2020 export market analysis

Wayne Prowse, Fresh Intelligence Consulting

After reaching a record level of 4,272 tonnes exported in 2019, the export results in 2020 took a tumble: down 46% to 2,300 tonnes. Simply, the word COVID has been front left and centre for all of us in the past year and its impact on Australian avocado exports cannot be understated.

Avocado export markets

The impact on air freight was most significant, then a severe crop shortage in Western Australia drove domestic prices higher causing a disincentive to export. Our key international markets, Singapore and Malaysia, were filled with avocados mainly from Mexico and Kenya at price points that were around 50% of the Australian domestic prices and very few could be sold to importers at the prices that Australian growers could achieve in the domestic market.

The hard fought access to Japan yielded just six (6) tonnes in 2020, all being in February, which was negligible in the 80,000 tonnes market dominated by the Mexican supply.

Hong Kong was the only market that defied the trend and took 698 tonnes, an increase of 6% on last year.

In this section we will take a brief look at the global situation and then at the 4 markets of interest to understand more of the market dynamics and import demand though this last year, and Australia’s position.

Global

Global avocado production continues to experience sustained growth above the rates for overall fruit production in the past decade. Global avocado increased 5.8% to 7.2 million tonnes in 2019 and some 40% of the world’s avocados are internationally traded. In contrast Australia’s production reached 87,000 tonnes or 1.2% of the global production with less than 2.6% exported. This shows that Australia remains strongly domestic focussed.

The growing acceptance of avocados by European and North American consumers for use in a wide variety of meal situations, and the emerging interest from North Asian markets is fuelling the production growth. Investment in promotion and the good news stories of avocado health benefits are helping increase demand along with improved distribution and ripening systems.

Almost 70% of avocados are produced in Latin America, notably Mexico, Peru and Colombia, and from there the distribution lanes reach as far as Europe, Asia and North America. Kenya is now the largest exporter of avocados in Africa and is making an impact in South East Asian markets of interest to Australia.

Singapore 4% Malaysia 2% Thailand 1% Taiwan 1% all other 0%

South Korea 10%

Hong Kong (net) 5%

China 20% Japan 57%

Figure 1. Avocado Imports by Asian market share. Source: ITC Trademap; Fresh Intelligence analysis

Avocado Key Measures (Calendar Years) 2019 2020 Change

Volume (tonnes) 4,272 2,300 -46.2% Value (M AUD) 24.5 19.1 -22.0% $ per kg $5.74 $8.32 44.9%

Source: IHS Global Trade Atlas; Fresh Intelligence analysis

Mexico, Peru, Chile, South Africa and Kenya combined account for 90% of the global avocado export trade, which stood at 2.5 million tonnes in 2019. The United States is the single largest importer of 1.2 million tonnes of avocados, mostly from Mexico while Europe collectively imported 500,000 tonnes (excluding internal trade), mostly from Peru, Chile, Colombia and Mexico.

Asian markets imported 140,000 tonnes of which 80,000 tonnes were imported by Japan and almost 35,000 tonnes by China and Hong Kong.

China’s imports have receded after rapid growth and part of this is due to the increasing local production. Some reports suggest that up to 100,000 tonnes of production is due to come online from plantings mainly in the southern Yunnan Province by 2025 which is starting to impact on import demand.

Australia’s major export markets were again Singapore and Malaysia, which account for 6% of the total avocados imported by the region even though Australia’s trade fell away by over 50%.

Singapore

Nowhere is the demand and supply impact on pricing more evident than in Singapore. With a small affluent population of 5.6 million, Singapore is Australia’s leading destination for avocados and also Australia was the leading supplier of avocados until 2020. Imports from Australia dropped 54% offset mainly by the United States. As Australia’s prices increased the volumes collapsed and the share shifted to the United States while the Mexican volume remained steady. Kenya also increased although it appears to have offset South Africa’s decline. Regardless of the shifts in supply the overall market demand was virtually unchanged, up just 1.6% to 5,553 tonnes.

Figure 2 shows the price movements through 2020 highlighting Australia’s CIF price (average A$8.82) steadily increasing to over an insane $18.00 per kg in December albeit with almost no trade. The price of Mexican avocados (average A$5.40), decreased to around A$4.20 per kg by December. Mexico’s highest volumes were from September to March. During this period Australia’s CIF price was below Mexico although there was almost no trade from Mexico from April to June. Kenya is in the market year-round with prices below A$4.00 per kg, while New Zealand is in the market from September to January at A$4.64 per kg average. The United States maintained price points between A$5.50 to A$6.00 for the year and raised volumes by over 5-fold to 1,284 tonnes offsetting Australia’s decrease.

