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February 10, 2017

Seed SEF

660 West Lake Street

Chicago, IL

60661

VIA E-MAIL

Mr. Christopher J. Kirkpatrick

Office of the Secretariat

Commodity Futures Trading Commission Three Lafayette Centre

1155 21st Street, N.W.

Washington, D.C. 20581 

Re: Listing of New Financially Settled US Agricultural Swap and Option Contracts Pursuant to Section 5c(c)(1) 

of the Act and Regulation 40.2

Dear Secretary Kirkpatrick: 

Seed SEF LLC (“Seed” or the “SEF”) is notifying the Commodity Futures Trading Commission (“CFTC” or the “Commission”) that it 

will certify the listing of financially settled Hass Avocado swap and option contracts for electronic trading on Seed SEF.

SWAP CONTRACT SPECIFICATION SUMMARY

 Contract Name: Hass Avocado

 Product Type: Swap

 Code: HASSD

 Rule Chapter: See Appendix A

 Contract Size: 25,000 pounds

 Minimum Price Fluctuation: $0.0002 per pound ($5.00 per contract)

 Settlement: Financially Settled

 First Contract Listed: May 2017

 Last Trading Day: Business Day preceding 20th calendar day of the contract month

 Trading Hours: 8:30 am to 1:30 pm CST

OPTION CONTRACT SPECIFICATION SUMMARY

 Contract Name: Hass Avocado

 Product Type: Option

 Code: HASSO

 Rule Chapter: See Appendix B

 Contract Size: 25,000 pounds

 Minimum Price Fluctuation: $0.0002 per pound ($5.00 per contract)

 Strike Price Interval: $0.001 per pound

 Settlement: Financially Settled

 First Contract Listed: May 2017

 Last Trading Day: Business Day preceding 20th calendar day of the contract month

 Trading Hours: 8:30 am to 1:30 pm CST

The Hass Avocado market within the United States has seen substantial growth in recent years with total supply reaching 2.6 billion 

pounds in 2016, with a CAGR of 10.89% since 2004. The market also exhibits considerable price volatility (~3% daily volatility from 

2014-2016) with unique dynamics affecting prices, including labor shortages in Mexico, “avocado holidays” like the Super Bowl or 

Cinco de Mayo, and even political rhetoric. The Hass Avocado swap and option contracts are designed to help commercial entities 

within this market mitigate these risks and plan for the future.

Seed SEF staff identified the following areas may have some bearing on the new products being certified:

 Prevention of Market Disruption: Trading in these contracts will be subject to the Seed SEF Rules (“Rulebook”) Chapters 4 

and 7, which include prohibitions on manipulation, price distortion and disruptions of the delivery or cash-settlement process. As 

with all products listed for trading on Seed SEF, activity in the product will be subject to extensive monitoring and surveillance by 

Seed.

 Contracts not Readily Subject to Manipulation: The new swap and option contracts are not readily subject to manipulation 

due to the impartiality and nature of the data underlying the settlement value, the liquidity in the underlying cash market, and the 

construction methods of the final settlement value as described in Appendix E. 
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 Compliance with Rules: Trading in these swap and option contracts will be subject to the rules in Rulebook Chapter 7 which 

includes prohibitions against fraudulent, noncompetitive, unfair and abusive practices. Seed has the authority to exercise its 

investigatory and enforcement power where potential rule violations are identified.

 Availability of General Information: Seed SEF will publish information on the swap and option contracts’ specification on its 

website (as well as other trading products available on its trading platform), in accordance with CFTC regulations.

 Trade Information: All required trade information is included in the audit trail and is adequate for Seed to monitor for market 

abuse.

 Disciplinary Procedures: Chapter 9 of the Rulebook contains provisions that allow the SEF to discipline, suspend, or expel 

members or market participants that violate the Rulebook. Trading in these contracts will be subject to Chapter 4, and Seed has 

the authority to exercise its enforcement power in the event of rule violations in this product are identified.

 Dispute Resolution: Disputes with respect to trading in this contract will be subject to the arbitration provisions set forth in 

Chapter 10 of the Rulebook. Chapter 10 allows all participants to submit a claim for financial losses resulting from transactions 

on the SEF to arbitration. A participant named as a respondent in a claim submitted by a participant is required to participate in 

the arbitration pursuant to Chapter 10. Additionally, the SEF requires that participants resolve all disputes concerning transactions 

on the SEF via arbitration.

Pursuant to Section 5c(c) of the Act and CFTC Regulation 40.2(a), Seed SEF hereby certifies that the attached swap and option 

contracts comply with the Act, including regulations under the Act. A description of the cash market for these new products is attached 

(See Appendix D: Cash Market Overview and Analysis of Deliverable Supply).

