Expect to pay more for your avos

The price of a box of avocados from the world’s largest producer, Mexico, hit an all time high this month. A recent note from Stanlib pointed out that at 580 pesos, or around $31.50, the price has surged over 150% in US dollars since the start of the year.

There was a similar spike in the price of the fruit last year, and for similar reasons. The first is a decline in supply, primarily due to drought conditions in California.

The US is the world’s largest consumer of avocados and production in California is expected to fall by between 40% and 50% this year. This has been exacerbated by flooding in Peru, which is the world’s third largest producer.

The second factor is that these supply problems are happening at a time when avocado consumption has been growing significantly.

“In particular, European consumption has been robust due to the increasing trend to eat healthier and lighter meals, while consumers in new markets, such as China and Turkey, are also discovering their appetite for the fruit,” noted Stanlib chief economist Kevin Lings.

“Some consumers’ obsession with avocados is highlighted by the opening of the world’s first all-avocado restaurant in Brooklyn, in April 2017, called Avocaderia (bizarrely even their cappuccino is served in the skin of an avocado).”

Remarkably China is now the 11^th largest global importer of avocados, having not imported a single avocado as recently as 2012. France, the UK, Germany, Spain, the Netherlands and Belgium are all among the top ten importers of the fruit.

These fundamentals mean that the spike in avocado prices is unusual. The price of oranges, for instance, has come down substantially since November last year, from over $1 000 per metric ton to under $850 per metric ton.

Soft commodities like cocoa, coffee, soybeans and sugar have all been trending lower since the end of 2016.

As the Mexican price for avocados is commonly used as the international benchmark, and because South Africa exports around half of its avocado production, local consumers should probably expect to keep having to fork out more for the fruit. However, as Lings pointed out, there is also a growing opportunity for local farmers.

“In South Africa most of the avocados are grown in Limpopo and Mpumalanga as well as certain areas of KwaZulu-Natal,” he noted. “Annual production is in the region of 90 000 to 110 000 tons, of which approximately 40 000 to 50 000 tons is exported the Europe and the United Kingdom. The remainder of the crop is consumed domestically and approximately 10% is processed.

“The combination of higher international prices (the price of avocados has trended higher over the past three years) coupled with a lifestyle rise in global demand suggests South Africa could look to increase avocado production, exporting the additional supply into both Europe and China,” Lings concluded.

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