Malaysia

With a population of 32 million, Malaysia is Australia’s second leading destination after Singapore for avocados and again Australia is the leading supplier accounting for almost 26% of all avocados imported. Like Singapore, Malaysia has unrestricted access and is therefore open to many suppliers although despite a much larger population the imports were under 4,000 tonnes in 2020. Australia’s advantage is being the closest supplier and having a strong quality reputation although this cannot guarantee on going demand if price premiums get too far ahead as they did in 2020.

600

500

TONNES PER MONTH 400

300

200

100

Imports of avocados by Singapore in 2020 Tonnes Change Share A$ / kg CIF

Australia

853 -54.3% 15.4% $8.82 Mexico 1,591 -4.6% 28.7% $5.40 United States 1,284 514.4% 23.1% $5.72 Kenya 755 47.5% 13.6% $3.29 New Zealand 467 -25.2% 8.4% $4.64 South Africa 263 -40.6% 4.7% $4.10 Other 340 6.1%

Total 5,553 1.6% 100% $5.52

Source: ITC Trademap; Fresh Intelligence analysis

Imports of avocados by Malaysia in 2020 Tonnes Change Share A$ / kg CIF

Australia

896 -52.9% 26.1% $8.85 Mexico 724 258.4% 21.1% $4.29 United States 493 61.1% 14.3% $4.77 Kenya 485 -17.7% 14.1% $3.17 New Zealand 192 45.5% 5.6% $5.77 Other 646 18.8%

Total 3,436 -12.2% 100% $5.19

Source: ITC Trademap; Fresh Intelligence analysis

$20.00

$18.00

$16.00

$14.00

$12.00

$10.00

$8.00 AU$ PER KG (CIF)

$6.00

$4.00

$2.00

Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20 Jul-20 Aug-20 Sep-20 Oct-20 Nov-20 Dec-20 $0.00

Total Tonnes Australia Tonnes Australia AU$ Mexico AU$ United States AU$ Kenya AU$ New Zealand AU$

Figure 2. Singapore avocado CIF prices per month overlaid with the total and Australian share of import volumes.

Figure 3 shows the price movements through 2020, highlighting Australia’s CIF price (average A$8.85, although nudging A$12.00 in September) and that of Mexico (average A$4.29), which made substantial inroads to the Malaysian market and eroded Australia’s market share. United States and New Zealand both increased volumes to Malaysia with prices around the A$5.00 mark. Kenya’s decreased volumes by 17% even though the price points were the lowest of all suppliers.

Hong Kong

Hong Kong trade is strongly influenced by China. With a population of 7.4 million, Hong Kong has developed a strong demand for avocados for local consumption, particularly since Mexico, United States, Chile and Peru can export direct to China. However approximately 55% of this volume is reexported to China leaving around 6,500 tonnes for domestic consumption.

Total imports dropped almost 17%, mainly due to reduced supply from Mexico and Chile allowing Australia’s market share to increase from 4.1 to 5.6% of the 14,750 tonnes imported. Hong Kong has unrestricted access, and some suppliers use Hong Kong as a pathway to China.

Figure 4 shows the price movements through 2020 based on Hong Kong statistics, and highlights Australia’s CIF price (average A$8.80) was the highest of all major suppliers. Australia’s highest volumes were not surprisingly in April and May when the prices were below A$8 per kg with Mexico and Chile not supplying the market at that time.

Japan

Japan is the largest importer of avocados in Asia with a population of 125 million. In 2020 the country imported 79,560 tonnes of avocados and has increased 2.9% since the previous year. Mexico has long been Japan’s dominant supplier though access from several markets notably Peru, New Zealand and now Colombia is challenging Mexico’s dominance pushing its market share below 90% for the first time.

400

Imports of avocados by Hong Kong in 2020 Tonnes Change Share A$ / kg CIF

Australia 819 12.1% 5.6% $8.80

Mexico Peru

4,417 -11.5% 29.9% $3.46 4,672 32.6 31.7% $3.05 Chile 2,785 -62.1% 18.9% $3.81 United States 1,213 300.3% 8.2% $5.55 New Zealand 172 132.5% 1.2% $7.03 Other 671 4.6%

Total 14,750 -16.8% 100% $3.95

Source: ITC Trademap; Fresh Intelligence analysis

Imports of avocados by Japan in 2020 Tonnes Change Share A$ per kg CIF

Australia 6 -83.8% 0.0% $5.50

Mexico

68,514 -3.2% 86.1% $4.02 Peru 8,360 86.6% 10.5% $4.11 United States 2,467 190.6% 3.1% $5.67 Colombia 213 1,083.3% 0.3% $3.83 Other 0 0.0%

