South American Avocados Satisfy Growing Global Appetite
South America has become the second most important avocado supplier after Mexico. Within this subcontinent we see three countries at different stages in the market cycle. The US and Europe will remain the leading markets, with increasing per capita consumption.
Exports From South America on the Rise
South American avocado exports have been on the rise since 2014, and will reach more than 700,000 metric tons in the current year (see Figure 1). If this trend continues, we can expect exports to surpass a million metric tons in the next two years.
Current South American avocado exports show three major players: Peru, the leader; Chile, the mature industry; and Colombia, the breakout newcomer. Peru will end the current year with a record figure of more than 550,000 metric tons exported (until November). Chile suffered a turbulent 2020/21 season, with a 40% decrease in production. This caused a similar drop in exports but helped to maintain a high value. Colombia is the third player, showing even greater increment figures than Peru (CAGR of 57% between 2016 and 2021). It is also the only country producing a year-round supply, complementing the existing global supply from Peru, Chile and countries in Europe.
US Market for South American Avocados
The US is the largest avocado market in the world, with growth in avocado availability relying heavily on imports. The imports-to-consumption ratio has increased from about 37% in 2001 to more than 90% in 2020, according to USDA numbers. In terms of production, the US crop has remained flat to declining over the last few years, as the domestic industry faces several supply-side challenges in California. Under these circumstances, the US reliance on imports will only increase in the future as consumption continues to expand.
Avocados rank high in per capita consumption growth among fruits, with a CAGR of almost 8% over the past decade. In 2010, per capita consumption of avocados in the US was about 4 pounds, whereas in 2018 it was close to 8.5 pounds. Following this trend, avocado consumption could exceed 11 pounds per person per year by 2026.
Twenty years ago most US avocado imports came from Chile, as Mexico was still facing sanitary restrictions into the US market. Ever since the sanitary restrictions were lifted for avocados from Michoacán, the main growing region in Mexico, exports from this country have dominated the US market (see Figure 2). Conversely, US imports from Chile have practically disappeared, as Chilean growers focus on other export markets as well as the country’s expanding domestic market. Going forward we will see the US importing more avocados from Peru and Colombia.
Mexico supplies the US year-round, with seasonally lower shipments during summer in the northern hemisphere, when California production reaches its peak. The US also imports from Peru, mainly from May to August. The expanding demand for avocados goes beyond guacamole and specific dates, events, and holidays. The popularity of avocados is increasing year-round, which is reflected in strong prices outside of Super Bowl weekend and Cinco de Mayo celebrations (see Figure 3).
Continued Demand in an Overcrowded European Market
Europe is the main destination market for the three South American countries. In the last decade, we have seen unstoppable growth in avocado demand, leading to a year-round supply derived from at least 10 different countries. South American countries lead in this market, representing 55% of the total volume in 2019 and 2020. In 2020, Peruvian avocado exports to Europe increased by 39%, or 70,000 metric tons, with peak volumes in June. In 2021, despite the 22% increase in Peruvian avocado exports, the supply was better distributed between May and August, leading to better wholesale prices (see Figure 4).
Increasing volumes are forecast for exports from South America and other producing countries, which will increase competition and affect prices in the June-to-August period in 2022.
Attractive Chilean Market
Chile has a long tradition of avocado production, spanning more than 70 years. In the late nineties, strong marketing campaigns helped to increase domestic consumption. At the moment, around 40% of Chilean avocados remain in the country, with the remaining 60% exported, mainly to Europe. In recent years, the exported volume has faced stable or decreasing wholesale prices in Europe due to ever-increasing competition.
Chile’s avocado consumption is the second highest in the world after Mexico, at around 6kg per person. This means year-round strong demand, susceptible to high prices in periods of low production. In 2021, the lower domestic supply and high prices opened the door to Peruvian avocados that flooded the market (see Figure 5). Avocado imports doubled in 2021, reaching a maximum of 71,500 metric tons according to ODEPA (see Figure 6), 94% from Peru and 6% from Mexico.
This creates uncertainty for next year, when the Chilean supply will have a bumper crop (+57%). Increasing competition in the European market, with stable to declining prices, could lead to a scenario in which a greater portion of Chilean production stays in the country. This would mean stable or even lower prices in the Chilean market in 2022, decreasing the incentive for Peruvian exporters to focus on the southern country.