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OVERVIEW GLOBAL AVOCADO MARKET

Over the past 12 years, millions have been invested in the promotion of avocados. The Peruvian and South African sectors alone have already spent $ 2.5 million on promotions for the Hass in Europe. That budget won't be reduced any time soon, now that sights have been set on China. Finding new markets is not an unnecessary luxury. The production continues to grow, so new markets are necessary. While Peru is investing in promotional campaigns, Mexican growers are going on strike. The consequences could be greater if the growers wanted to. What is the market like? How does the sector look back on 2018 and, more importantly, what will 2019 bring?

Mexico: Major consequences of strikes
The strikes in Michoacan have not only disrupted the market for two weeks, the consequences have also been felt in the weeks that followed, especially in the exports to the US. The strikes, which started due to dissatisfaction with prices, initially caused those prices to rise; however, that effect was short-lived. Afterwards, the price plummeted to levels below those recorded before the strike. This was mainly due to the large volumes that had accumulated and which hit the shelves in a short time.

In addition to the price issue, there is also the fact that American importers want certainty about the deliveries. As a result of the strikes, some importers were unable to meet their programs, so contracts were lost. The trust in Mexican avocado suppliers has been damaged. American companies have started looking for alternatives.

In recent years, Mexican growers have obtained good prices. There is a year-round supply, with a peak in the first two months of the year. This year, the prices have been disappointing. This is also the result of the increasing competition in the market. It seems as if the Mexican sector is so convinced of the superiority of their avocados, that they have closed their eyes to the advance of Peru, Chile or Colombia. On the global market, the Mexicans are also increasingly facing those competitors. In China, for example, a large market for Mexico, Peru's market share is growing every year. The sector in Mexico must adapt to these new conditions, but the fear is that growers will not see the challenges. Then the growers could lose more than they have managed to build up over the past few years. The coming years will be decisive and strikes will not help.

Peru attracts investment for promotions in China
Next year, the sector will focus on promotions in China. The members of ProHass will make a financial contribution to make this possible. "Introducing a new product is difficult, which is why we are organizing promotions," reported the organization. Every year, such campaigns are already carried out in the US and Europe.

Looking back on the past year, the summer has been the most remarkable period. Exports rose by 47%, but the price was disappointing because the country put a large volume on the market within a few weeks. In the same weeks, other countries were also on the market. "We have to get used to the fact that Hass-producing countries harvest and export large volumes and that there are new production countries ready to compete," says a trader. In order to prevent similar situations in the future, exports need to be better planned, and we also need to better monitor the countries to which exports are going. In the meantime, new export markets are opening. For example, the first containers have already been shipped to India.

Dominican Republic puts greenskins on the map
The Caribbean island has around 15,000 avocado producers who grow 20 different varieties. The majority of these varieties are the so-called greenskins. The island is therefore working to market these varieties, including the Semil-34, which accounts for about 60% of the production. "It is the favorite variety of chefs in the Dominican Republic, because it can be used for different purposes," says a trader.

Colombian growth continues
In recent years, there has been considerable investment in avocado cultivation. The country's season overlaps with those of Spain and Chile. At the start of the campaign in late November, the prospects were good. Around the Christmas season, a dip in the demand is expected that will continue until the New Year. The country exports to the United Kingdom, the Netherlands and Germany, among others. The Saudi Arabian market has also recently been opened, so Colombian exporters see opportunities there. The first containers to this destination have already been shipped. The exporters have also set sights on the US market. Growers point to their country's favorable location in relation to the equator, which makes irrigation unnecessary.

Brazil: Everything for the domestic market
The country's production is growing, but the vast majority of the fruit is intended for the domestic market. The export has a share of roughly 7%, but this percentage is growing. The country has a year-round supply of different varieties. A trader mentions that the most important ones are the Geada, Fortuna, Breda and Margarida. In addition to these varieties, there are also Hass, Ouro, Verde and Quintal avocados. Although the weather is always an important factor, the crops are grown in different regions. Any losses caused by weather damages in one region are usually covered by other regions.

Chilean season delayed by growers
Avocados are a popular fruit in Chile. Approximately one third of the total production remains on the domestic market. For the 2018/2019 season, growers have deliberately delayed the harvest to avoid overlapping with the campaigns of competing countries. Estimates point to the harvest this season totaling 245,000 tons, which entails an increase of 8.8% compared to the previous year.

Growers have different varieties in production, including the Edranol, Negra de la Cruz and Fuerte. Nevertheless, the Hass accounts for about 88% of the 29,166 hectares planted. That acreage has been under pressure in recent years. In 2013/2014, the acreage stood at 36,355 hectares. Growers are only planting in areas with high temperatures, and the plantations in areas with too little rainfall or on the plains are being abandoned. Two thirds of the acreage correspond to the Valparaiso region. Meanwhile, the Metropolitana and Coquimbo regions account for 15 and 14%, respectively.

US has oversupply of Mexican avocados
Now that the strikes in Mexico are over, the avocados are being imported again. According to a trader, since the workers in Mexico have returned to work, the market has been oversupplied. In the first week after trade was resumed, more than 30,000 tons were shipped to the US. In the following weeks, the volume has decreased slightly, but the supply is still greater than the demand. In addition to the large supply, the fruit is also riper due to the delays, and this can be a cause for concern amongst traders. Furthermore, there is a predominance of small sizes.

In addition to the Mexican supply, there is also fruit from the Dominican Republic and Florida on the market. Chile tried to take advantage of Mexico's absence during the strikes, but when the Mexican shipments returned, that opportunity was soon lost.

