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A US ban on Mexican avocados could have a major impact on US fast-food chains
mmeisenzahl@businessinsider.com (Mary Meisenzahl)
© Provided by Business Insider
mmeisenzahl@businessinsider.com (Mary Meisenzahl)
© Provided by Business Insider
Chipotle restaurant workers fill orders for customers on the day that the company announced it will only use non-GMO ingredients in its food on April 27, 2015 in Miami, Florida. The company announced, that the Denver-based chain would not use the GMO's, which is an organism whose genome has been altered via genetic engineering in the food served at Chipotle Mexican Grills.
Joe Raedle/Getty
The US banned avocados from the Mexican state that produces the bulk of imports to the US.
Experts say that California producers cannot grow enough to keep up with demand.
Chipotle says it has enough avocados for several weeks of guacamole.
Avocados are about to get much more expensive as the US limits imports from Mexico.
The US banned importation of avocados from Michoacán, Mexico, which exports about $3 billion of avocados annually, on Friday. The ban started because of a US safety inspector who received a threatening phone call, Bloomberg reported, although details are scarce. It will "remain in place for as long as necessary to ensure the appropriate actions are taken, to secure the safety of APHIS personnel working in Mexico," the Department of Agriculture told The New York Times, referring to the Animal and Plant Health Inspection Service.
Slowing the flow of avocados to the US is bad news for consumers, who are consuming record volumes of avocados and already paying more than 10% more than they were at this time last year.
About 80% of US avocados are imported from Mexico, so even a temporary ban could have wide-reaching affects, reducing availability and spiking prices. Fast-food chains that rely on avocados are adding yet another product to their lists of supply-chain woes.
Experts say California isn't able to produce enough avocados to meet demand. California supplier Eco Farms says wholesale clients are reaching out about securing their supplies, Bloomberg reported. Prices could increase as much as 25%, Eco Farms president Steve Taft said.
At Chipotle, guac is famously extra but beloved by many customers.
"We are working closely with our suppliers to navigate through this challenge. Our sourcing partners currently have several weeks of inventory available, so we'll continue to closely monitor the situation and adjust our plans accordingly," Jack Hartung, chief financial officer, told Insider.
Hartung previously commented on avocado prices during a fourth-quarter earnings call earlier in February, when he noted high avocado prices cut into the margins gained by raising prices. Hartung said that he didn't expect a supply-chain crisis around the fruit, because prices typically jump seasonally. Historically, avocado prices tend to increase in the first quarter, as Hartung previously warned in 2021.
Moe's, Subway, and Taco Bell all also sell products that contain avocado, but did not immediately respond to Insider's request for comments.
Mexico Hopes to Resolve Avocado Spat With U.S. in Coming Days
Max de Haldevang, Bloomberg News
(Bloomberg) -- Mexico says it hopes to resolve the U.S. ban on avocado imports in a matter of days after finding the source of a threat to an inspector that triggered the suspension.
The country’s presidential spokesman Jesus Ramirez played down the nature of the threat to the U.S. inspector, but said the government is working with its northern neighbor to guarantee everyone’s safety.
The ban on avocados from Michoacán, a coastal state just west of Mexico City that has been plagued with violence in recent years, went into effect on Feb. 11 after an inspector said he received a threatening call to his cell phone. Mexican President Andres Manuel Lopez Obrador responded by suggesting there were political and economic interests at play in the U.S. decision.
Ramirez, who said he didn’t personally know the culprit’s identity, said the threat wasn’t concerning. “It has no importance,” he said in a phone interview with Bloomberg News, saying he understands it wasn’t a “direct threat.” He noted that Mexico’s national guard accompanies inspectors to ensure their safety. “There’s no problem so we’re going to see what more is required.”
Separately, Mexico’s avocado export group APEAM met with several U.S. and local authorities to review security measures and protocols, according to a tweet from the organization.
Mexico accounts for 80% of the U.S. market, and the ban could drive up prices for American shoppers on yet another product in an economy grappling with its worst inflation surge in four decades.
©2022 Bloomberg L.P.
Avocado Spat Brews After U.S. Inspector Is Threatened in Mexico
Elizabeth Elkin, Carolina Gonzalez and Leslie Patton
Mon., February 14, 2022,
(Bloomberg) -- The great avocado affair of 2022 began with a little-noticed weekend press release from Mexico’s Agriculture and Rural Development Ministry. The U.S. was shutting down imports of avocados from Mexico because one of its inspectors received a threatening phone call.
Details are hard to come by -- who made the threat? what was the threat? -- but what’s known is this: Mexican President Andres Manuel Lopez Obrador has not taken kindly to the U.S. action. In a Monday morning press conference, he said Mexican authorities would look into the allegations but also made clear he believes there’s something fishy about the incident. There are political and economic interests, Lopez Obrador said, who want to keep the Mexican avocados out of the U.S. market.
One group that wants the avocados to keep flowing north: U.S. consumers, who now eat more guacamole than ever. It’s only a matter of time before the import halt will squeeze supplies, as Mexico accounts for 80% of the U.S. market, and drive up the price on yet another product in an economy grappling with its worst inflation surge in four decades.
