Required Report - public distribution

**Date:** 11/28/2005

**GAIN Report Number:** MX5107

M

**Mexico**

**Avocado**

**Annual**

**2005**

**Approved by:**

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

U.S. Embassy Mexico City

**Prepared by:**

Gabriel Hernandez and Jeff Nawn

**Report Highlights:**

Mexican Hass avocado production is expected to reach a record 1 million
metric tons (MMT) in 2005. Hass exports for MY 2005/06 are forecast at
160,000 MT, of which approximately 130,000 MT will be exported to the
United States. The year-round opening of the U.S. market, which became
effective January 31^st^, 2005, will allow Mexican Hass avocados to be
shipped to 47 of the 50 U.S. states. Even though producers and shippers
were not granted year-round access to the U.S. market during MY 2004/05,
as they had expected, exports still reached a record 112,000 MT last
year.

Includes PSD Changes: Yes

Includes Trade Matrix: Yes

Annual Report

Mexico \[MX1\]

\[MX\]

+-------------------+-------+-------+-------+------+-------+--------+
| **PSD Table**     |       |       |       |      |       |        |
+-------------------+-------+-------+-------+------+-------+--------+
| **Country**       | **Mex |       |       |      |       |        |
|                   | ico** |       |       |      |       |        |
+-------------------+-------+-------+-------+------+-------+--------+
| **Commodity**     | *     |       |       | (HE  |       |        |
|                   | *Avoc |       |       | CTAR |       |        |
|                   | ados, |       |       | ES)( |       |        |
|                   | Fr    |       |       | 1000 |       |        |
|                   | esh** |       |       | TR   |       |        |
|                   |       |       |       | EES) |       |        |
|                   |       |       |       | (MT) |       |        |
+-------------------+-------+-------+-------+------+-------+--------+
|                   | *     |       | *     |      | *     |        |
|                   | *2003 |       | *2004 |      | *2005 |        |
|                   | Revi  |       | Estim |      | Forec |        |
|                   | sed** |       | ate** |      | ast** |        |
+-------------------+-------+-------+-------+------+-------+--------+
|                   | USDA  | Post  | USDA  | Post | USDA  | Post   |
|                   | Off   | Est   | Off   | Esti | Off   | Es     |
|                   | icial | imate | icial | mate | icial | timate |
|                   | \[    |       | \[    |      | \[    |        |
|                   | Old\] | \[    | Old\] | \[N  | Old\] | \      |
|                   |       | New\] |       | ew\] |       | [New\] |
+-------------------+-------+-------+-------+------+-------+--------+
| Market Year Begin | *     |       | *     |      | *     |        |
|                   | *08/2 |       | *08/2 |      | *08/2 |        |
|                   | 003** |       | 004** |      | 005** |        |
+-------------------+-------+-------+-------+------+-------+--------+
| Area Planted      | 10    | 10    | 10    | 102  | 0     | 1      |
|                   | 2,519 | 2,519 | 2,533 | ,627 |       | 11,834 |
+-------------------+-------+-------+-------+------+-------+--------+
| Area Harvested    | 9     | 9     | 10    | 98   | 0     | 1      |
|                   | 5,482 | 5,482 | 2,476 | ,330 |       | 00,000 |
+-------------------+-------+-------+-------+------+-------+--------+
| Bearing Trees     | 0     | 0     | 0     | 0    | 0     | 0      |
+-------------------+-------+-------+-------+------+-------+--------+
| Non-Bearing Trees | 0     | 0     | 0     | 0    | 0     | 0      |
+-------------------+-------+-------+-------+------+-------+--------+
| TOTAL No. Of      | 0     | 0     | 0     | 0    | 0     | 0      |
| Trees             |       |       |       |      |       |        |
+-------------------+-------+-------+-------+------+-------+--------+
| Production        | 90    | 90    | 1,03  | 934  | 0     | 1,0    |
|                   | 2,332 | 2,332 | 0,000 | ,282 |       | 00,000 |
+-------------------+-------+-------+-------+------+-------+--------+
| Imports           | 0     | 0     | 0     | 0    | 0     | 0      |
+-------------------+-------+-------+-------+------+-------+--------+
| TOTAL SUPPLY      | 90    | 90    | 1,03  | 934  | 0     | 1,0    |
|                   | 2,332 | 2,332 | 0,000 | ,282 |       | 00,000 |
+-------------------+-------+-------+-------+------+-------+--------+
| Exports           | 10    | 10    | 13    | 133  | 0     | 1      |
|                   | 5,000 | 5,000 | 5,000 | ,856 |       | 60,000 |
+-------------------+-------+-------+-------+------+-------+--------+
| Fresh Dom.        | 77    | 77    | 86    | 772  | 0     | 8      |
| Consumption       | 2,332 | 2,332 | 0,000 | ,747 |       | 00,000 |
+-------------------+-------+-------+-------+------+-------+--------+
| Processing        | 2     | 2     | 3     | 25   | 0     | 40,000 |
| Consumption       | 5,000 | 5,000 | 5,000 | ,000 |       |        |
+-------------------+-------+-------+-------+------+-------+--------+
| TOTAL             | 90    | 90    | 1,03  | 934  | 0     | 1,0    |
| DISTRIBUTION      | 2,332 | 2,332 | 0,000 | ,282 |       | 00,000 |
+-------------------+-------+-------+-------+------+-------+--------+