In California, the harvest has already started, although the first volumes will actually hit the shelves in January. "This year, the harvest in California is much smaller," says a trader. A volume of between 68,000 and 80,000 tons is expected for this season. The market is currently quiet, but after the turn of the year, the demand will rise again as the Super Bowl and Cinco de Mayo loom.

Australia: Growing production offers export opportunities
Avocado cultivation in Australia has increased by 17% in the 2017/2018 campaign. The latest figures show that the country is on its way to being able to harvest 115,000 tons by 2025. The Hass represents 78% of the production. The Shepard, a greenskin avocado grown in Queensland in the summer months, has a share of 19%. Most of the production can be found in Queensland, which accounts for 62% of the harvest. Next in the ranking is Western Australia, with 25%, followed by New South Wales, Victoria and South Australia.

The supply remains stable in the early summer. On the international market, the country will remain known mainly as an exporter of premium avocados, and not as a bulk exporter. According to the sector's organization, a third of the trees in the country still have to become fully productive. The rapid growth of avocado cultivation offers new opportunities for exporters to open up markets. Exports to Japan, for instance, have started recently.

New Zealand expects 25% increase in the production
The growers on this island group expect to harvest 25% more than last year. The total volume was reduced in the 2017/2018 season. It reached an estimated 5.2 million trays (5.5 kg each). Of these, 3.6 million are planned to be exported. This entails an increase of 60% compared to the previous season.

The sector is attracting investors for new plantings and the expansion of existing plantations. In 12 months, brokers have seen the price for a hectare rise by NZ $ 150,000 (about 88,000 Euro), to NZ $ 400,000 (about 235,000 Euro). Two factors behind these trends are better consistency and better yields. A lot has been invested by the sector in order to get exports going. Following these efforts, growers have seen their turnover increase.

Spain: Larger harvest, but small sizes
The Bacon season has come to a close, while those of the Fuerte and Hass are in full swing. Their harvest started in mid-November. The production is greater this year and sales are going well, according to some importers. However, a large amount of small sizes is available. The price for the Hass, the most common avocado variety in Spain, is on the rise. This is especially true for the large sizes. The price at origin oscillates between 2.80 and 3 Euro per kilo.

Due to the exports from Colombia and Chile, there has been some pressure on the prices. These countries supply cheaper avocados, but the Spanish ones are usually more attractive to European companies due to the flexibility in the supply and the fruit's freshness, according to an exporter.

Spain has around 10,000 hectares of avocados, with an average yield of 6,000 tons per hectare. Around 12% of that production corresponds to the Canary Islands. The largest production area is that of La Axarquía, in Malaga. Due to water shortages and extremely high land prices, production cannot continue to grow there. As a result, the acreage is expanding in Valencia, Cadiz and Portugal. Huelva is also planting its first avocado trees. Other Spanish companies have moved to Peru to be able to guarantee a year-round supply.

Germany: Stable market situation
In Germany, the avocado market is currently relatively stable. In addition to Hass avocados from Latin America, there are also large volumes of ready-to-eat Israeli avocados available. The wholesale prices stand at around 1-1.40 Euro per piece (assuming normal calibres). It is suspected that the market will remain stable in the coming weeks, at least until after the holiday season.

The consumption of avocados doesn't increase significantly during the holidays, according to the traders. This is apparently due to the product having generally become too mainstream in the past few years. Nevertheless, there are some importers who are currently testing the import of greenskin avocados. This tropical variety, which is imported from the Dominican Republic, among other countries, is already being supplied to retailers in small volumes. Spanish avocados marketed under the Sigfrido brand are also gaining ground. That season has recently started and the avocados from Spanish growers have already hit the shelves in Leipzig and Munich.

France: A lot of avocados on the Christmas menu
On the French market, South American avocados are slowly being replaced by Spanish and Israeli products. Few large sizes are available, so the prices for these are high. As is usually the case, the demand is rising ahead of Christmas and many supermarkets have nice promotional campaigns. Several traders say that they are extremely busy these days. They are struggling to get all deliveries done before Christmas. This is largely due to the delays they have suffered due to the yellow vest protests, which are still underway.

The Netherlands and Belgium: Concerns amongst traders
It has been a very challenging season so far. Chilean shipments arrived to the European market at the end of September, which was more than a month later than usual. However, there was still Peruvian fruit available, so prices were under pressure during that period.

Traders were concerned, but the market became a little quieter in mid-November. The higher prices recorded last year have not been reached at any time this year. Colombia has also been responsible for the situation of Chilean fruit. This new supplier is gaining ground and this will lead to changes in the avocado market in the coming years.

A good supply is expected for the beginning of the New Year. Chile has had a longer season and Spain and Israel also have a good production. Colombia is now harvesting in several regions and will also continue for longer. The situation in spring will therefore be different compared to last year's.

Chinese market: Great potential, but promotion needed
China's avocado market is a growing one. The demand is not as high as in the United States, but it has the potential to reach that level. However, before that can be achieved, more promotions are needed in order to provide information to consumers. In Japan, this promotional work has been done very well and the country's consumption is many times higher than in China. The consumers showing the most interest in this product are young mothers. They see the good nutritional value of avocados as a key reason to buy them.

The avocados that are imported into China come mainly from Mexico, Chile and Peru. Mexican avocados account for the largest share of those shipments. At the moment, the market is flooded with avocados, which means that prices have dropped considerably. It is not clear when the price will go up again. The low price also ensures that the growth of avocado production in China won't take place quickly. Initiatives have been launched to grow avocados in China, but the limited space available makes this a more difficult task.


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