Nothing is constant, but the avocado market is taking this expression to a whole new level; within one year, price have doubled. In Canada, one unit is going for at least $2 while in the US 25 pounds of the fruit will leave you almost $85 short. Trump may be blamed for a lot of things, but the exorbitant prices are not his fault. So, why are avocados so expensive? Let's get to the root of why the prices have been on the increase for the past few months.
Increase in Demand
Anyone who knows some economics class is aware of the inverse relationship between prices and supply, as well as the direct link between demand and prices. Whenever the amount of anything goes up, its costs will go down drastically because the suppliers have too much and want to dispose of it through a low price. However, when the demand is high, then every supplier will be keen to make a killing from the many people who are willing to spend their money on the product or service. The same case has happened to the avocado market.
People are increasingly making lifestyle changes that include healthy living. With the high cases of diabetes, heart diseases, and obesity, everyone is trying to ensure they have balanced meals. Mostly that means giving up on fast foods and processed foods and going for vegetables and fruits. Salads have become almost mandatory on everyone’s plate and what’s a salad without avocado. Guacamole especially cannot taste the same even if the avocado is substituted with other green vegetables like peas. Therefore the more the consumption, the more suppliers move to attach hefty price tags to the product.
While you may think that it is only in America where the avocado consumption has been on the rise, you could not be more wrong. According to People, the need to have avocado on toast and guacamole is everywhere, including China and Europe. However, as explained, since avocado trees take longer to reach maturity than people are consuming, there is a gap left unfulfilled, leading to more demand than supply.
The demand has resulted in those in the catering industry to be creative. As more customers opt for guacamole and salads that contain avocados, restaurant owners have started substituting the fruit with cheaper alternatives. Therefore it is no surprise to find guacamole made with asparagus and broccoli. For those who cannot do without avocado in their guacamole, then as little as possible, avocado is being used, leaving customers to refer to the finished product as “mock guacamole.”
Situation in Mexico
If you want to eat a tasty avocado, then you must be ready to give it time to ripen lest you end up with a small and bitter fruit. As with everything, avocados take time to mature, and trees can take up to five years. And even when they are mature, you need to give it time to form the fruits, so there is a specific period for harvesting. That said, Mexico is the leading supplier of avocados in North America. Matter of fact is Canada gets 95% of its supply from Mexico, while 34% of the world’s supply comes from the country according to The Star.
Mexico usually has an avocado season all the year through but some months have more production than the rest. In July, Mexico has its lowest production; hence, there was hope that the prices would go back to normal once the month passed. However, things have not been looking any better even though we are way past July and approaching October. It is not just consumers in America who are feeling the pinch of seasonal production. In Mexico, entrepreneurs are opting to preserve the little that is in the market by failing to eat the fruit at home, and instead, selling it in their food stands. Guacamole is so popular that if a food stall owner does not have guacamole, then no one will eat at their stands.
Still, there is more to seasonal production that is affecting the avocado prices because allegedly, land in Mexico is under siege by drug lords and cartels. Additionally, the reports claim that even the marketing boards are run like cartels with minimal regulations. For those with a conscious, serving the fruit in their restaurants is impossible because to them, the avocados are like blood diamonds. They would rather lose customers than have a guilty conscious knowing how far cartels go to protect their territory.
Low supply from California
If you have been fortunate to eat a tasty avocado, it most likely was the Hass species that tend to have some oil to make your sandwich and salad a delicacy. However, what most may not know is that Hass avocados in the USA are mostly from California, 80% to be precise. Currently, the avocados are in their growing season, which lasts from around February to September, meaning the peak production will resume in summer, according to Cheatsheet.
Further, California has been experiencing a series of unfortunate events for some years now. In December 2017, California experienced wildfires that could be affecting the trees to date. Some trees were entirely burnt while those that remained may have internal damage that curtails the production of avocados leading to low supply hence high prices. Still, even if they did not suffer any damage, then the climatic conditions play a role in determining the avocados produced in the state. For instance, heavy rains during winter affect production and consequently supply.
One thing that countries who are looking to minimize the impact of seasonal production do is enter into futures and forwards contracts. Futures contracts help in locking a specific price today such that an asset can be sold at that amount in future regardless of the market conditions then. If such a contract was possible for the avocado market, like many countries do with wheat, then the fluctuation of prices would be a thing of the past.
Written by Bill Vix
Read more posts by Bill Vix