# 

# PRODUCTION

For MY 2005/06, Mexican avocado production is forecast at a record 1
million metric tons (MMT) due to favorable weather conditions,
implementation of phytosanitary programs which have successfully
controlled pests, and more trees coming into production. The cessation
of the producers' practice of harvesting only 2 MT per hectare has also
contributed to the high production level. In past years, this practice
has been utilized in order to avoid saturating export markets, and
thereby causing price reductions in the international markets. Because
avocados do not ripen until picked, they can stay on the tree for
months. This unique quality has allowed producers to work with exporters
in order to harvest and ship at the most optimal times of the year.

Despite the fair weather conditions that prevailed in MY 2004/05,
production is estimated at 934,282 MT, 9.29 percent lower than the
initial forecast. Unexpected rains at the blooming stage, combined with
the down year of the alternate bearing cycle, contributed to a drop in
production. Moreover, the enforcement of conservative harvesting
practices during five months of MY 2004/05 also contributed to the lower
than expected production numbers. MY 2003/04 figures remain unchanged
and reflect official data.

Michoacan is the main avocado producing state in Mexico, accounting for
more than 88 percent of total production, followed by the states of
Mexico, Morelos, and Nayarit.

# CROP AREA

The official forecast for total national area planted for MY 2005/06 is
111,834 hectares, approximately a 9-percent increase over MY 2004/05
planted area. Planted area has increased because there is greater
international demand for high-quality Mexican Hass avocados. In
addition, several municipalities in Michoacan have been added to the
APHIS list of authorized pest-free municipalities. These additions have
also had a slight impact on the area planted in MY 2004/05. According to
state authorities, Michoacan boasts roughly 90,000 hectares devoted to
Hass avocado production. Area planted for MY 2003/04 remains unchanged.

Currently, the APHIS--administered export inspection program has
certified 28,853 hectares of avocado orchards. This program allows for
Mexican avocados to be shipped to 47 of the 50 U.S. states. Based on the
provisions established in the work plan, signed on September 14, 2005,
the Michoacan Plant Health State Committee (Comite Estatal de Salud
Vegetal - CESV) intends for the certified area to increase to 33,000
hectares by the end of MY 2005/06. This work plan also calls for the
semi-annual surveillance of listed municipalities, once in the dry
season (Jan-March) and again during the wet season (August-October).
Furthermore, the work plan allows for the inspection of proposed areas,
in conjunction with the surveillance applied to certified areas.

