Mexican Avocado Industry Prepares To Export
to the U.S. Northeast
The Mexican avocado industry works to meet APHIS
requirements and gears up to export to the U.S. northeastern
On January 31, 1997, the Animal Plant Health Inspection Service (APHIS) of the U.S. Department of Agriculture approved the import of Mexican Hass avocados from Michoacan state to be imported into 19 northeastern U.S. states and the District of Columbia during the months of November, December, January and February, provided growers meet pest-control requirements. Prior to this action, Hass avocados from Mexico had only been permitted entry into Alaska under similar requirements. Thus far, approximately 65 Mexican growers and 5 exporters in 4 counties have been approved by APHIS to export to northeastern states and Washington, D.C.
APHIS approval requires strict compliance with phytosanitary procedures and standards as well as passing a series of APHIS inspections during the growing, packing, and exporting processes. Mexican producers reportedly are receiving loans from the Michoacan government to pay for the initial costs of the APHIS program, estimated at about $110,000 per year for the areas approved by APHIS. The Mexican industry hopes that revenues from avocado export sales to the United States will eventually more than offset the APHIS costs.
Producer and trade sources forecast Mexican fresh avocado exports to the United States in 1997/98 to range from 5,000 to 25,000 tons. However, based on the 1,500 hectares of orchards approved for export by APHIS and average yields, it appears most likely that Mexican exports to the United States this season will range between 10,000 and 15,000 tons. On the other hand, some producers and traders are concerned that their limited knowledge of the northeastern U.S. market could limit exports. They are concerned that avocados are viewed only as a summer fruit, which may be difficult to market during the U.S. winter, even though Mexican avocados will be at peak flavor and quality at that time. Mexican exporters also want to maintain their export markets in Europe (especially France and the United Kingdom), Canada, and Japan, as well as expanding sales in Central and South America (particularly Argentina).
Processed avocado exports expected to continue strong
Mexican exporters also expect to continue increasing exports of processed avocados to the United States, especially to those states not yet approved by APHIS for fresh export. In 1996/97 (August/July), processed avocado imports into the United States totaled 11,825 tons and were valued at $21 million; 22 percent lower than in 1995/96 due to the smaller Mexican harvest. Mexican processed exports are expected to recover in 1997/98 based on the expected larger crop. Processed avocados are primarily used in the United States by institutions, restaurants and supermarket chains. Because of the strong U.S. demand for processed avocados (the United States accounts for 90 percent of Mexican processed exports), processors agree that processed avocado exports will continue as long as supplies are available. However, some processors are concerned about prices, which they say are barely above production costs. Competition is strong and processors are reluctant to raise prices. U.S. companies operating in Mexico produce most of the processed avocado exports.
Mexican avocado production to rebound in 1997/98
Mexican avocado production, much of which was planted in the 1970's, has expanded throughout the 1980's and 1990's. According to Mexican industry sources, national avocado production has increased from 444,000 tons in 1981 to an average of more than 700,000 tons from 1991 to 1995. Industry sources are forecasting the 1997/98 crop (harvest began in August) at 800,000 tons, a 26 percent increase from the previous year's output, assuming more normal weather conditions. Due to maturing orchards, the planted area is forecast to increase 2 percent to 95,000 hectares. Harvested area is expected to increase 8 percent to 90,000 hectares based on more growers returning to their orchards and more trees coming into production.
The 1996/97 crop, estimated at 635,000 tons, decreased 20 percent from the previous year because of excessive rainfall, hail, and low temperatures during the flowering season in Michoacan. The unfavorable weather caused early fruit drop, lower yields, and smaller-sized fruit. In addition, high input costs and low prices discouraged small producers from completely harvesting their orchards. Larger producers slowed picking since avocados can be stored on the trees for long periods. As a result, harvested area decreased in 1996/97. Since the announcement that Mexico will be able to export fresh avocados to the United States, prices have increased and some small producers have returned to their orchards.
Michoacan accounts for most of Mexico's avocado production
The State of Michoacan is the center of the avocado producing industry in Mexico. Since 1991 production in Michoacan typically has accounted for 80-85 percent of the total national production. Other producing states include: Nayarit, Morelos, Mexico, Puebla, Sinaloa, Guanajato and other states with relatively small production levels. Michoacan is a mountainous region with dense vegetation and significant rainfall at least half the year, which supplies at least half the water needs for avocado production. The additional water needs are supplied through (mostly drip) irrigation usually from December to May. This terrain makes it a suitable area for avocado orchards which require a lot of water, however, with drainage (on the hill and volcanic mountain slopes).
Trade sources argue that the state of Michoacan has limited land suitable for expanding avocado cultivation. Bringing these marginal areas into production, would be costly according to industry sources. Nevertheless, given the significant number of new trees planted in the late-1980's and early-1990's, some sources expect total production to expand sharply between 1998 and 2000 when trees reach full maturity. Avocado trees usually begin producing fruit within 3 to 4 years and may produce up to 50 years. The average yield in Michoacan is 10 tons per hectare, however, mature orchards can have yields of 15 tons or more.
