50 percent of what it was. Foodservice is still running at about 50 percent,” says Slattery.

All of this likely means no signs of significant price swings anytime soon. “Unless something really drastic happens—whether it’s a strike or something like that,” says Slattery. “But we’re not going to see $40-50/box anytime this entire season.”

He does note that coming back from the new year—New Year’s is in the top three promotional avocado events in the year—pipelines were empty and sporting events such as college football championships were looming. “So the growers were able to get a few more pesos per kilo. It was at 18-23 pesos and it jumped up to 23-25 pesos. A lot of large California handlers and other importers reordered to make sure their distribution centers were full and fruit would be in place,” says Slattery.

Looking ahead, Slattery notes that Mexico’s acreage is up five percent over this time last year. “If we were to do a conservative approach with the crop estimate as far as what the crop estimate shows vs. what’s been picked, Mexico will need to harvest close to 60 million lbs./week between now and the end of the season,” he says, noting 85 percent of that crop lands in the U.S. Also coming on soon will be California supplies and in the spring, Peruvian fruit. “That’s why I can confidently say prices are going to stay relatively low close to where they’re at. Because there’s too much fruit that needs to come off the trees in Mexico.”

For more information:
Keith Slattery
Stonehill Produce Inc.
Tel: +1 (949) 488-9613)
slattery@stonehillproduce.com 
www.stonehillproduce.com