Required Report - public distribution

**Date:** 11/30/2007

**GAIN Report Number:** MX7084

MX0000

**Mexico**

**Avocado**

**Annual**

**2007**

**Approved by:**

![](media/image1.wmf)Suzanne E. Heinen

U.S. Embassy

**Prepared by:**

Gabriel Hernandez

**Report Highlights:**

Mexican Hass avocado production for MY 2007/08 is expected to reach a
record 1.10 million metric tons (MMT). Hass exports are expected to
reach 300,000 MT, of which approximately 200,000 MT will be exported to
the United States as a result of the recent complete market opening.
Exports of California Hass avocados to Mexico are forecast at 1,000 MT.

Includes PSD Changes: Yes

Includes Trade Matrix: Yes

Annual Report

Mexico City \[MX1\]

\[MX\]

Table of Contents

[PRODUCTION 3](#production)

[CROP AREA 3](#crop-area)

[INPUTS 4](#inputs)

[YIELDS 4](#yields)

[POLICY 4](#policy)

[CONSUMPTION 5](#consumption)

[AVOCADO PRICES 5](#avocado-prices)

[TRADE 6](#trade)

[TRADE MATRIX 7](#trade-matrix)

[TRADE POLICY 8](#section-22)

[MARKETING 8](#marketing)

# 

  --------------- ------------- ----------- ----------- ----------- ----------- ----------------- ---------- ---------- -----------
  **PSD Table**                                                                                                         

  **Country**     **Mexico**                                                                                            

  **Commodity**   **Avocados,                                                   (HECTARES)(1000                         
                  Fresh**                                                       TREES)(MT)                              

                  2005          Revised                 2006        Estimate                      2007       Forecast   

                  USDA\         Post\       Post\       USDA\       Post\       Post\             USDA\      Post\      Post\
                  Official      Estimate    Estimate\   Official    Estimate    Estimate\         Official   Estimate   Estimate\
                                            New                                 New                                     New

  **Market Year   08/2005                               08/2006                                   08/2007               
  Begin**                                                                                                               

  Area Planted    112,381       112,381     112,381     112,700     112,700     112,770           0          0          117,000

  Area Harvested  103,318       103,318     103,318     110,000     110,000     103,436           0          0          110,000

  Bearing Trees   0             0           0           0           0           0                 0          0          0

  Non-Bearing     0             0           0           0           0           0                 0          0          0
  Trees                                                                                                                 

  Total No. Of    0             0           0           0           0           0                 0          0          0
  Trees                                                                                                                 

  Production      1,016,594     1,016,594   1,016,594   1,050,000   1,050,000   1,072,063         0          0          1,100,000

  Imports         1,309         1,309       1,309       1,300       1,300       897               0          0          900

  Total Supply    1,017,903     1,017,903   1,017,903   1,051,300   1,051,300   1,072,960         0          0          1,100,900

  Exports, Fresh  228,000       228,000     228,000     248,000     248,000     270,541           0          0          300,000

  Fresh Dom.      754,903       754,903     754,903     763,000     763,000     763,000           0          0          765,000
  Consumption                                                                                                           

  For Processing  35,000        35,000      35,000      40,300      40,300      39,419            0          0          35,900

  Total           1,017,903     1,017,903   1,017,903   1,051,300   1,051,300   1,072,960         0          0          1,100,900
  Distribution                                                                                                          
  --------------- ------------- ----------- ----------- ----------- ----------- ----------------- ---------- ---------- -----------

# 

# PRODUCTION

For MY 2007/08, Mexican Hass avocado production is forecast at 1.10
million metric tons (MMT) ---2.61 percent up from the 1.07 MMT record
level reached in MY 2006/07--- due to the producer's expectation of
increasing harvested acreage with younger tress coming into full
bearing. Also, assuming the prevalence of favorable weather conditions
through out the year, good residual humidity during the wet season, and
continued implementation of phytosanitary programs to control pests,
production should continue to grow. Even though there is the potential
prevalence of harsh weather conditions in Michoacan --- during late 2007
and early 2008 --- producers are confident the blooming stages on
bearing tress will not be significantly impacted. Producers continue to
apply the best agricultural practices to ensure the quality and food
safety of avocado, either for export or for supplying the domestic
market. Along with these practices, there is the projected
implementation of an aerial aspersion (fumigation) program intended to
ease the maintenance of the avocado orchards, which would result in
healthier trees with increased yields.