Total 79,560 2.9% 100% $4.08

Source: ITC Trademap; Fresh Intelligence analysis

Australia gained access for avocados to the Japanese market in May 2018, from Western Australia and other areas that are free of Queensland fruit fly. This means that our supply window correlates with Mexico’s national peak export season to all destinations (December to April) and their lowest price period below A$4.00 per kg shown in Figure 5. Australia exported 37 tonnes in 2019 and this reduced to 6 tonnes in 2020 consisting of 2 consignments in February 2020.

$14.00

350

300

TONNES PER MONTH 250

200

150

100

50

Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20 Jul-20 Aug-20 Sep-20 Oct-20 Nov-20 Dec-20

Total Tonnes Australia Tonnes Australia AU$ Mexico AU$

United States AU$ Kenya AU$ New Zealand AU$ South Africa AU$

Figure 3. Malaysia avocado CIF prices per month overlaid with the total and Australian share of import volumes.

$12.00

$10.00

$8.00

$6.00

$4.00

$2.00

$0.00

2,000

1,800

1,600

TONNES PER MONTH 1,400

1,200

1,000

800

600

400

200

Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20 Jul-20 Aug-20 Sep-20 Oct-20 Nov-20 Dec-20

Total Tonnes Australia Tonnes Australia AU$ Mexico AU$ Peru AU$

Chile AU$

Figure 4. Hong Kong avocado CIF prices per month overlaid with the total and Australian share of import volumes.

9,000

8,000

7,000

TONNES PER MONTH 6,000

5,000

4,000

3,000

2,000

1,000

Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20 Jul-20 Aug-20 Sep-20 Oct-20 Nov-20 Dec-20

Total Tonnes Australia Tonnes Australia AU$ Mexico AU$ Peru AU$ United States AU$

Figure 5. Japan avocado CIF prices per month overlaid with the total and Australian share of import volumes. Source: ITC Trademap; Fresh Intelligence analysis

$12.00

$10.00

$8.00

$6.00

$4.00 AU$ PER KG (CIF)

$2.00

$0.00

$8.00

$7.00

$6.00

$5.00

$4.00

$3.00 AU$ PER KG (CIF)

$2.00

$1.00

$0.00

Figure 5 shows the price movements through 2020, highlighting Australia’s CIF price (average A$5.50) and that of Mexico (average A$4.02), against the background of total volumes and Australia’s market share by month, albeit negligible on this scale. Mexico’s highest volumes are in March and April with over 8,000 tonnes per month correlating with their lower price points while Peru peaks in July with over 2,000 tonnes even though Mexico barely falls below 4,000 tonnes in any given month in their off season. In 2019/20 Australian avocados were in the market from September to March, albeit very small volumes, though not repeated in 2020 after being impacted by the supply shortage in Western Australia. The high domestic prices manifested in CIF prices in other markets of more than A$8.00 or 100% premium to Mexican avocados imported by Japan meant no further trade succeeded in 2020.

More information

Monthly import and export updates are regularly uploaded to the industry’s Best Practice Resource Library: avocado.org.au/bpr/.

Acknowledgement

The Avocado industry and market data capture and analysis (AV20000) project has been funded by Hort Innovation, using the avocado research and development levy, and contributions from the Australian Government.

Great results from the bottom up.

Serenade® Prime unlocks soil resources, to support development of larger and more efficient root systems.

Trial results in young avocado plants confirm that using Serenade Prime makes soil resources more available, leading to an increase in the number of roots, their length and their surface area. And we all know that a healthy root system below the ground, delivers healthy results above it.

Untreated Control Serenade Prime

Untreated Control

Serenade Prime

= indicates significance compared to UTC Trial ID: Evaluation of Serenade Prime on various tree crops - Avocado. Mahmood. West Scramento. December 2018

Always consult the product label for detailed information. The information and recommendations set out in this brochure are based on tests and data believed to be reliable at the time of publication. Results may vary, as the use and application of the products is beyond our control and may be subject to climatic, geographical or biological variables, and/or developed resistance. Any product referred to in this brochure must be used strictly as directed, and in accordance with all instructions appearing on the label for that product and in other applicable reference material. So far as it is lawfully able to do so, Bayer CropScience Pty Ltd accepts no liability or responsibility for loss or damage arising from failure to follow such directions and instructions.