There is some concern that the long term export potential for fresh avocados could be constrained if Mexican production does not rise to meet both domestic and export demand. If plantings in Michoacan and/or other states do not increase, rising exports will put significant pressure on domestic avocado prices. The Mexican government closely monitors food prices and would be sensitive to sharp increases in domestic avocado prices, especially as the next presidential election approaches in the year 2000.
There are many varieties of avocados produced in Mexico including: Hass, Fuerte, Atlixo, Bacon, Duke, Perfecto, San Sebastian, Sinaloa, Zutano, and Criollo. For commercial production purposes in Michoacan, most of the avocados are produced using the seed of the Criollo variety. Later, part of a Hass stem is grafted onto the Criollo plant. This process is used to take advantage of the characteristics of the Criollo, which is the natural growing variety in Michoacan. This is combined with the Hass for its long shelf-life and durability during transit.
The avocado orchards in Michoacan are characterized by a large number of small producers and a small number of large and medium sized producers. The majority (perhaps 80 percent) are small producers that own 10 hectares or less, while only a few producers own more than 1,000 hectares. This has been the situation for many years and the avocado industry apparently thinks it will not change significantly over the next few years. However, increased exports could have an impact on production areas (i.e. concentration of land, etc.).
The average farmgate price for avocados in 1996/97 was about 1,200 pesos per ton (US$156 per ton) for the peak season (November through April). This is equivalent to an average price of about 9.5 pesos per kilogram, which is much higher than the prices of the last few years when prices were below 4 pesos per kilogram. During the off season (May through September), growers may receive over 2,500 pesos per ton (US$325 per ton). Growers have succeeded in commanding higher prices in 1996/97 because of the short crop and price negotiations. In addition, total production costs have remained fairly stable. According to industry sources, prices in 1997/98 will likely remain near last year's level as orchards recover and exports expand. Usually the most expensive inputs include agro-chemicals, fertilizer, electricity for irrigation, and finance costs for production loans. Labor costs are growing more slowly.
Processors source their avocados by often going directly into the orchards to choose the product they prefer. They may choose to buy the whole orchard's fruit, or only fruit from individual trees. They then send trucks with plastic boxes to get the fruit and may contract a picking company to ensure they get the quality fruit they want. Processed products include guacamole, paste and avocado oil.
Mexican producers cooperate to meet common goals
Avocado production is reported to employ 65,000 people year round in Michoacan and thousands of additional workers during the harvest. Producers have organized to meet their goals of working for better avocado prices for growers and to reduce the costs of inputs. Each member of the Union of Producers pays an annual fee plus a small fee per kilogram of avocados for marketing promotions. The interests of the growers are overseen by a board of directors. The organization continues to look for new markets and is very interested in exporting to the United States.
Domestic consumption likely to recover in 1997/98
Consumption of avocados in Mexico decreased 21 percent in 1996/97 due to the smaller harvest and high retail prices. However, consumption is forecast to rise by 26 percent in 1997/98 based on the expected larger harvest. Avocados for the domestic sector pass through wholesale distributors which sell to local supermarkets, hotels and restaurants.
Although Mexico permits the import of fresh avocados, because of current prices and the peso devaluation, avocado imports are not generally competitive in Mexico. Mexico maintains its 20 percent tax on imports of avocados with the exception of the United States, where under NAFTA regulations there is a mutual tariff of approximately 7.9 cents/Kg in 1997. This tariff (08.04.40.01) will be phased out over 10 years by 2004.
Government support for producers and processors
There are no direct government support policies for avocados. However, avocados, along with other fruits and vegetables, benefit from the government's Agricultural Debt-Relief Program (FINAPE). FINAPE is a program for restructuring overdue and non-performing loans in order to reduce the size of monthly payments on the existing debts of agricultural and aquaculture producers. This program has helped producers affected by inflation in 1995 after the peso devaluation.
FIRA, a part of the Bank of Mexico, is organized at the state
and local level and gives producers and processors short and
long-term credits for production and processing equipment,
storage facilities, irrigation, fertilizers, nursery products,
etc. Some of the costs of production may be offset by lower
interest-rate loans and credits to producers based on costs per
hectare and their income. FIRA also provides technical assistance
According to FIRA sources, there has been little activity involving credits given to avocado producers over the last several years due to a slowing of plantings, low prices, and budgetary limitations due to the peso devaluation. However, in recent months and in part because of the U.S. market opening to Mexican avocados, FIRA sources indicate that banks are more interested in helping producers. FIRA is providing some administrative support to the 65 producers that have been approved by APHIS for export. FIRA officials note that the producers have not yet agreed on how to proceed with some administrative and marketing aspects of exports to the United States and they have requested FIRA's assistance.
For further information on avocado production, supply, distribution, and trade, contact Stephanie Riddick, 202-720-9792. For information on marketing contact Steve Shnitzler, 202-720-8495.