Avocadonomics

For better or for worse, I seem to have acquired a reputation as the go-to guy regarding the price of trendy foods. So a few weeks ago, I talked to Bloomberg reporter Kyle Stock about the price of avocados. Here is the article that he wrote, which also features insights from my Purdue colleague David Widmar.

This is what I had to say:

When a new tree is planted, it won’t bear much fruit until its third year. At the moment, that stings consumers. Supply can’t catch up with demand in a manner of months, as it can with a product such as the tomato. All the while, though, farmers are watching the price, ready to plant where they can and cash in. This fall’s expensive avocados may trigger a glut in two or three years. That’s what happened with quinoa in 2015, according to Bellemare. After doubling to record highs, prices for the trendy grain swooned.

“When you see this kind of crazy demand, there are a lot of people sitting on the margins that decide to get in and plant,” he said. “Eventually, all those extra-normal profits get competed away.”

In the process of preparing for my call with Kyle, I read a whole bunch about avocados, as they were a commodity I knew little about.

Here are some of the things I’ve learned, in no particular order (I list my sources at the end of this post):

  1. We pretty much owe the fact that we in the US eat and have access to a relatively stable supply of avocados entirely to a postal worker named Rudolph Hass, who was growing avocados in his backyard and selectively bred the best-tasting ones; today, 95% of avocados eaten in the US each year–all four billion of them–are of the Hass variety.
  2. The average American eats 7 lbs of avocados each year. But this average likely conceals a lot of heterogeneity, and I’d bet that there are many people who eat double or even triple that amount given that many people don’t like avocados. Though 90% of Latinx folks in the US eat avocados, that is only true for 50% of all Americans.
  3. The name “avocado” comes from the Aztec word ahuacate, whose direct translation in English–“testicle”–was not exactly great marketing-wise. So in the early 20th century, a group of growers invented the name “avocado” because of it’s similarity to the original Aztec name.
  4. You may think the (in)famous avocado toast is a newfangled invention, but the New York Times apparently suggested spreading avocado on toast as early as… 57 years ago.
  5. Vine ripe tomatoes and large Hass avocados appear to be complements, as “discounting or lowering the price of the tomatoes increases the volume of large Hass avocados.”
  6. The US is the world’s biggest importer of avocados. Besides Hass, common varieties are Reed Fuerte and Zutano (both grown in California) and Choquette and Hall (both grown in Florida). Both California and Florida are the leading avocado-growing states in the US, followed by Hawaii. A full 90 percent of US avocados come from California.
  7. Mexico is the world’s biggest producer of avocados, followed by Indonesia.
  8. Avocado imports to the US are highest in December and January and at their lowest in July. If you look at avocado price data, prices are consistent with import availability, with the price being the lowest in December-January (so it is perhaps no surprise that guacamole is so pervasive at Super Bowl parties) and the highest in July.
  9. Avocados enter the US from Mexico duty-free thanks to NAFTA. So all this talk of renegotiating NAFTA might spell doom for that (relatively) cheap avocado toast you like to have at brunch.
  10. The reason why Kyle talked to me in the first place was because he wanted to know about the price-elasticity of the demand for avocados. Given that avocados are not a staple, even for people who have historically eaten it, I’d venture to guess that the demand for avocados is relatively price-elastic. And lastly, on the income-elasticity of the demand for avocados: “because avocados are much like a luxury food good, people are more likely to buy more avocados if their income increases.”
  11. Avocados have 60% more potassium than bananas, and its consumption has quadrupled in the US since 2000.

Finally, I think the End Times peak avocado might be upon us:

Sources: Time article for 1 to 4 above; Hass Avocado Board for 5; USAID for 6 to 9; here for 10.

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