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, Tancítaro, Uruapan,
Tingüindin, Salvador Escalante, Nuevo Parangaricutiro, Peribán de Ramos,
Ario de Rosales, Los Reyes, Apatzingán, and Taretan.

Producers from the neighboring states of Mexico and Jalisco are
currently working to implement phytosanitary and good agricultural
practices programs in their avocado producing areas. These practices are
similar to those used in the state of Michoacan. This is the first stage
of a three-stage process that must be completed before a municipality
can export to the United States. These stages are comprised of:

1.  The eradication of pests of concern;

2.  Recognition of pest free areas by Mexican authorities; and

3.  Accreditation in the APHIS avocado export program.

Although the majority of avocado exports are destined for the U.S.,
other markets such as Japan, Canada, France, and El Salvador are also
significant. Unlike the U.S., these markets do not require APHIS
accreditation. However the GOM requires that all avocado producers,
processors, and shippers meet strict phytosanitary requirements, as
established by the Secretariat of Agriculture.

Though producers from the states of Mexico and Jalisco are looking for
eventual certification to export to the United States, their primary
objective in the short-term is to grow and solidify their market share
in the Central American and the emerging European markets. Their
marketing efforts are based on promoting the quality of Mexican produce.
To this end, the Michoacan Plant Health State Committee expects the
entire state of Michoacan to be free of pests in 2006.

# INPUTS

The production of Mexican Hass avocados has been a profitable activity,
due to high domestic retail prices, increased exports, and relatively
stable production costs. For MY 2005/06, the cost of production is
expected to be \$35,000--\$37,500 pesos (USD \$3,264-\$3,544) per
hectare, which is similar to MY 2004/05 costs. Over the past several
years many producers have implemented the Mexican Ministry of
Agriculture's (SAGARPA) non-mandatory food safety program
recommendations. These voluntary measures include providing for:

-   Sanitary facilities in the orchards for workers;

-   Fences to separate the orchard from other areas of the farm;

-   Trash disposal and recycling systems;

-   The banning of non-essential animals from the production areas; and

-   The creation of designated eating areas outside of the production
    zones.

Although many producers were concerned that these measures would
increase costs, they have found that production costs have not been
significantly impacted. In fact, the majority of avocado farmers in
Mexico have implemented SAGARPA's recommended measures because they are
aware that such practices elevate the image of Mexican avocados as a
sanitary product in foreign markets.

# YIELDS

Official data reveals that average yields for MY 2005/06 are forecast at
10 MT/ha. This impressive yield is primarily due to favorable weather
and good agricultural practices in the orchards. MY 2004/05 yield
figures were revised downward to 9.5 MT/ha, upon the recent publication
of official data. MY 2003/04 remained unchanged at 9.45 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 one
state official 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.

# CONSUMPTION

Fresh domestic consumption in MY 2005/06 is forecast at 800,000 MT, a 4
percent increase over MY 2004/05. This increase in consumption can be
attributed to the fact that producers and packers are now marketing
export quality produce, at competitive prices, to 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.

Avocado consumption by the processing industry is forecast at 40,000 MT
in MY 2005/06. Though data on avocado consumption by the processing
industry is either proprietary, or does not exist, industry
representatives indicate that it may be up as much as 10 percent over MY
2004/05. This increase in consumption is mainly due to greater demand
from the U.S. Anglo and Hispanic sectors, as well as chefs in selected
restaurants looking for a competitive edge in the retail food
marketplace. Furthermore, because of successful overseas positioning of
Mexican cuisine, consumption of guacamole is expected to increase during
key selling periods such as Cinco de Mayo, Memorial Day, and the
Superbowl. Recently, Agro-industrial companies have started processing
fresh avocados by extracting avocado pulp and oil. The pulp is frozen
and packed, or prepared as guacamole, to be exported, mainly to the U.S.
market. The non-refined avocado oil, which is highly versatile and
claims a number of health benefits, is used in the manufacturing of
cosmetics and beauty products.

