Trade and avocados

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Right now, America’s avocados come from Mexico. Specifically, 75-80% of all avocados imported in the US are from Mexico (only about 16% come from California). Most of these are actually from one state, Michoacan. Trump, as we know, is in a trade war with Mexico and Canada (although there has been some reprieve for steel and aluminum), and this has already started to impact prices. Avocados were up 34% in April, which may be related more to delays at the border because of the increased numbers trying to cross or apply for asylum.

So it makes sense that other countries would see this as an opportunity to get in the market. Avocados are like bananas, you pick them and they ripen on the way to market. This makes it a perfect fruit for world trade. There are a few good books about the early banana trade, such as Bananas and also Bitter Fruit, that talk about this as well, if I remember them correctly.

IMPORTS OF AVOCADOS (LESS THAN ACTUAL CONSUMPTION). SOURCE: HASS AVOCADO BOARD

IMPORTS OF AVOCADOS (LESS THAN ACTUAL CONSUMPTION). SOURCE: HASS AVOCADO BOARD

So avocados is the next great trade crop, and the world is trying to take advantage of this. This story caught my eye about how Vietnamese farmers are starting to grow avocados, which the article attributes to the Mexican .

However, it really seems like these articles (at least the headlines) are wrong to blame Trump’s trade war. A few facts about avocados:

  • Avocado trees take something 5 and 13 years to reach fruition, although using high-density planting, it could be as quick as 2 years after planting (potentially after a year in the greenhouse).

  • Avocado sales are growing year over year worldwide. See the chart to the right above. The increase from 2016 to 2018, imports of avocados have increased 25%. Coffee production actually decreased in 2018 and is growing much slower.

  • Domestic consumption of avocados is also increasing in Vietnam. Also in China: “The country imported only two tons in 2010; last year, it brought in 32,100 tons.”

  • Coffee prices have been falling and are lower than avocados. Farmers are trying to replace coffee with avocados. Coffee prices have been quite volatile and are now are just around $0.90, while avocado prices are about $1.20. Prices in Vietnam are even lower at around $1.33-1.36 per kg.

  • Avocado production can be as high as 30,000 pounds per acre at full utilization. That is so much more than coffee, which looks like produces just 3,000 pounds per acre at the high.

  • Mexico was the largest trading partner of the US in the first two months of this year. So maybe Vietnam is not going to displace Mexican production.

Combining all of this, I realized that farmers in Vietnam are just seeing the market trends, realize they are not able to compete in a flat or declining coffee market and decided to move into a market with better returns and potential. This has absolutely nothing to do with problems between Mexico and the US, except for the fact that avocado prices increased. But with such a lead time - 3 years at the earliest, and probably more like 5 on average before avocado tree fruition - it makes absolutely no sense to base decisions on today’s prices. Farmers are looking at potential and deciding that it is huge.

I think so many of these articles on the trade war (US vs. China, US vs. EU, US vs. Canada, US vs. Mexico, [do you see a trend here?]) the business decisions being made are actually much more long term. Chinese labor costs are increasing, and competition there is increasing, so companies are looking for alternatives. Like they did with textiles before.