Due to excellent weather conditions during MY 2006/07, production was
revised to 1,072,063 MT, 2.10 percent higher than the initial forecast.
Ample rains, previous to the blooming stage, combined with beneficial
weather contributed to the increased production. Reportedly, the
cessation of the producers' practice of harvesting only 2 MT per hectare
also contributed to the high production level. MY 2005/06 figures remain
unchanged and reflect official data.

Michoacan, which is the world leader in production and exports, accounts
for roughly 88 percent of total production followed by the states:
Mexico, Morelos, Puebla, and Nayarit.

# CROP AREA

The official forecast for total national area planted for MY 2007/08 is
117,283 hectares, slightly up from the revised MY 2006/07 planted area
estimate. In recent years, planted area has increased because there is
greater international demand for high-quality Mexican Hass avocados.
Simultaneously, the APHIS list of authorized pest-free municipalities in
Michoacan continues to grow. At this stage, 14 Michoacan municipalities
are certified to export to the U.S., and it is expected that two more
will be certified in the near future. State authorities confirm that
Michoacan has devoted roughly 98,000 hectares to Hass avocado
production. Michoacan's neighboring states, specifically Jalisco and
Mexico, have also increased their planted area. According to state
government sources, growers of avocado plants in Michoacan nurseries are
focusing their expansion efforts on the untapped markets in other states
and not in Michoacan. Area planted for MY 2005/06 remains unchanged.

Currently, the APHIS--administered export inspection program has
certified 40,266 hectares in 5,293 certified avocado orchards. Michoacan
is the only state in Mexico that is allowed to export avocados to the
United States. Within Michoacan, the only municipalities that have been
certified by APHIS to export are: Acuitzio, Tancitaro, Uruapan,
Tingüindin, Salvador Escalante, Nuevo Parangaricutiro, Periban de Ramos,
Ario de Rosales, Los Reyes, Apatzingan, Taretan, Tacambaro, and
Tingambato y Madero. Cotija and Tangamandapio are two other
municipalities that are in the process of being certified.

Producers from the neighboring states of Mexico and Jalisco continue to
implement phytosanitary and good agricultural practices in their avocado
producing areas in the hopes of eventual certification to export to the
United States. However, their primary short-term objective is to grow
and solidify their market share in the Central American and emerging
European markets by promoting the quality of Mexican produce. For the
most part, their growing practices are similar to those used in the
state of Michoacan.

# 

# INPUTS

The production of Mexican Hass avocados has been a profitable activity,
despite the relatively high cost of production, due to high domestic
retail prices and increased exports. For MY 2007/08, the cost of
production is expected to be similar to MY 2006/07. The latest
information indicates that the cost of production per hectare with
natural residue water table irrigation was between \$49,000--\$52,000
pesos (USD \$4,599-\$4,881) while the costs for orchards with assisted
fertilization-irrigation was between \$58,000-\$61,000 pesos (USD
\$5,443-\$5,725) per hectare. Over the past several years, many
producers have implemented SAGARPA's non-mandatory food safety program
recommendations. Even though these practices have slightly increased
production costs, the majority of avocado farmers in Mexico have
implemented the recommended measures because they are aware that such
practices elevate the image of Mexican avocados as a sanitary product in
foreign markets. Producers consider these practices a medium-long term
investment.

# YIELDS

Official data reveals average yields for MY 2007/08 are forecast to be
above 10.0 MT/ha. MY 2006/07 yield figures were revised upward to 10.36
MT/ha as a result of the recent publication of official data. MY 2005/06
remained unchanged at 9.83 MT/ha.

# 

# POLICY 

Mexico continues to successfully implement phytosanitary requirements
and good manufacturing practices for the transportation of fresh
avocados within the country (see MX2080). Unofficial reports from state
officials indicate that the vast majority of Michoacan producers and
packers have implemented SAGARPA's recommended good manufacturing
practices in order to guarantee the distribution of high quality produce
in international and domestic markets.

In early 2007, the armored scaled insect was discovered aboard shipments
of Mexican avocados bound for California. The California Avocado
Commission (CAC) argued that the armored scale found on Mexican avocados
was an invasive pest, but USDA/APHIS did not agree with this statement.
On September 2007, CAC finally accepted USDA/APHIS's decision that
armored scales on fruit for consumption do not pose a significant risk
to U.S. agriculture.  Thus, CAC desisted from the legal action
previously taken against USDA. In the same vein, the U.S. government,
which implements a strict surveillance program on imported products
entering its territory, announced that current federal regulations
regulating the import of Mexican Hass avocado would not be modified.

