This is the warning from Sergio Paz, general manager of Coliman Avocados, who describes all the particularities that have changed the price and size behavior for Mexican avocados in the United States.

For the past two years, Sergio Paz has led Coliman Avocados as general manager. Coliman Avocados belongs to the Coliman Group, which has over 32 years of history. The company began exporting avocados in 2002, providing ample experience to analyze current trends in the North American market.

In this conversation with Avonews, he clearly warns of the new scenarios, where competition is becoming fierce, due to adjustments in the California harvest and the arrival of new origins that are managing to occupy a space in the main consumer market for this fruit in the world.

- When reviewing Avobook's reports, we see one particularity: it has been more difficult to predict or anticipate how prices would behave in the United States. Do you agree with that idea?

“The current situation with Mexican fruit prices dates back to the end of March, when we reached the peak price of the previous season. Since then, prices have been falling steadily. March coincided with the arrival of fruit from Peru and California, and obviously with the entire summer season, during which Mexico essentially played a significant role, but ultimately, it was a complement to imports from other origins. So, when the new Mexican season arrived in July, with a larger volume than anticipated, we found that the available space was still occupied mainly by Peru and California, and to some extent by Colombia. Prices began to fall even more sharply, to levels that no one had anticipated. Mexico has had to push its fruit forward by increasing volume through price.”

- To what level has the transaction reached?

“We’ve had prices between 17 and 18 pesos per kilo for almost five weeks now, which is equivalent to between 90 cents and one dollar. We haven’t had a year with these prices since 2015. On the other hand, if we look at the season from July onwards, this has been the year in which Mexico has exported the most fruit to the United States and other destinations, between July and October. We’re about 14% higher than last year.”

- And what price should it have if we were in a more typical year?

"I think we should be at least at 25 pesos per kilo, that's 1.35 dollars per kilo."

Given this scenario, could there be a rebound effect and the price rise significantly at some point, or will the current situation remain the same?

“It’s really difficult to predict, because every year has been very different, and sometimes we get some pretty interesting surprises. But right now, I think the price will stay low throughout November, probably within the range we’ve been seeing. We could expect demand for fruit to increase a little in December, when we might have slightly higher prices. But I don’t see them jumping significantly. Maybe 2 or 3 pesos more per kilo. Perhaps hovering around the 20-peso-per-kilo mark between December and January. In January, we might expect increased demand with the Super Bowl. But it’s usually a month when producers make a lot of fruit available for harvesting. That’s why we wouldn’t see a significant increase due to that increased demand.”

Another interesting piece of data we've seen from Avobook is a similarity in the price curves for fruit from California and Mexico. Is that a regular occurrence or is it also a peculiarity of the period?

“I think this phenomenon we've seen these past few weeks is happening because California shouldn't have any fruit left. It took them a long time to exit the market. Currently, their market share is very marginal, but they still extended their season considerably. California's product was also affected by the influence of other origins (Peru and Colombia). We had always considered the competition with California to be very healthy: California sold at high prices, Mexico perhaps a little lower, but we had good prices and a good market. Now all those beliefs we had have disappeared. In some sizes, California was selling cheaper. At certain times, we saw them withdraw from the market a bit and then return. Their harvest management is also changing. And not just this year. Furthermore, they will have larger yields due to the plantings they've established in the north—larger and later-planted. So, they won't be harvested as early as they used to be.”

- So, are we not facing an exceptional period, but rather a kind of "new normal"?

“I agree. This situation is no longer temporary or seasonal. Peru and Colombia are here to stay, California's production is constantly increasing, and Mexico, although no one talks about it much, continues to grow. I think all producers and exporters are aware that we need another way to reach customers, the supermarket chains. Ultimately, they decide what fruit they're going to make available to the consumer.”

- What should be the basis of a strategy to deal with these new circumstances?

“It has to be stability, a constant supply, and we need to be less speculative with Mexican fruit. It’s very clear to us that if we offer that to retailers, they’ll prefer Mexican fruit. It’s very well positioned to compete; it will have the volume. But if we continue with that speculation, knowing that the big chains don’t like it, they’ll go to other origins as soon as fruit is available.”