“We could see a significant reduction in availability” of avocados in the U.S. and higher prices as a result, said David Magana, senior analyst for Rabobank International in Fresno, California.
The ban on avocados from Michoacán, a coastal state just west of Mexico City, went into effect on Feb. 11, a day before Mexico issued its statement. The U.S. Department of Agriculture only confirmed its actions on Monday. Neither side would answer questions on the nature of the alleged threat, but Michoacán has been riddled by violence since drug cartels took over large swathes of the state years ago.
Read more: Did Avocado Cartels Kill the Butterfly King?
Avocados are already the most expensive for this time of year in government data going back two decades due to the labor shortfalls, higher production costs and wage hikes that have plagued the broader economy. It’s one of the many products that’s helping to push global food prices closer to a record high.
At the same time, demand for the fruit is booming. Per-capita consumption doubled in the 10 years through 2020 to 9 pounds, and could surpass 11 pounds by 2026, Magana said, citing industry projections.
Many of Michoacán’s avocados will likely have nowhere to go. It will be difficult to find new markets for the fruits, a spokesperson for Mexico’s Ministry of Agriculture said. Other possible destinations could be Chile, China, Korea, the European Union, United Arab Emirates, Canada and Japan. But those countries will buy fewer fruits and pay less for them.
In the U.S., avocado buyers are closely monitoring the situation. Chipotle Mexican Grill Inc.’s suppliers have “several weeks” of inventory available, Chief Financial Officer Jack Hartung said in a statement. Mission Produce, the biggest U.S. distributor, said it’s trying to source additional products from around the world. There may be limits to that, however, as there isn’t enough global supply to make up for the loss of Mexican avocados, especially on a near-term time horizon, JPMorgan Chase & Co. analysts said.
Francesco Brachetti, co-founder of Avocaderia, an avocado bar in New York City, said it’ll be a couple of weeks before consumers see impacts because there’s a lag between when fruit ships and when it’s sold in the U.S. Disruptions to the avocado supply chain usually don’t last longer than a few days or at most a week or two, but this time could be different, he said.
“The last couple of years have been unique, so we’ll take it with caution and wait for this situation to evolve,” Brachetti said.
Read more: Guacamole Prices Hit Record Before Super Bowl: Supply Lines
Avocado supplier Eco Farms in California is seeing an uptick in inquiries from wholesale clients worried about securing extra product in light of the ban, according to the company’s president Steve Taft. Taft said he could foresee raising prices by as much as 25% depending on how long the ban goes on.
Michoacán is “the big bully on the block. They dictate the market,” he said.
(Adds comments fromMexico’s Ministry of Agriculture, Chipotle in eighth and ninth paragraphs.)
Most Read from Bloomberg Businessweek
The US banned avocados from the Mexican state that produces the bulk of imports to the US.
Experts say that California producers cannot grow enough to keep up with demand.
Chipotle says it has enough avocados for several weeks of guacamole.
Avocados are about to get much more expensive as the US limits imports from Mexico.
The US banned importation of avocados from Michoacán, Mexico, which exports about $3 billion of avocados annually, on Friday. The ban started because of a US safety inspector who received a threatening phone call, Bloomberg reported, although details are scarce. It will "remain in place for as long as necessary to ensure the appropriate actions are taken, to secure the safety of APHIS personnel working in Mexico," the Department of Agriculture told The New York Times, referring to the Animal and Plant Health Inspection Service.
Slowing the flow of avocados to the US is bad news for consumers, who are consuming record volumes of avocados and already paying more than 10% more than they were at this time last year.
About 80% of US avocados are imported from Mexico, so even a temporary ban could have wide-reaching affects, reducing availability and spiking prices. Fast-food chains that rely on avocados are adding yet another product to their lists of supply-chain woes.
Experts say California isn't able to produce enough avocados to meet demand. California supplier Eco Farms says wholesale clients are reaching out about securing their supplies, Bloomberg reported. Prices could increase as much as 25%, Eco Farms president Steve Taft said.
At Chipotle, guac is famously extra but beloved by many customers.
"We are working closely with our suppliers to navigate through this challenge. Our sourcing partners currently have several weeks of inventory available, so we'll continue to closely monitor the situation and adjust our plans accordingly," Jack Hartung, chief financial officer, told Insider.
Hartung previously commented on avocado prices during a fourth-quarter earnings call earlier in February, when he noted high avocado prices cut into the margins gained by raising prices. Hartung said that he didn't expect a supply-chain crisis around the fruit, because prices typically jump seasonally. Historically, avocado prices tend to increase in the first quarter, as Hartung previously warned in 2021.
Moe's, Subway, and Taco Bell all also sell products that contain avocado, but did not immediately respond to Insider's request for comments.
Mexico Hopes to Resolve Avocado Spat With U.S. in Coming Days
Max de Haldevang, Bloomberg News
(Bloomberg) -- Mexico says it hopes to resolve the U.S. ban on avocado imports in a matter of days after finding the source of a threat to an inspector that triggered the suspension.
