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The
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
market
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
to producers.
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.
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