Mexico supplies 45% of global sales, but this is Mexico.

By Don Quijones, Spain, UK, & Mexico, editor at WOLF STREET.

Mexico is the world’s largest supplier of avocado. “Green Gold,” as Mexicans call their beloved staple fruit and lucrative cash crop, accounts for around 45% of global sales. Over two-thirds of those avocado are grown in the state of Michoacán. But in widespread industrial action over the weekend, more than two-thirds of the state’s avocado orchards were on lock-down and many of the roads used to transport the produce were blocked as growers accused packing firms of using inferior quality, lower priced produce from other regions to ship to the US market.

Michoacán growers are the only suppliers included in the US Department of Agriculture certified export program, says José Luis Mata, a representative for a Michoacán avocado growers’ association. The escalating practice of shipping “pirate” avocados from other parts of the country into the state to be passed off as locally grown produce is driving down the fruit’s export price, resulting in financial losses for local growers and layoffs of local workers — in addition to violating USDA’s certified export program.

And given Michoacán’s size in the avocado trade, the strike, if it continues, it’s likely to have a big impact on both domestic and international markets.

Some effects are already being felt, according to Robin Wedin, vice president of sales and marketing for Calavo Growers Inc., Santa Paula, California. “Inventories are dropping quickly,” he said on October 31. “We’re going to run out of avocados sometime next week if they don’t get back in and get going again.”

Prices are also on the rise, following months of ample supply and relatively subdued prices. Yet they are still nowhere near the peak registered in October, 2017, when the average retail unit price in the U.S. reached $1.60. In Mexico, the price in shops and markets more than doubled between mid-2016 and mid-2017, as broader inflation reached multi-year highs.

The price of avocado has been pushed higher in recent years by surging demand for the high-fat, zero-cholesterol fruit. Since 1994, the year that NAFTA cranked open the US border to Mexico’s bountiful, year-round supply of green gold, consumption in the US has increased seven fold, from one pound per person per year to over seven pounds per person per year.

Michoacán provides nine out of every 10 imported avocados. Since the turn of this century the total value of Mexico’s global exports of avocado has ballooned from €73 million to $2 billion today. That’s despite the spiraling violence and lawlessness that has plagued Michoacán and other key growing regions. Even last year, Mexico’s most violent on record, more avocados were exported than ever before.

Other important international markets include Japan, Canada, Spain, France and China, which only recently succumbed to green gold fever. In the first six months of 2018, Mexico exported 9,000 tonnes of avocado to China, more than the total for the whole of 2017. As the New York Times pointed out in March, if demand for avocado — or as Chinese consumers like to call it, “butter fruit” — really took off in the world’s most populous nation, only Mexican production would come close to meeting it.

That would benefit not only Mexico’s avocado growers and distributors, but also one of the country’s most bloodthirsty drug gangs, the Michoacán-based Knights Templar, which has been extorting avocado growers with ruthless, methodical efficiency since 2010. According to the Mexican news website Sin Embargo, the gang, either through bribes or threats, harvests data from the local authorities on all avocado producers in the state and then determines how much each one should pay.

Farmers are forced to cough up an annual tribute on each hectare they grow (around $100) as well as a fee of around 10 cents on every kilo of avocado sold. The cartel recently expanded its extortion racket to include all other players in the industry, from distributors and harvesters to fertilizer manufacturers. It has also taken a direct financial stake in many of the plantations, which it uses to launder the proceeds of its main line of business, drug trafficking.

In total, the Michoacán avocado business is estimated to be worth around $150 million dollars a year to the cartel. With so much at stake, the Knights Templar will no doubt be keeping a close eye on negotiations as they unfold over the course of this week. So, too, will many US wholesalers and retailers.

On Sunday, a fragile truce was brokered between local producers, local police, federal agencies and the Avocado Producers and Exporting Packers Association of Michoacan. On Monday, the checkpoints on major roads in and out of the growing region that had prevented picking crews and field trucks from entering the groves were lifted as a gesture of good faith.

Whether they stay that way will depend on whether the government can persuade growers that they will be able to keep unwanted avocados out of the state, so that the price of Michoacan’s golden green produce does not fall any further. But given how little power the State actually wields on the ground in the region, where armed “self-defense” vigilante groups run entire villages and towns and are constantly vying for control of territory with the drug cartels, it’s going to be a tall order. By Don Quijones.

Now everything is up in the air, so to speak. Read…  Whiff of Panic After Mexico Voted to Scrap Mega-Airport & Corruption Project  

Would you like to be notified via email when WOLF STREET publishes a new article? Sign up here.