The country’s presidential spokesman Jesus Ramirez played down the nature of the threat to the U.S. inspector, but said the government is working with its northern neighbor to guarantee everyone’s safety.
The ban on avocados from Michoacán, a coastal state just west of Mexico City that has been plagued with violence in recent years, went into effect on Feb. 11 after an inspector said he received a threatening call to his cell phone. Mexican President Andres Manuel Lopez Obrador responded by suggesting there were political and economic interests at play in the U.S. decision.
Ramirez, who said he didn’t personally know the culprit’s identity, said the threat wasn’t concerning. “It has no importance,” he said in a phone interview with Bloomberg News, saying he understands it wasn’t a “direct threat.” He noted that Mexico’s national guard accompanies inspectors to ensure their safety. “There’s no problem so we’re going to see what more is required.”
Separately, Mexico’s avocado export group APEAM met with several U.S. and local authorities to review security measures and protocols, according to a tweet from the organization.
Mexico accounts for 80% of the U.S. market, and the ban could drive up prices for American shoppers on yet another product in an economy grappling with its worst inflation surge in four decades.
©2022 Bloomberg L.P.
Avocado Spat Brews After U.S. Inspector Is Threatened in Mexico
Elizabeth Elkin, Carolina Gonzalez and Leslie Patton
Mon., February 14, 2022,
(Bloomberg) -- The great avocado affair of 2022 began with a little-noticed weekend press release from Mexico’s Agriculture and Rural Development Ministry. The U.S. was shutting down imports of avocados from Mexico because one of its inspectors received a threatening phone call.
Details are hard to come by -- who made the threat? what was the threat? -- but what’s known is this: Mexican President Andres Manuel Lopez Obrador has not taken kindly to the U.S. action. In a Monday morning press conference, he said Mexican authorities would look into the allegations but also made clear he believes there’s something fishy about the incident. There are political and economic interests, Lopez Obrador said, who want to keep the Mexican avocados out of the U.S. market.
One group that wants the avocados to keep flowing north: U.S. consumers, who now eat more guacamole than ever. It’s only a matter of time before the import halt will squeeze supplies, as Mexico accounts for 80% of the U.S. market, and drive up the price on yet another product in an economy grappling with its worst inflation surge in four decades.
“We could see a significant reduction in availability” of avocados in the U.S. and higher prices as a result, said David Magana, senior analyst for Rabobank International in Fresno, California.
The ban on avocados from Michoacán, a coastal state just west of Mexico City, went into effect on Feb. 11, a day before Mexico issued its statement. The U.S. Department of Agriculture only confirmed its actions on Monday. Neither side would answer questions on the nature of the alleged threat, but Michoacán has been riddled by violence since drug cartels took over large swathes of the state years ago.
Read more: Did Avocado Cartels Kill the Butterfly King?
Avocados are already the most expensive for this time of year in government data going back two decades due to the labor shortfalls, higher production costs and wage hikes that have plagued the broader economy. It’s one of the many products that’s helping to push global food prices closer to a record high.
At the same time, demand for the fruit is booming. Per-capita consumption doubled in the 10 years through 2020 to 9 pounds, and could surpass 11 pounds by 2026, Magana said, citing industry projections.
Many of Michoacán’s avocados will likely have nowhere to go. It will be difficult to find new markets for the fruits, a spokesperson for Mexico’s Ministry of Agriculture said. Other possible destinations could be Chile, China, Korea, the European Union, United Arab Emirates, Canada and Japan. But those countries will buy fewer fruits and pay less for them.
In the U.S., avocado buyers are closely monitoring the situation. Chipotle Mexican Grill Inc.’s suppliers have “several weeks” of inventory available, Chief Financial Officer Jack Hartung said in a statement. Mission Produce, the biggest U.S. distributor, said it’s trying to source additional products from around the world. There may be limits to that, however, as there isn’t enough global supply to make up for the loss of Mexican avocados, especially on a near-term time horizon, JPMorgan Chase & Co. analysts said.
Francesco Brachetti, co-founder of Avocaderia, an avocado bar in New York City, said it’ll be a couple of weeks before consumers see impacts because there’s a lag between when fruit ships and when it’s sold in the U.S. Disruptions to the avocado supply chain usually don’t last longer than a few days or at most a week or two, but this time could be different, he said.
“The last couple of years have been unique, so we’ll take it with caution and wait for this situation to evolve,” Brachetti said.
Read more: Guacamole Prices Hit Record Before Super Bowl: Supply Lines
Avocado supplier Eco Farms in California is seeing an uptick in inquiries from wholesale clients worried about securing extra product in light of the ban, according to the company’s president Steve Taft. Taft said he could foresee raising prices by as much as 25% depending on how long the ban goes on.
Michoacán is “the big bully on the block. They dictate the market,” he said.
(Adds comments fromMexico’s Ministry of Agriculture, Chipotle in eighth and ninth paragraphs.)
Most Read from Bloomberg Businessweek
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