State and private sources indicate that despite record exports, domestic
consumption will not be affected. The increased output, and new orchards
coming into production, will allow producers and exporters to adequately
meet both domestic and international demand. The MY 2004/05 figures for
fresh and processing consumption were revised downward, due to
lower-than-expected supplies. MY 2003/04 figures remained unchanged.
Total average annual per capita consumption in Mexico is estimated
around 9 kg.

# 

# AVOCADO PRICES

MY 2005/06 export prices are expected to be similar to those of MY
2004/05. Export prices in MY 2004/05 were roughly US \$24.00- \$24.50
per 11.3 kg (25 lbs) box. As of November, 2005, wholesale domestic
prices during CY 2005 have been set between US \$15.99-\$27.08 per 17 kg
(37.4 lbs) box. Wholesale domestic prices for CY 2004 were between US
\$11.65-\$18.94 per 17 kg (37.4 lbs) box. It is expected that wholesale
domestic prices during CY 2006 will remain about the same as CY 2005.

+-----------------+-----------+---+-----------+---+-------------+---+
| #               |           |   |           |   |             |   |
| ##### WHOLESALE |           |   |           |   |             |   |
|  AVOCADO PRICES |           |   |           |   |             |   |
+-----------------+-----------+---+-----------+---+-------------+---+
| ###### Month    | **2004**  |   | **2005**  |   | **Change    |   |
|                 |           |   |           |   | %**         |   |
+-----------------+-----------+---+-----------+---+-------------+---+
| **January**     | 7.39      |   | 10.16     |   | 37.48       |   |
+-----------------+-----------+---+-----------+---+-------------+---+
| **February**    | 8.31      |   | 10.57     |   | 27.20       |   |
+-----------------+-----------+---+-----------+---+-------------+---+
| **March**       | 9.15      |   | 13.43     |   | 46.78       |   |
+-----------------+-----------+---+-----------+---+-------------+---+
| **April**       | 10.91     |   | 16.54     |   | 51.60       |   |
+-----------------+-----------+---+-----------+---+-------------+---+
| **May**         | 11.78     |   | 15.34     |   | 30.22       |   |
+-----------------+-----------+---+-----------+---+-------------+---+
| **June**        | 12.01     |   | 25.83     |   | 115.07      |   |
+-----------------+-----------+---+-----------+---+-------------+---+
| **July**        | 11.67     |   | 25.18     |   | 115.77      |   |
+-----------------+-----------+---+-----------+---+-------------+---+
| **August**      | 11.47     |   | 18.94     |   | 65.13       |   |
+-----------------+-----------+---+-----------+---+-------------+---+
| **September**   | 11.33     |   | 13.75     |   | 21.36       |   |
+-----------------+-----------+---+-----------+---+-------------+---+
| **October**     | 10.26     |   | 10.64     |   | 3.70        |   |
+-----------------+-----------+---+-----------+---+-------------+---+
| **November**    | 9.50      |   | 10.14     |   | 6.74        |   |
+-----------------+-----------+---+-----------+---+-------------+---+
| **December**    | 8.68      |   | N/A       |   | N/A         |   |
+-----------------+-----------+---+-----------+---+-------------+---+
| Pesos/kilogram  |           |   |           |   |             |   |
+-----------------+-----------+---+-----------+---+-------------+---+
| Source: Sevicio |           |   |           |   |             |   |
| Nacional de     |           |   |           |   |             |   |
| Informacion de  |           |   |           |   |             |   |
| Mercados        |           |   |           |   |             |   |
|                 |           |   |           |   |             |   |
| 2004 Exchange   |           |   |           |   |             |   |
| Rate Avg.:      |           |   |           |   |             |   |
| U.S.\$ 1.00 =   |           |   |           |   |             |   |
| \$ 11.28 pesos  |           |   |           |   |             |   |
|                 |           |   |           |   |             |   |
| November 14,    |           |   |           |   |             |   |
| 2005 exchange   |           |   |           |   |             |   |
| rate U.S. \$    |           |   |           |   |             |   |
| 1.00 = \$ 10.78 |           |   |           |   |             |   |
| pesos           |           |   |           |   |             |   |
|                 |           |   |           |   |             |   |
| As of November  |           |   |           |   |             |   |
| 14, 2005        |           |   |           |   |             |   |
+-----------------+-----------+---+-----------+---+-------------+---+