Seed SEF certifies that these swap and option contract terms and conditions comply with the CEA and regulations thereunder. Seed 

SEF certifies that this submission has been concurrently posted on the SEF’s website at http://seedcx.com/trading/seedsef/regulations/rulebook/chapter-1. Seed SEF is not aware of any substantive opposing views to this proposal.

If you require any additional information regarding this action, please contact me at (855) 744-7333 ext. 122, or via e-mail at 

edward@seedcx.com.

Sincerely,

Edward Woodford

Chief Executive Officer
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Appendix A: Chapter 20 – Hass Avocado Swaps

Rule 2001. Scope

This chapter is limited in application to financially-settled Hass Avocado swaps. In addition to this chapter, Hass Avocado swaps shall 

be subject to the general rules and regulations of the SEF as applicable.

Rule 2002. Contract Specifications

(a) Contract Size

Each swap contract shall be for 25,000 pounds of Hass Avocados multiplied by the Hass Avocado Index, or settlement price.

(b) Minimum Price Fluctuation

The minimum price fluctuation shall be in multiples of $0.0002 per pound ($5.00 per contract).

(c) Months Traded

Seed SEF will list financially-settled swap contracts for the nearest three consecutive calendar plus as at least eight additional 

months of the following cycle: January, March, May, June, July, August, October and December.

(d) Trading Hours

Trading shall take place between 8:30 am to 1:30 pm CST during Business Days.

(e) Last Trading Day

All contracts cease trading on the Business Day prior to the twentieth (20th) calendar day of the contract month.

Rule 2003. Grades

(a) Hass Avocados underlying this contract must meet grade U.S. No. 2 as defined by the United States Department of Agriculture 

in the United States Standards for Grades of Florida Avocados.

(i) “U.S. No. 2” consists of avocados of similar varietal characteristics which are mature but not overripe, fairly well formed, clean, 

fairly well colored, well-trimmed and which are free from decay and freezing injury and are free from serious damage caused 

by anthracnose, bruises, cuts or other skin breaks, pulled stems, russeting or similar discoloration, scars or scab, sunburn, 

sunscald or sprayburn, cercospora spot, other disease, insects, or mechanical or other means.

(ii) In order to allow for variations incident to proper grading and handling, not more than a total of 10 percent, by count, of the 

avocados in any lot may fail to meet the requirements of this grade: Provided, that not more than one-half of this amount, or 

5 percent, shall be allowed for avocados affected by decay or seriously damaged by anthracnose, including therein not more 

than 1 percent for avocados affected by decay.

(b) Hass Avocado meeting the following sizes underlying the contract.

Size Total Weight (oz)

32 11.75-14.00

36 10.50-12.50

40 9.50-11.50

48 7.50-9.50

60 6.25-7.50

70 4.75-6.25

84 3.75-4.75

Rule 2004. Settlement Procedure

(a) There shall be no delivery of Hass Avocados in settlement of this contract. All contracts open as of the termination of trading shall 

be financially-settled based upon the Seed Hass Avocado IndexTM for the two–day period ending on the day on which trading 

terminates.

(b) Temporary Settlement Calculation for Expiring Contract.

(i) Seed determines the settlement for the expiring Hass Avocado swap contract based on trading activity on Seed SEF between 

12:30:00 and 1:30:00 Central Standard Time (CST) – the last hour of the contract’s life.
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(A) The expiring contract’s temporary final settlement is its volume-weighted average price (VWAP) of all trades that occur 

between 12:30:00 and 1:30:00 CST on the day of expiration, rounded to the nearest tradable tick. If the VWAP is 

equidistant between two ticks, then it’s rounded to the nearest tradable tick that is closer to the prior-day’s settlement 

price.

(B) In the absence of any trade activity in the expiring contract between 12:30:00 and 1:30:00 CST, the bid price that is 

higher than the last trade or prior day’s settlement price, or the ask price that is lower than the last trade or prior day’s

settlement price, from 12:30:00 and 1:30:00 CST, will determine the temporary final settlement price for that contract 

month.

(C) If there is no market activity, then the contract’s temporary settlement will be its prior-day settlement price.

(c) Final Settlement.

(i) Final settlement will be to the Seed Hass Avocado IndexTM. 

(ii) Final settlement is released two Business Days after trading in the expiring contract month terminates at which points any 

adjustments between the temporary settlement price and final settlement price will be made.

(iii) Sample: The sample consists terminal market pricing at thirteen (13) major US locations, as recorded by the USDA Agricultural

Marketing Service.

(iv) Calculation: The procedure for calculating the Seed Hass Avocado IndexTM is as follows:

(A) The daily Mostly Low and Mostly High price points for size 32, 36, 40, 48, 60, 70, and 84 non-organic Hass Avocados 

in “carton 2 layer”, “flats 2 layer”, and “carton loose” are average together for each terminal market.

