Avocados will likely be in short supply and more expensive due to Mexican-import suspension
- The federal government has suspended all imports of Mexican avocados after a U.S. plant safety inspector in Mexico received a threat.
- Avocado supply is expected to shrink in the coming weeks until the suspension is lifted.
- Consumers also will likely find themselves paying more at grocery stores and restaurants for avocado products.
Avocados will likely be in short supply and more expensive in the coming weeks if a current U.S. suspension of Mexican avocado imports persists.
On Saturday, the Mexican government confirmed the U.S. government had suspended all imports of Mexican avocados after a U.S. plant safety inspector in Mexico received a threat. The pause was a surprise, giving grocers, restaurants and consumers no time to prepare before Mexican avocado imports ground to a halt. And while the suspension is temporary, it's unclear how long it will last.
Michoacan was the only Mexican state fully authorized to export its avocados to the U.S. until the suspension. The United States relies heavily on the border nation for that product; roughly 80% of the avocados bought in the U.S. come from there, according to David Magana, Rabobank senior fruits and vegetables analyst. And this time of year, that number rises closer to about 90%.
"Obviously, we will see availability of avocados significantly decline in the next couple of weeks, and by economic logic, we can expect avocado prices to increase temporarily," Magana said.
However, California avocado production is up about 15% compared to the year-earlier period, Magana said. That should help offset at least some of the supply issues, although likely not enough to satisfy U.S. consumers' appetite for the fruit.
Since Michoacan began exporting the fruit about 25 years ago, avocado sales have skyrocketed, thanks to the soaring popularity of guacamole and avocado toast. From 2001 to 2018, Americans quadrupled their consumption of avocados to eight pounds a year per person, according to data from the U.S. Department of Agriculture. Super Bowl weekend still sees peak demand for the year.
Unofficially, Magana said the suspension could take several weeks to get lifted.
"If this ban lasts only two weeks, we will probably see less availability, but I don't think that the impact is going to be too big. We're just past Super Bowl weekend, and people probably already have avocados in their kitchen," he said.
Due to their growing popularity and seasonality, avocado prices are often unstable. Last year, higher shipment levels meant abnormally low prices, but strong demand so far in 2021 has raised prices.
For its part, the U.S. government hasn't given any official timeline for how long the suspension could last.
"The suspension 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 USDA's Animal and Plant Health Inspection Service said in a statement to CNBC.
The agency also said it is working with Customs and Border Protection to allow avocados that were inspected and certified for export by Feb. 11 to continue to be imported.
The grocery store won't be the only place to feel the pressure of the import ban. Restaurants will also likely have to pay more for avocados and face challenges securing supply. Truist analyst Jake Bartlett wrote in a note Monday that avocados account for 5% to 10% of Chipotle Mexican Grill's cost of goods sold and about 2% of El Pollo Loco's.
Chipotle has seen its quarterly earnings dented before by high avocado prices. The burrito chain was already anticipating seasonally higher avocado prices for the first quarter.
"We are working closely with our suppliers to navigate through this challenge," Chipotle CFO Jack Hartung said in a statement to CNBC. "Our sourcing partners currently have several weeks of inventory available, so we'll continue to closely monitor the situation and adjust our plans accordingly."
Despite the near-term price concerns, there is good news on the horizon for avocado fans. The U.S. recently approved a second Mexican state, Jalisco, to begin exporting its avocados. Magana expects those imports will start hitting U.S. grocery stores this summer, which could help bring prices down in the long term.