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Avocado supply faces 'big concern' as inflation, scarcity send prices on a tear

On one hand, they are deliciously creamy, versatile and gloriously Instagram-mable.

On the other, they leave an enormous carbon footprint, which hasn’t stopped consumers from slathering them on everything in a way that's led to a dramatic boost in consumption in recent years.

Americans have a “hefty” appetite for avocados — one that's adding to widespread food price pressures and general scarcity, according to Zhengfei Guan, an associate professor of food and resource economics at the University of Florida.

The consumption of avocados has more than quadrupled over the past two decades, according to data from the Avocado Institute of Mexico (AIM), which supplies the lion's share of U.S. supply. That boom has made the green-skinned plant the single largest fruit import for the United States. More than 2.2 billion pounds of avocados were imported in 2020.

Meanwhile, nearly 91% of those avocados come from Mexico, which exports the vast majority of its avocado crop – 80% – to its northern neighbor. The avocado market is worth more than $2.5 billion and rising as prices surge. In January, the monthly average for an avocado $1.36 per, representing a 40% jump compared to January 2021.

Days ago, the U.S. lifted a temporary ban on Mexican avocado imports, which may help alleviate price pressures. However, observers are still nervous, mainly because of troubles with domestic production.

In California, where over 90% of U.S. supply comes from, “production has been down because acres have been going down, and California has been experiencing severe droughts,” Trent Blare, an assistant professor in food and resource economics at the University of Florida, told Yahoo Finance in an interview.

While the Golden State's stock comprises a slim portion of the nation's consumption, Mexico continues to thrive as an avocado grower and exporter powerhouse. By 2018, Mexican imports captured 87% of the U.S. market share, according to the USDA annual report.

Meanwhile, there are different varieties of avocados available in the U.S. market, and during different seasons. Smaller Hass avocados from Mexico are available during the winter and early spring. California growers harvest year round, but production tends to peak in the spring through the fall, Blare's research found.

'Big concern'

Daniel Donis, 30, executive chef at Baja Cantina, holds a bowl of guacamole in the restaurant's kitchen in Marina del Rey, California, U.S., February 15, 2022. REUTERS/Nathan Frandino
Daniel Donis, 30, executive chef at Baja Cantina, holds a bowl of guacamole in the restaurant's kitchen in Marina del Rey, California, U.S., February 15, 2022. REUTERS/Nathan Frandino

Florida and the Dominican Republic grow a different, larger type of avocado, but the former's peak production starts in the summer, while the latter's happens in the winter. Of late, domestic crops have been ravaged by redbay ambrosia beetles that infect them with a fungus, causing avocado trees to die.

Some fear that Florida's infected avocado supply is a harbinger for an impending disaster.

“There's a big concern that if this disease spreads throughout the United States and gets to California and into Mexico, it could greatly reduce production. It's reduced our production of avocados by 30%,” UF's Blare said.

A supply squeeze and short-term price bump can be a good thing for a local grower, but some argue the brief embargo didn't disrupt supply much.

“Our fruit comes out of the Dominican Republic. We do not handle any Mexican avocados," Louis Dessaint, director of tropical fruit operations for Florida-based Brooks Tropical. The family-owned farm grows premium products shipped throughout Florida, the Caribbean, and beyond.

"It didn’t affect us or even change the price but if the [ban] would have gone on longer it would have affected the price,” he added.

Despite the issue being resolved quickly, Dessaint expects demand for avocados to keep growing. But he worries about the inflationary pressures consumers are up against, and how it might price the product out of their diet.

I'm anticipating [avocados] going up to $100 per case. So that would be an almost 50% increase.Ruby Bugarin, Mexican restaurant owner

While some of the immediate effects from the embargo have been muted, there’s concern for independent businesses that more trouble could be just around the corner, given the after-effects of COVID-19. Restaurants and food suppliers have been grappling with inflationary prices exacerbated by labor shortages and supply bottlenecks.

Ruby Bugarin, co-owner of Margaritas and Pepe’s Mexican Restaurants, in Southern California, told Yahoo Finance in an interview that prices per case have surged by over $20, to $80, within the last 2 weeks alone.

“I'm anticipating it going up to $100 per case. So that would be an almost 50% increase,” Bugarin added. While she hasn't changed prices so far, there are some discussions about potential alternatives.

“We considered using pulp, just because it's so close to the natural state of the avocado," she said. That version comes “already pre-mashed in a plastic bag” so essentially it's less work for those preparing the guacamole, Bugarin explained. It’s unclear whether there's any material cost benefit, but pulp has also been somewhat scarce.

“Our food distributors had said, no, we're out of pulp because I'm sure the big players in the field, we're already buying that,” Bugarin said.

Meanwhile, other businesses are toying with the idea of removing the staple from their menus, and offer supplemental options.

Evonne Varady, co-Founder of Clean Eatz, a restaurant franchise that sells wellness-focused meal plans, told Yahoo Finance in a phone interview that she decided to replace avocados on the menu, based on cost considerations.

Instead, Clean Eatz is trying to “come up with more unique things to use, to replace it” by using spinach, fresh herbs, arugula, and salsa, Varady explained.

During the pandemic, restaurants scaled back menus and hiked prices to keep up with product shortages and escalating ingredient costs. Yet Varady didn't pass those costs on to the customer, because “customers are only gonna take so much of that inflation,” she explained.

While online grocery shopping has boomed — much of that spurred by the pandemic — there’s concern that avocado supply will not meet demand.

“If demand goes that fast, you realize that avocados like other fruit trees take five years to mature, you can't just increase demand quickly from one year or supply,” UF's Blare said. “It'll take some time before supply can catch up to the growing demand."

Dani Romero is a reporter for Yahoo Finance. Follow her on Twitter: @daniromerotv

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