(B) If Mostly Low and Mostly High are not recorded, the Low Price and High Price are utilized instead.

(C) The resulting prices are then averaged across all sizes at each location.

(D) The resulting average prices at each terminal market are then average together to obtain a daily price which represents 

the Hass Avocado Index value for that particular day.

(E) The Hass Avocado IndexTM for the two–day period ending on the day on which trading terminates (i.e. the day before 

the last trading day and the last trading day) are then averaged together to obtain the final settlement price.
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Appendix B: Chapter 20A – Hass Avocado Options

Rule 20A01. Scope

This chapter is limited in application to financially-settled Hass Avocado options. In addition to this chapter, Hass Avocado options

shall be subject to the general rules and regulations of the SEF, as applicable.

Rule 20A02. Contract Specifications

(a) Contract Size

(i) Each trading unit shall be an option to buy, in the case of the call, or to sell, in the case of the put, one financially-settled Hass 

Avocado swap contract as specified in Chapter 20. 

(ii) The underlying swap contract is the swap contract for the month in which the option expires. For example, the underlying 

swap contract for an option that expires in July is the July swap contract.

(b) Minimum Price Fluctuation

The minimum price fluctuation shall be in multiples of $0.0002 per pound ($5.00 per contract).

(c) Months Traded

Seed SEF contracts will always have trading available for the months of January, March, May, July, August, September and 

November, as well as the nearest three consecutive calendar months.

(d) Trading Hours

Trading shall take place between 8:30 am to 1:30 pm CST during Business Days.

(e) Last Trading Day

All commodity options expire at 12:00 pm CST on the Business Day following the last trading day. All contracts cease trading the 

Business Day prior to the twentieth (20th) calendar day of the contract month.

(f) Strike Price

(i) The strike price shall be stated in terms of cents per pound. 

(ii) For all contract months, strike price shall be at intervals of one-tenth (1/10) of one cent per pound; e.g., 10 cents, 12 cents, 

etc. 

(A) At the commencement of option trading in a contract month, the SEF shall list put and call options in a range within 25 

percent above and below the strike closest to the previous day's settlement price of the underlying futures contract (the 

at-the-money strike). If the previous day’s settlement price is midway between two strikes, the at-the-money strike shall 

be the larger of the two. All strikes will be listed prior to the opening of trading on the following Business Day. 

(B) New strikes may be listed for trading up to and including the termination of trading. The SEF may modify the provisions 

governing the establishment of exercise prices as it deems appropriate. The SEF may modify the procedure for the 

introduction of strike prices as it deems appropriate in order to respond to market conditions.

Rule 20A03. Exercise of Options

(a) The buyer of a Hass Avocado option may exercise the option on any Business Day prior to expiration by giving notice of exercise 

to Seed SEF by 6:00 pm CST, or by such other time designated by the SEF, on such day.

(b) After the close on the last day of trading, all in-the-money options shall be automatically exercised unless notice to cancel 

automatic exercise is given to Seed SEF. Notice to cancel automatic exercise shall be given to Seed SEF by 6:00 pm CST, or 

by such other time designated by the Exchange, on the last day of trading.

(c) Unexercised Hass Avocado options shall expire at 12:00 pm CST on the Business Day following the last trading day.
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Appendix C: Contract Specifications

Swap Contract Specifications

Contract Unit 25,000 pounds

Price Quotation Cents per pound

Listed Contracts Seed SEF will list the nearest three consecutive calendar in addition to at least eight additional months 

of the following cycle: January (F), March (H), May (K), June (M), July (N), August (Q), October(V) & 

December (Z).

Trading Hours CLOB: Monday to Friday, 8:30am to 1:30pm Central Standard Time 

Block Trade: Monday to Friday, 8:30am to 2:00pm Central Standard Time

Minimum Price Fluctuation $0.0002 per pound ($5.00 per contract)

Termination of Trading Business Day preceding the twentieth calendar day of the delivery month

Settlement Method Financially Settled

Settlement Procedures Refer to Seed SEF Settlement Procedures in the Seed SEF Rules

Exchange Rulebook Seed SEF Rules

Product Code HASSD

Option Contract Specifications

Contract Unit One Hass Avocado swap contract (of a specified month) of 25,000 pounds

Price Quotation Cents per pound

Listed Series January(F), March (H), May (K), July (N), August (Q), September (U), & November (X), as well as the 

nearest three consecutive calendar months

Trading Hours CLOB: Monday to Friday, 8:30am to 1:30pm Central Standard Time 

Block Trade: Monday to Friday, 8:30am to 2:00pm Central Standard Time

Minimum Price Fluctuation $0.0002 per pound ($5.00 per contract)

Termination of Trading Business Day preceding the twentieth calendar day of the delivery month. 