# CONSUMPTION

Fresh domestic consumption in MY 2007/08 is forecast at 765,000 MT, a
0.26 percent increase over MY 2006/07. This slight increase in sustained
consumption can be attributed to the fact that producers and packers
continue marketing export quality produce to the international market
without disregarding the domestic market. In fact, the vast majority of
Mexico's avocado production continues to be consumed domestically.
Avocado is a staple food in most Mexican households, and is usually
consumed fresh or as a main ingredient in homemade guacamole. Fresh
domestic consumption figures for MY 2006/07 were kept unchanged despite
the augmented domestic prices due mainly to increased exports. MY
2005/06 showed no further changes than those previously reported.

Avocado consumption by the processing industry is forecast at 36,000 MT
for MY 2007/08. Though data on avocado consumption by the processing
industry is either proprietary, or does not exist, industry
representatives indicate that it may be down 8.67 percent compared to MY
2006/07. Despite the fact that developing new market niches (related to
extraction and export of avocado oil for the cosmetic industry) is on
the up swing, the export of fresh avocados continues to drive producers
due to attractive profits. However, close competition from fresh-produce
exporting countries continues to entice producers to extract and export
avocado oil products.

In line with the previous season, state and private sources indicate
that despite record exports, domestic consumption will not be affected.
Increased output, new orchards coming into production, and an increased
number of certified municipalities will allow producers and exporters to
adequately meet both domestic and international demand. However, MY
2006/07 figures for processing consumption were revised downward, due to
increased exports. MY 2005/06 figures remain unchanged. Total average
annual per capita consumption in Mexico is estimated between 9-10 kg.

# 

# AVOCADO PRICES

MY 2007/08 export prices are expected to be more attractive than MY
2006/07 for exporting producers. This price increase is mainly
attributable to the latest crop damage in Chile, due to freezing
temperatures, and the Southern California acreage wildfires, which have
resulted in a 10 percent crop loss. Reportedly, both problems enticed
authorized Mexican packers to increase exports. Thus, domestic prices
will be higher than MY 2006/07. Typically, Mexico uses three different
box sizes depending on the market and the size of the avocado. Export
prices in MY 2006/07 were roughly U.S. \$24.03-\$26.81 per 11.3 kg (25
lbs) box. As of October 2007, wholesale domestic prices during CY 2007
have ranged between U.S. \$12.84-\$38.53 per 15 kg (33.08 lbs) box.
Wholesale domestic prices for CY 2006 were between U.S. \$16.31-\$35.00
per 17 kg (37.4 lbs) box.

+-----------------+-----------+---+-----------+---+-------------+---+
| ##              |           |   |           |   |             |   |
| #### WHOLESALE  |           |   |           |   |             |   |
| AVOCADO PRICES  |           |   |           |   |             |   |
| Pesos/kilograms |           |   |           |   |             |   |
+-----------------+-----------+---+-----------+---+-------------+---+
| ###### Month    | 2006      |   | 2007      |   | Change %    |   |
+-----------------+-----------+---+-----------+---+-------------+---+
| January         | 10.41     |   | 10.40     |   | (0.10)      |   |
+-----------------+-----------+---+-----------+---+-------------+---+
| February        | 11.00     |   | 11.56     |   | 5.09        |   |
+-----------------+-----------+---+-----------+---+-------------+---+
| March           | 12.03     |   | 12.93     |   | 7.48        |   |
+-----------------+-----------+---+-----------+---+-------------+---+
| April           | 14.41     |   | 16.25     |   | 12.77       |   |
+-----------------+-----------+---+-----------+---+-------------+---+
| May             | 15.40     |   | 18.04     |   | 17.14       |   |
+-----------------+-----------+---+-----------+---+-------------+---+
| June            | 15.51     |   | 20.56     |   | 32.56       |   |
+-----------------+-----------+---+-----------+---+-------------+---+
| July            | 18.31     |   | 22.73     |   | 24.14       |   |
+-----------------+-----------+---+-----------+---+-------------+---+
| August          | 22.34     |   | 23.68     |   | 6.00        |   |
+-----------------+-----------+---+-----------+---+-------------+---+
| September       | 15.97     |   | 17.73     |   | 11.02       |   |
+-----------------+-----------+---+-----------+---+-------------+---+
| October         | 12.88     |   | 14.52     |   | 12.73       |   |
+-----------------+-----------+---+-----------+---+-------------+---+
| November        | 11.27     |   | 14.53     |   | 28.93       |   |
+-----------------+-----------+---+-----------+---+-------------+---+
| December        | 10.67     |   | N/A       |   | N/A         |   |
+-----------------+-----------+---+-----------+---+-------------+---+
|                 |           |   |           |   |             |   |
+-----------------+-----------+---+-----------+---+-------------+---+
| Source: Sevicio |           |   |           |   |             |   |
| Nacional de     |           |   |           |   |             |   |
| Informacion de  |           |   |           |   |             |   |
| Mercados        |           |   |           |   |             |   |
|                 |           |   |           |   |             |   |
| 2006 Exchange   |           |   |           |   |             |   |
| Rate Avg.:      |           |   |           |   |             |   |
| U.S.\$ 1.00 =   |           |   |           |   |             |   |
| \$ 10.90 pesos  |           |   |           |   |             |   |
|                 |           |   |           |   |             |   |
| November 14,    |           |   |           |   |             |   |
| 2006 exchange   |           |   |           |   |             |   |
| rate U.S. \$    |           |   |           |   |             |   |
| 1.00 = \$ 10.89 |           |   |           |   |             |   |
| pesos           |           |   |           |   |             |   |
|                 |           |   |           |   |             |   |
| As of third     |           |   |           |   |             |   |
| week of         |           |   |           |   |             |   |
| November        |           |   |           |   |             |   |
+-----------------+-----------+---+-----------+---+-------------+---+