One of Mexico's competitive advantages has been its proximity to the market. But importers are learning to handle avocados from distant origins. Is this also a new challenge?

“In fact, Colombia is quickly reaching the East Coast, and an example of a country that can grow is Guatemala. As you can see, they're not that far away. We were alone for many years, used to not competing, and were the only option for many years. That's over.”

- What volume is projected for the remainder of the season, from November until the end of the season?

“Approximately 75% of the harvest remains. We're four months into the season. There's still plenty left. I don't foresee any supply problems with fruit from Mexico.”

- Regarding calibers, there have also been some very interesting variations. The Abobook Data team observed that calibers 84 and, to a lesser extent, 70 are showing little fluctuation throughout the year. Is there any explanation for this?

“There are several factors. Mexico has experienced two years where the average fruit size decreased. As a result, many markets shifted to handling smaller fruit. When we entered the new season, demand was very strong, and it remains so to this day. So, what happened? More 84-70 size fruit has been harvested to meet that demand. I believe that has helped ensure a good supply of those sizes and kept prices stable.”

- But there is also another phenomenon: a smaller-than-usual price gap between large and small calibers.

“This is because—considering the scenario described above—exporters are pushing larger sizes onto the market. Obviously, the importer says, 'I'll take them, but at a lower price.' That's why the market for smaller fruit has remained stable, but there hasn't been that price difference with larger sizes, because we have to push them with higher prices.”

- And has that had an impact on the return to the producer?

“It’s been a bigger problem for the exporter. As you know, in most cases the producer is paid a price per kilo. The exporter is the one who breaks it down and sells it by size. Of course, the producer doesn’t like it when we come along and tell them to have large fruit, but without offering a price incentive. But they still have to move their fruit. And we, as exporters, are the ones who turn things around and, from one day to the next, we have a load of sizes we weren’t expecting, and we have to somehow move it to get it off the shelves.”

- In this dynamic, what decisions do exporters have to make to keep the numbers in the black?

“There are many of us exporters. Currently, in APEAM, we have about 95 or a little more exporters. There are very large companies and very small ones. Some are also producers, and others aren't. Everyone manages the business as best they can. I can tell you about the strategy we follow: harvest and buy back what we've already sold. We try not to accumulate inventory and adjust the sizes and percentages according to what we know will be coming in from the fields. But it's impossible to think that we can tailor everything to very good clients and very good prices. We know that sometimes we'll have to push a certain size, but at Coliman, the philosophy is: if I don't have orders, I don't harvest.”

- In these fluctuations in calibers, are there any that are more difficult to position in the United States?

“The problem we’ve been seeing in the United States for a while now is that demand is also fluctuating a lot. Three weeks ago, we had very good demand for 48. But today, nobody wants it. We have to keep an eye on how the market moves. The good thing is that the trees will continue to produce everything.”

- After all this analysis, what is the most important lesson for Mexican industry?

“We have to put on our gloves to compete with other origins, in fair competition. Knowing that we are no longer alone.”

- It's a paradigm shift, because it was always said that competing with Mexico was impossible and that the new origin was the one that had to adapt. What attitude does the Mexican exporter need to change to take advantage of competitive advantages?

“We need to provide certainty to importers, wholesalers, and retailers—to all our clients. We don't want to be selling a box for $25 one day, then $32 three days later, and $45 ten days later. There can be price fluctuations. That's unavoidable, but they need to be much more moderate. If we run a promotion, retailers need to be confident that we'll honor the promotional price and not change it simply because demand has increased and prices have skyrocketed. And another thing: we need to improve productivity per hectare, especially in Michoacán, more so than in Jalisco. Although in Jalisco, some older orchards are starting to be replanted, and they're going to start having problems. But here in Michoacán, we have to increase our productivity per hectare.”

- And what is the reason for not having done that before?

“Producers are very used to the idea that even with low yields, it was still a good business. Not anymore. A producer who yields less than 12 or 13 tons per hectare is no longer going to be profitable; they'll have to be producing 15 tons or more. We're far from that. I'm not talking about impossible yields. But we've been too complacent: if I produce 10 tons and do very well, I don't need to produce 11. But the situation has changed.”