# 

# TRADE

Mexican avocado exports are forecast to reach a record level of 160,000
MT in MY 2005/06, a nearly 20-percent increase over the MY 2004/05
figure. This increase is due to greater output, and year-round market
access to 47 of the 50 U.S. states. 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 have
worked together to limit their exports by harvesting only 2 MT/hectare.
In light of the year-round U.S. market opening, producers are suspending
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 2005/06 avocado exports to the
United States at 130,000 MT. Exports to the U.S. in MY 2004/05 were
112,000 MT, while exports in MY 2003/04 were only 42,407 MT. Mexico, as
a member of the Hass Avocado Board (HAB), is working with their
California, Chile, New Zealand, and Dominican Republic counterparts to
monitor the U.S. market situation in order to prevent market saturation
and price reductions.

As of January 31, 2005, Mexican Hass avocados can be imported into all
U.S. states except California, Florida, and Hawaii, on a year-round
basis. This policy change was made in a USDA amended regulation, and was
established in a final rule published in the Federal Register on
November 30, 2004 (69 FR 69747--69774, Docket No. 03--022--5).
Twenty-two packers are officially eligible to export Mexican avocados to
the United States under the APHIS export program.

Export figures for MY 2004/05 were revised downward to 133,856 MT. These
lower-than-expected export numbers are due to the partial-year
enforcement of restricted harvesting programs, whereby producers pick
only 2 MT per hectare, and strong domestic demand. Growers ceased
restrictive harvesting practices once the U.S. market opened up in
January of 2005. MY 2003/04 export figures are unchanged.

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 most Mexican avocados were exported to the
United States, Japan, Canada, France, and El Salvador. Exporters are
currently channeling resources into developing markets in the European
Union and China. In order to gain access to these emerging markets,
producers are enforcing good agricultural practices, such as avoiding
the use of pesticides and agro-chemical products that do not comply with
EUREGAP regulations.

On September 14, 2005, USDA and SAGARPA signed the work plan that allows
access for U.S. Hass avocados into Mexico. For the first 12 months of
the work plan, avocados may be distributed to all states, except for
Michoacan, Jalisco, Morelos, Puebla, and Nayarit. After 12 months, U.S.
avocados may be distributed to all Mexican states. Most industry
representatives do not expect U.S. avocados to be highly competitive in
the Mexican market, mainly because it will be hard for U.S. producers to
compete on a price basis, but also because U.S. avocados have a slightly
different taste and texture, which may not meet with Mexican
preferences. The most significant opportunity for U.S. avocado exports
to Mexico will be for California avocados to find markets in the Baja
Peninsula.