# 

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# TRADE

Mexican avocado exports are forecast to reach a record 300,000 MT in MY
2007/08, a nearly 11 percent increase over the MY 2006/07 figure. This
increase is due to a combination of factors, including; 1) year-round
market access to all 50 U.S. states, 2) the decrease in Chilean
production as well as a recent freeze, and 3) recent wildfires in
southern California that destroyed approximately 10 percent of the
current crop. Reportedly, producers and packers had been concerned for
some time that open access to the U.S. market might lead to market
saturation, and eventual downward pressure on prices. In order to avoid
such a situation, producers and packers limited their exports by
harvesting only 2 MT/hectare. However, producers have suspended this
practice but only to the extent to which they are still able to avoid
market saturation. Michoacan growers currently have the capacity to
harvest 10-15 MT/ha if there is no threat of market saturation. Growers
and packers have forecast MY 2007/08 avocado exports to the United
States at 200,000 MT. Exports to the U.S. in MY 2006/07 were 166,830 MT,
while exports in MY 2005/06 were 129,482 MT.

As of January 31, 2005, Mexican Hass avocados were granted access to all
U.S. states except California, Florida, and Hawaii. On February 1, 2007,
Mexican Hass avocados were allowed access into all 50 states on a
year-round basis. Currently, 25 packers are officially eligible to
export Mexican avocados to the United States under the APHIS export
program. The main destinations for Mexican Hass avocados within the
United States are: Texas, Illinois, New York, Georgia, Colorado,
Arizona, Washington, Massachusetts, Maryland, Indiana, Minnesota,
Kansas, Oregon, North Carolina, and Florida.

Export figures for MY 2006/07 were revised upward to 270,541 MT due to
increased export markets. These higher-than-expected export numbers are
due to greater demand from international markets. To this end, growers
ceased restrictive harvesting practices once the U.S. market opened
January 2005. MY 2005/06 export figures remain unchanged.

Although the majority of avocado exports are destined for the U.S.,
other markets including Japan, Canada, France, and El Salvador are also
significant. Unlike the U.S., these markets do not require APHIS
accreditation.

According to both official and private sources, the export market
continues to be profitable to producers, but the domestic market still
represents the main business platform for most Mexican avocado farmers.
Official data indicates that Mexican avocados were exported mainly to
the United States, Japan, Canada, and El Salvador. Exports to Japan and
the EU continue to represent a strategic market niche for producers and
packers.

In September 2005, USDA and SAGARPA signed a work plan to allow access
for U.S. Hass avocados into Mexico. For the first 12 months of the work
plan, avocados were allowed to export to all states except: Michoacan,
Jalisco, Morelos, Puebla, and Nayarit. In September 2006, U.S. avocados
were officially allowed to export to all Mexican states, but exports to
the non-border states is minimal. Reportedly, Mexico will be importing
California avocados for processing and eventual re-export to the United
States. As a result, Mexican imports for MY2007/08 are forecast to be
slightly up from those of MY 2006/07 at 1,000 MT. MY 2006/07 imports
were revised downward to 897 MT due to ample domestic supplies. MY
2005/06 figures remain unchanged.

