Avocados at a crossroads: how tariffs affected harvests in week 10
Mexico
In week 10, Mexico exported 820 shipments of avocados to the United States. The most significant event of the week was the implementation of a 25% tariff by the United States on all imports of Mexican products, including avocados. Although previously announced, the measure took both importers and exporters by surprise, as they had likely hoped for a postponement, which did not occur until three days later.
The confusion ranged from how to use the sales incoterms and the payment procedure to, above all, who would absorb the cost of the tariff. Tuesday the 4th was a chaotic day, filled with negotiations between exporters and importers, the implementation of procedures, and calls with customs brokers who also didn't seem to have all the information. For the value of an avocado shipment, the 25% tariff represents a significant amount to pay, which would affect not only the value of the product itself but also the importers' cash flow, given the considerable sums involved. By Wednesday, March 5th, it seemed that progress had been made in resolving most of the problems, but in the afternoon, further confusion arose: the tariffs would not be implemented. With this message, many importers assumed that by the 6th, tariffs would no longer be payable, which didn't happen until the 7th. In other words, all shipments imported on March 4th, 5th, and 6th were subject to tariffs, leaving importers in a very difficult situation with fruit that cost significantly more than fruit imported after the 7th. Finally, all of this was postponed until April 2nd, which will surely bring its own problems and uncertainty.
The volume harvested during the week was below average due to the prevailing uncertainty, but this caused Mexican fruit inventories to decrease to a lower-than-expected level, generating additional demand toward the weekend. By the start of week eleven, farmgate prices were already at higher levels, similar to those of the second and third weeks of January. Through Tuesday, March 11, Mexican fruit inventories continued to decline, while demand remained strong. A notable trend is the increased demand for smaller sizes, primarily 70s and 84s. It appears that some supermarket chains either switched to carrying these sizes due to the lower price, offered promotions, or both.
Fluctuations in demand for Mexican fruit have resulted in weeks of strong demand followed by weeks of weak demand since the end of January, with prices behaving similarly and generating uncertainty. This week, prices are trending upward again. These conditions are far from ideal for any sales program. Importers are undoubtedly dissatisfied and are hoping for increased volume from other sources, such as California and Peru, plus the volumes that Chile and Colombia will contribute, to balance demand and, in some way, help the Mexican industry stabilize prices or at least generate more certainty for the coming weeks.
Sergio Paz Vega
Mexico
