Below is a brief excerpt from a complementary research note written by our Consumer Staples analysts Howard Penney and Daniel Biolsi. We are pleased to announce our new Sector Pro Product Consumables Pro. Click HERE to learn more.
Mexico is not the world’s largest avocado producer. The Dominican Republic is the largest producer, but the country’s residents consume 105 pounds annually, leaving little for the export market (in comparison, the per capita consumption in the U.S. is 8 pounds).
The Dominican Republic is taking steps to change that and export more, but its varieties are the less popular green skin varieties.
They are popular in Hispanic markets in the U.S., but not elsewhere, as Hass is dominant.
Demand has grown 10% annually in recent years in the U.K. and E.U., while the US has been trending at an MSD% growth rate. All of the imports of avocados from Mexico come from the state of Michoacan, which limits growth.
The avocado season is now turning from California to Mexico, where it appears the harvest will be abundant.
Peru is a small but growing significant supplier for the U.S. This year Peru will export 180M pounds to the U.S., similar to the last two years. Mission Produce is producing avocados on 8,300 acres it owns in Peru.
The U.S. market only represents 30% of Peru’s production, with the rest going to the U.K. and E.U.
The current harvest in Peru, which is just coming to an end, is seen to have outstanding quality, and prices have been increasing from $14-15 per package in September to nearly $22 this week.
Colombia grows Hass avocados and could also be a future exporter to the U.S., but its production currently goes to the E.U.
Mission Produce is currently trading at its IPO price of $12, lower than the initial $15-17 range. Single commodity crop companies have not had a great public track record, but avocados are not like other crops. We are on the sidelines due to the inherent commodity risks, but we do appreciate the secular growth story.