# TRADE MATRIX

+-----------------+------------+---+-----------------+-----------+----+
| **[Avocado H.S. |            |   | **[Units:       |           |    |
| 0804.40         |            |   | MT              |           |    |
| ]{.smallcaps}** |            |   | ]{.smallcaps}** |           |    |
+-----------------+------------+---+-----------------+-----------+----+
| [Exports for    |            |   |                 |           |    |
| (Jan-Dec)       |            |   |                 |           |    |
| t               |            |   |                 |           |    |
| o:]{.smallcaps} |            |   |                 |           |    |
+-----------------+------------+---+-----------------+-----------+----+
| [CY             |            |   | ####### CY 2007 |           |    |
| 20              |            |   |                 |           |    |
| 06]{.smallcaps} |            |   |                 |           |    |
+-----------------+------------+---+-----------------+-----------+----+
| [U.             | 118,809    |   | [U.             | 138,014   |    |
| S.]{.smallcaps} |            |   | S.]{.smallcaps} |           |    |
+-----------------+------------+---+-----------------+-----------+----+
| [Jap            | 28,807     |   | [Jap            | 16,479    |    |
| an]{.smallcaps} |            |   | an]{.smallcaps} |           |    |
+-----------------+------------+---+-----------------+-----------+----+
| [Cana           | 17,148     |   | [Cana           | 12,111    |    |
| da]{.smallcaps} |            |   | da]{.smallcaps} |           |    |
+-----------------+------------+---+-----------------+-----------+----+
| [El             | 10,965     |   | [El             | 5,151     |    |
| Salvad          |            |   | Salvad          |           |    |
| or]{.smallcaps} |            |   | or]{.smallcaps} |           |    |
+-----------------+------------+---+-----------------+-----------+----+
| [Oth            | 32,617     |   | [Oth            | 14,340    |    |
| er]{.smallcaps} |            |   | er]{.smallcaps} |           |    |
+-----------------+------------+---+-----------------+-----------+----+
| [Tot            | 208,346    |   | [Tot            | 186,095   |    |
| al]{.smallcaps} |            |   | al]{.smallcaps} |           |    |
+-----------------+------------+---+-----------------+-----------+----+

+-----------------+------------+---+-----------------+-----------+----+
| **[Avocado H.S. |            |   | **[Units:       |           |    |
| 0804.40         |            |   | MT              |           |    |
| ]{.smallcaps}** |            |   | ]{.smallcaps}** |           |    |
+-----------------+------------+---+-----------------+-----------+----+
| [Imports for    |            |   |                 |           |    |
| (Jan-Dec)       |            |   |                 |           |    |
| fro             |            |   |                 |           |    |
| m:]{.smallcaps} |            |   |                 |           |    |
+-----------------+------------+---+-----------------+-----------+----+
| ####### CY 2006 |            |   | [CY             |           |    |
|                 |            |   | 20              |           |    |
|                 |            |   | 07]{.smallcaps} |           |    |
+-----------------+------------+---+-----------------+-----------+----+
| [U.             | [2,114]{.  |   | [U.             | 91        |    |
| S.]{.smallcaps} | smallcaps} |   | S.]{.smallcaps} |           |    |
+-----------------+------------+---+-----------------+-----------+----+
| [Oth            | [0]{.      |   | [Oth            | 0         |    |
| er]{.smallcaps} | smallcaps} |   | er]{.smallcaps} |           |    |
+-----------------+------------+---+-----------------+-----------+----+
| [Tot            | [2,114]{.  |   | [Tot            | 91        |    |
| al]{.smallcaps} | smallcaps} |   | al]{.smallcaps} |           |    |
+-----------------+------------+---+-----------------+-----------+----+

**Source: World Trade Atlas, Mexico Edition.**

As of July 2007.

# 

# 

# TRADE POLICY

Currently, Mexican fresh Hass avocados entering the United States are
not subject to a duty, but are compelled to pay a fee of 2.5 cents per
pound for promotional purposes (see Marketing section).

Fresh avocado imports (HS 08.04.40.01) from the United States are also
not subject to a duty, but are subject to phytosanitary and sanitary
inspections by SAGARPA.

# 

# MARKETING

Under the Hass Avocado Promotion, Research and Information Order, an
assessment of 2.5 cents per pound is levied on fresh Hass avocados
imported into the United States, and is used to finance promotion,
research, consumer information, and industry programs. Mexico does not
assess a charge against U.S. avocados.