While Americans are paying more for everything from lumber to computer parts, and with most of the food industry contending with price increases, one surprising exception can be found: avocados.
While often considered one of the pricier items in the produce department, avocado supplies remain plentiful on the heels of a bumper crop in Mexico. Rabobank reported that the U.S. market continued to absorb record avocado volumes, even amid the pandemic. In fact, the U.S. brought in nearly 320 million pounds in January, representing an all-time high and a 33% increase over January 2020.
However, Rabobank argued the market will tighten in the second half of the year, with prices rising to reflect lower supplies. The report indicated supplies could be less available later in the summer when California and Peru close their growing seasons and Mexico begins to transition into its new harvest.
“Once the new harvest season ramps up in Mexico after week 40, shipments may stabilize. Unsurprisingly, the highest shipment levels are expected in the first few weeks of 2022, just in time for the Super Bowl demand,” the analysts wrote in the report.
Impact on Chipotle as Volume Sales Up, Imports Drop
The Hass Avocado Board (HAB) reported volume sales of avocados were up 5.17% in the four weeks ending May 16 when compared to the prior year, reaching 908.6 million pounds. Additionally, HAB reported that sales had dropped 4.51% during the period, reaching $942.9 million, with the average unit price down 9.21% from the prior year to $1.04.
Analysis of Census Bureau data by The Food Institute found much the same; during the first four months of 2021, the volume of avocado imports increased 2.4% to about 1.9 million pounds when compared to the same period in 2020. Meanwhile, import value plunged 23.5% to about $408.2 million. Mexico was the origin of virtually all avocados imported during the period.
However, HAB predicted avocado shipments could fall by 5.8% in the third quarter, a fact that pushed Truist Securities to publish a warning that Chipotle Mexican Grill could be squeezed by rising prices, reported MarketWatch (June 23). The company has already said it will raise menu prices by nearly 4%.
“We believe that avocados account for only 5% to 10% of Chipotle’s COGS [cost of goods sold], but volatility in recent years has had an outsized impact on margins,” analysts noted.
Suppliers Report Lower Prices, Rising Demand in First Half
Early in the year, public avocado companies reported increasing sales volume and declining dollar sales.
Mission Produce reported a 6% increase in total revenue, reaching $234.7 million, during its fiscal second quarter ending April 30. The company noted avocado volume sales increased 22% during the period as the average selling price declined 14%.
“Looking ahead to the second half of fiscal 2021, we transition into the southern hemisphere season where our Peruvian harvest comes online. The growing season was very productive, and we are expecting solid yields from our crop. … For the third quarter-to-date period, retail pricing is steady, along with consumption patterns versus the prior year, which is common going into the summer months,” said Mission Produce CEO Steve Barnard in a press release.
Meanwhile, competitor Calavo Growers reached $276.8 million in its first quarter, also ending April 30. Additionally, the company reported a 9% increase in avocado sales volume, which was offset by a 10% decrease in prices.
“We are indeed seeing positive signs as the economy reopens and we are pleased with our recovery, which is driving our long-term optimism,” said James E. Gibson, CEO of Calavo Growers, in the earnings release.