In the summer of 2018 the EU market had some difficulties absorbing the huge spike in avocado volumes supplied. In reality, this was the start of a new era for EU avocado prices. Although the market still has potential to grow, periods of market irregularities will become more common.
EU avocado prices all over the place in 2018
In the last few years, the EU avocado market got used to climbing prices, but 2018 saw an end to that trend. The 2018 price swings were among the most noteworthy of the decade. The year started with relatively high price levels followed by a steep decline leading to low prices during summer. The dramatic fall was mainly caused by a very strong rise in supply (55%) from Peru and South Africa, the two dominant EU suppliers in summer time.
The recent drop in prices is a serious sign that the EU avocado market is about to change. Avocado supply to the EU will continue to grow, probably irregularly. At times this will result in mismatches, just like last summer.
Industry players can limit the impact of these mismatches by more intensified and coordinated product promotions during supply peaks. Furthermore, supply chain cooperation can help to manage price volatility and oversupply. Longer-term price agreements between players can reduce price volatility and supply uncertainty. And with timely and precise forecasting and information exchange, supply chain partners can anticipate supply peaks.
Supply peaks caused by Peru and others
Supply peaks are caused, among others, by Peru. Peru is one of the fastest growing avocado exporters globally and is still expanding its planted areas. In only five years’ time, Peruvian avocado exports have almost tripled. Other established producers like Mexico and South Africa are stepping up production, and so are upcoming producers like Kenya, Colombia, Brazil, and Morocco.
The expansion in this lucrative industry is fuelled by large-scale growers and investors, so growth is taking place in uneven, and sometimes big, spurts. Research Center FruiTrop forecasts global Hass avocado production to grow on average by roughly 230,000 tonnes a year over the next five years. Compared to global production of around 6 million tonnes per year, this is a modest volume. But these 230,000 thousand tonnes represent an additional 14% in global exports to be absorbed by import markets.
Source: rabobank.com
