Record Avocado Prices: Any Relief Coming?

Summary

WSJ Your Money Briefing: "Record Avocado Prices: Any Relief Coming?"
Aired: September 7, 2017; Host: Wall Street Journal

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Episode Overview

This episode explores the reasons behind the dramatic surge in avocado prices, investigating the underlying causes for the record highs and offering insights on whether relief might be on the horizon for consumers. Wall Street Journal reporter Ben Parkin joins to discuss the unpredictable world of avocado farming, the market impact of supply shortages, and the broader implications for both consumers and industries reliant on this increasingly popular fruit.

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Key Discussion Points and Insights

1. Why Are Avocado Prices So High?

• Volatility in Avocado Farming
  • Avocado production is highly unpredictable, with large yields one year often followed by poor crops the next.
  • California’s recent weather played a major role: “[California last had] it was too hot, if I'm not mistaken, and dry. And that set this year's crop off to a bad start...” (Ben Parkin, 00:47)
  • This resulted in California’s harvest being almost half of last year’s.
  • Simultaneously, there’s been a shortage from Mexico—the world’s largest producer—magnifying the supply crunch:

    “So the two together has just created a kind of a double whammy.” (Ben Parkin, 01:11)

2. The Impact on Consumers

• Price Jump
  • The average price per avocado rose 35% in the first half of the year, reaching $1.21 (Host, 01:29).
• Future Outlook
  • A positive note: California’s next crop is off to a promising start thanks to ample rain:

    “The good news is that next year's California crop has got off to a good start, apparently with plenty of rain...expecting a bigger crop next year.” (Ben Parkin, 01:38)

3. The Popularity of Avocados

• Surging Demand
  • U.S. avocado consumption has quadrupled since 2000 (Host, 01:50).
  • Health trends are fueling demand:

    “Avocados have been able to kind of ride this superfood and natural food wave. And that's made them very desirable to a lot of people.” (Ben Parkin, 01:58)

4. Effects on Restaurants and Businesses

• Chain Restaurants at Risk
  • Companies like Chipotle, which rely on avocados for guacamole, face direct financial exposure:

    “A company like Chipotle just has to weather these kinds of storms. There aren't many ways for them to avoid it. And the current record prices are setting them up potentially for some financial hits later this year.” (Ben Parkin, 02:59)

• Volatility is the Norm
  • Ben emphasizes that prices “swing up and down” and this spike, while significant, may be temporary (02:46).

5. Industry Efforts to Stabilize Supply

• Innovation in Farming
  • The industry is working on developing new avocado strains that could even out annual yield swings, aiming for reliability in both crop size and price:

    “Scientists trying to develop ways to grow avocados that will be more consistent from year to year and hopefully more reliable in that respect in terms of prices and in terms of supply.” (Ben Parkin, 03:39)

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Notable Quotes & Memorable Moments

• On unpredictable crops:

  “Avocado farming is quite unpredictable. And, you know, often a large crop one year is followed by a small crop the next.” (Ben Parkin, 00:47)

• On consumer trends:

  “People are increasingly turning against a lot of things that have been staples in the past and processed foods and whatnot, avocados have been able to kind of ride this superfood and natural food wave.” (Ben Parkin, 01:58)

• On restaurant impact:

  “There aren't many ways for them to avoid it. And the current record prices are setting them up potentially for some financial hits later this year.” (Ben Parkin, 02:59)

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Timestamps for Key Segments

• 00:19: Host introduces topic/guest and sets context
• 00:47: Ben Parkin explains price spike causes
• 01:29: Discussion of consumer price increases and outlook
• 01:58: Health trends and avocado demand
• 02:46: Impact on restaurant chains and business implications
• 03:25: Industry solutions for stabilizing supply and prices

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Summary: Essential Takeaways

• High avocado prices are due to both weather-driven shortfalls in California and a Mexican supply shortage—a “double whammy.”
• Consumers are paying 35% more per avocado, but hope exists for next year with anticipated larger crops.
• Avocado popularity remains strong, thanks to health food trends.
• Restaurants like Chipotle must absorb price swings, which could “hit the balance sheet” this year.
• The farming industry is investing in stable crop development to ease future volatility.

This brief but insightful episode provides clarity on the realities behind avocado pricing and the ongoing quest for reliability—in both crops and cost.

Transcript

[A]

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[B]

Matters from the Wall Street Journal. If you've been to the grocery store recently, you'll notice the price of avocados has gone up. Not just up, way up to record highs. So what's the story behind the price increases, and can we expect prices to come down? Joining us to discuss is Wall Street Journal reporter Ben Parkin. So, Ben, avocado prices have risen to, in some cases, record highs. What has caused the spike in prices?

[C]

Well, it's been a number of factors. The first thing is that avocado farming is quite unpredictable. And, you know, often a large crop one year is followed by a small crop the next. And California last had it was too hot, if I'm not mistaken, and dry. And that set this year's crop off to a bad start, as it were. This year in particular, rather this summer, California had a harvest. It was almost half of last year's. And that's coincided with a shortage coming out of Mexico, which is the world's largest producer. So the two together has just created a kind of a double whammy.

[B]

Now, the average price of an Avocado is up 35% in the first half of this year to $1.21 per avocado. Is there any hope down the line for consumers?

[C]

The good news is that next year's California crop has got off to a good start, apparently with plenty of rain and whatnot. So they're expecting a bigger crop next year.

[B]

And US consumption of avocados has quadrupled since 2000. Consumers are drawn to the health benefits of avocados.

[C]

Yeah, it gets a lot of good publicity with the sort of healthy fat content and nutrients. So at a time when people are increasingly turning against a lot of things that have been staples in the past and processed foods and whatnot, avocados have been able to kind of ride this superfood and natural food wave. And that's made them very desirable to a lot of people.

[B]

I'm speaking with Wall Street Journal reporter Ben Parkin, and you're listening to youo Money Matters. Thanks for listening, everybody. Now, Ben, for restaurant chains like Chipotle that use large volumes of avocados for guacamole, for example, the price hike could really hurt them in the balance sheet.

[C]

Prices are very volatile. You know, they swing up and down. And we're at the may well be at the peak of a huge spike, which would mean that they might get some relief in the months to come. But a company like Chipotle just has to weather these kinds of storms. There aren't many ways for them to avoid it. And the current record prices are setting them up potentially for some financial hits later this year.

[B]

And how is the farming industry hoping to take on the idea of having a bumper crop season one year and a less than robust season the next?

[C]

One of the ways in which people are trying to prepare themselves for rather buttress. There's a business against these big swings in prices is through developing strains of avocado trees and fruit that don't have this phenomenon of big years followed by small years. So that's something scientists trying to develop ways to grow avocados that will be more consistent from year to year and hopefully more reliable in that respect in terms of prices and in terms of supply.

[B]

All right. Ben Parkin of the Wall Street Journal, thanks for joining us.

[C]

Thanks very much.

[A]

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