In what Rabobank calls an ‘avo-lanche’ of avocados, Australia is having a bumper year in terms of production. The massive supply is driving prices down to as low as less than one Australian dollar per unit (US$0.7), with prices being down 47% compared to the last five-year average.
Australia is expected to produce 124,000 metric tons of avocados in2022, a 30,000 metric tons rise in a single year, with expectations that production will keep improving, reaching 173,000 tons in 2026.
Farmers, desperate to boost margins and escape this price race to 0$, are eyeing exports, with avocado sales abroad already being up 350% in 2021.
“Some producers would find these current prices difficult to break even,” Pia Piggot, RaboResearch associate, tells.
Margin for growth
Singapore and Malaysia already import half (46%) of their avocados from Australia. Other interesting markets for the product are Hong Kong, the Middle East and Japan. Rabobank underscores that India and Thailand offer vast growth opportunities that need to be tapped in order to dump the excessive supply.
“Australia has [for now] limited market access for exporting avocados, largely because of the Queensland Fruit Fly affecting phytosanitary requirements of importing countries,” explains Piggott.
“This is only the beginning, in Australia there is plenty more growth to come,” she highlights.
Over-optimistic tree planting of avocado trees during 2017 and 2018 – of over 100 hectares per year – will affect prices in the next decade, as the tree takes six years to mature.
Consumers are the big winners from this excess supply in a challenging year where it isn't easy to maintain grocery budgets in check. In fact, Australian buyers are paying less for more in this case. On average, each Australian household consumes 31.2% more avocados and pays 29.1% less.
However, household penetration of avocados is already at 78%, up 6% in a year, which limits the margin of domestic growth. Australians are already consuming 22 avocados per year (4.8 kg), this is considerable superior to the per capita consumption in Europe (1.33 kg), the US (3.8 kg) and Canada (2.5 kg), but still below the Mexican consumption (6.5 kg to 7 kg), according to the Centre for the Promotion of Imports from developing countries.
Overall, inflation in Australia reached 6.1% this June, with food costing 5.9% more than one year ago.
Even amidst rising inflation, avocado prices will continue their downward trend at least until Q4 2022, according to Piggot, when it is the off-season in Western Australia.
Too many avocado toasts supply
With domestic consumers buying 31.2% more avocados in a year and with exports being up 350%, excess supply should be experiencing a cooldown. However, production remains uncontrolled.
“A bumper 2021/22 crop in Western Australia was a turning point,” says Piggott.
Western Australia saw a 265% increase in production in 2021, with 21% more hectares of avocado trees reaching maturity. All other growing regions saw all-time highs in production numbers, except North Queensland – an area that saw a record a year earlier.
Some headwinds might make the tree plantation growth less reliable in the following years.
“Significant weather events and drought are also likely to affect the country’s avocado production, while the recent Varroa mite incursion in Australia may pose a threat to pollination and therefore production, and there is likely to be some industry consolidation along the way as well,” explains Piggott.
Export focus
Estimated annual exports will reach 12,500 metric tons this year, which will only bite a small part of the 124,000 metric tons of total production.
“Regaining balance in Australia’s avocado market requires both increased domestic demand and larger export volumes”, highlights Piggot.
Australia is also importing a substantial amount of avocados from New Zealand, which exported 57,000 metric tons in 2021, four of every five ending up in its neighbor supermarkets.
According to Rabobank, New Zealand is a more experienced exporter, allowing them to put more products on the market. In 2021, they exported 11% fewer avocados to Australia; however, they exported 154% to the rest of the world.