# TRADE MATRIX

+-----------------+------------+---+-----------------+-----------+----+
| **[Avocado H.S. |            |   | **[Units:       |           |    |
| 0804.40         |            |   | MT              |           |    |
| ]{.smallcaps}** |            |   | ]{.smallcaps}** |           |    |
+-----------------+------------+---+-----------------+-----------+----+
| **[Exports for  |            |   |                 |           |    |
| (Jan-Dec)       |            |   |                 |           |    |
| to:             |            |   |                 |           |    |
| ]{.smallcaps}** |            |   |                 |           |    |
+-----------------+------------+---+-----------------+-----------+----+
| **[CY           |            |   | ####### CY 2005 |           |    |
| 2004            |            |   |                 |           |    |
| ]{.smallcaps}** |            |   |                 |           |    |
+-----------------+------------+---+-----------------+-----------+----+
| **[U.S.         | 67,579     |   | **[U.S.         | 90,596    |    |
| ]{.smallcaps}** |            |   | ]{.smallcaps}** |           |    |
+-----------------+------------+---+-----------------+-----------+----+
| **[France       | 13,136     |   | **[Japan        | 19,343    |    |
| ]{.smallcaps}** |            |   | ]{.smallcaps}** |           |    |
+-----------------+------------+---+-----------------+-----------+----+
| **[El           | 11,973     |   | **[Canada       | 11,851    |    |
| Salvador        |            |   | ]{.smallcaps}** |           |    |
| ]{.smallcaps}** |            |   |                 |           |    |
+-----------------+------------+---+-----------------+-----------+----+
| **[Canada       | 10,893     |   | **[France       | 5,456     |    |
| ]{.smallcaps}** |            |   | ]{.smallcaps}** |           |    |
+-----------------+------------+---+-----------------+-----------+----+
| **[Japan        | 10,857     |   | **[El           | 4,813     |    |
| ]{.smallcaps}** |            |   | Salvador        |           |    |
|                 |            |   | ]{.smallcaps}** |           |    |
+-----------------+------------+---+-----------------+-----------+----+
| **[Other        | 22,097     |   | **[Other        | 9,940     |    |
| ]{.smallcaps}** |            |   | ]{.smallcaps}** |           |    |
+-----------------+------------+---+-----------------+-----------+----+
| **[Total        | 136,535    |   | **[Total        | 141,999   |    |
| ]{.smallcaps}** |            |   | ]{.smallcaps}** |           |    |
+-----------------+------------+---+-----------------+-----------+----+

+-----------------+------------+---+-----------------+-----------+----+
| **[Avocado H.S. |            |   | **[Units:       |           |    |
| 0804.40         |            |   | MT              |           |    |
| ]{.smallcaps}** |            |   | ]{.smallcaps}** |           |    |
+-----------------+------------+---+-----------------+-----------+----+
| **[Imports for  |            |   |                 |           |    |
| (Jan-Dec)       |            |   |                 |           |    |
| from:           |            |   |                 |           |    |
| ]{.smallcaps}** |            |   |                 |           |    |
+-----------------+------------+---+-----------------+-----------+----+
| ####### CY 2004 |            |   | **[CY           |           |    |
|                 |            |   | 2005            |           |    |
|                 |            |   | ]{.smallcaps}** |           |    |
+-----------------+------------+---+-----------------+-----------+----+
| **[U.S.         | [26]{.     |   | **[U.S.         | 0         |    |
| ]{.smallcaps}** | smallcaps} |   | ]{.smallcaps}** |           |    |
+-----------------+------------+---+-----------------+-----------+----+
| **[Other        | [0]{.      |   | **[Other        | 0         |    |
| ]{.smallcaps}** | smallcaps} |   | ]{.smallcaps}** |           |    |
+-----------------+------------+---+-----------------+-----------+----+
| **[Total        | [26]{.     |   | **[Total        | 0         |    |
| ]{.smallcaps}** | smallcaps} |   | ]{.smallcaps}** |           |    |
+-----------------+------------+---+-----------------+-----------+----+

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

As of August 2005.

# 

# 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, naturally, are subject to phytosanitary and
sanitary inspections by SAGARPA.

# 

# 

# MARKETING

During CY 2005, the Mexican Hass Avocado Importers Association (MHAIA)
conducted their "It has to be Hass" campaign in the U.S. The campaign,
which targeted the Anglo and Hispanic populations, was designed to raise
awareness and consumption of Hass avocados in strategic markets through
the promotion of the product's superior characteristics and versatility.

Currently, the order assessment of 2.5 cents per pound, to finance
promotion, research, consumer information, and industry programs, is
levied on fresh Hass avocados, produced or imported into the United
States for consumption.