Settlement Method Financially Settled

Settlement Procedures Refer to Seed SEF Settlement Procedures in the Seed SEF Rules

Exchange Rulebook Seed SEF Rules

Product Code HASSO

Strike Price Interval $0.001 per pound
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Appendix D: Cash Market Overview and Analysis of Deliverable Supply

Cash Market Overview

Supply and demand for avocados in the United States has been steadily increasing over the last decade (10.89% CAGR). While a 

variety of avocado exist, the most common is Hass Avocado which accounts for 80% of the total supply in the United States and 94%

of total avocado retail dollars1. This is primarily due to its favorable taste (featuring a creamy and smooth taste that functional well 

across a variety of culinary uses) and nutritional profile as well as its storability and year-round availability. 

Domestic Hass Avocado production takes place in South California and accounts for over 14% of total yearly supply. Imports, 

particularly from Mexico, comprise the majority of Hass avocado supply within the United States. While domestic production has seen 

modest growth over the last decade (4.63% CAGR), imports have fueled the growth within the industry (12.04% CAGR) over the last 

decade.

This industry growth has fueled convergence to certain packaging and sizing standards. While a variety of packaging and shipping 

standards are available, nearly 99% of all Hass avocados are moved via 25 pound cartons or “lugs.” Hass Avocado are also available 

in a variety of sizes (e.g. 30, 48, 70, 94) with the value corresponding to the number of avocados that can fit in the typical 25-pound

carton. However, here too the industry has converged on certain standards with sizes 32,36,40,48,60,70, and 84 representing 99% 

of the Hass Avocado market2.

Additionally, the USDA has established grading mechanisms for the avocado industry as whole in the United States Standards for 

Grades of Florida Avocados3 which defines the three major grades of avocados: No.1, No. 2, and No. 3. Imports laws require that any 

avocado brought into the United States meet at least grade No. 24 and as such, the majority of Hass Avocados within the United 

States are at least grade No. 2.

The industry features several trade associations, including the Hass Avocado Board (HAB) the Mexican Avocado Producers and 

Packager Exporter Association (APEAM)5, and the California Avocado Commission (CAC)6 which help promote marketing, research, 

and standards within the industry. These associations feature a diverse array of growers, handlers, imports, wholesalers, and retailers 

within the United States.

The majority of supply is destined for fresh consumption with the remainder be processed into products like guacamole, avocado 

paste, or pressed into avocado oil for human consumption and use in cosmetics.

Deliverable Supply Analysis

Weekly production and import figures on Hass Avocados are regularly recorded by the Hass Avocado Board7 dating back to 2004:

Table 1: Market Size - Hass Avocados

Year

Domestic Production

(lbs) 

Imports

(lbs) 

Total

(lbs)

2004 388,077,815 291,173,674 679,251,489

2005 285,050,425 517,926,404 802,976,829

2006 560,153,525 390,765,853 950,919,378

2007 232,661,800 718,148,733 950,810,533

2008 302,584,250 644,700,279 947,284,529

2009 159,345,112 902,966,556 1,062,311,668

2010 516,491,275 730,370,994 1,246,862,269

2011 264,539,800 873,207,141 1,137,746,941

2012 424,176,005 1,099,447,094 1,523,623,099

2013 460,026,696 1,225,443,622 1,685,470,318

2014 282,499,073 1,573,529,322 1,856,028,395

2015 262,577,494 1,918,459,294 2,181,036,788

 

1 Source: Hass Avocado Board

2 The convergence to these specific sizes is mainly due to retail pricing standards. Retail supermarkets utilize Price Look Up (PLU) codes to categorize products and to 

quickly obtain prices at the register. Hass Avocados in retail stores have three separate PLUE codes based on size. PLU code 4770 corresponds to sizes 32 and 36, code 

4225 to sizes 40 and 48, and code 4046 to sizes 60 and above. This mechanism has resulted in sizes 32, 36, 40, 48, 60, 70, and 84 being the dominant sizes as these are 

the sizes found on retail shelves.

3 https://www.ams.usda.gov/sites/default/files/media/Avocado_Florida_Grade_Standard%5B1%5D.pdf

4 http://www.ecfr.gov/cgi-bin/retrieveECFR?gp=&SID=03be3166932ef0a5386bda531f4649b8&mc=true&n=pt7.8.944&r=PART&ty=HTML%20-%20se7.8.944_131#se7.8.944_128

5 http://www.apeamac.com/en/quienes-somos.php

6 http://www.californiaavocadogrowers.com/

7 The Hass Avocado Board (HAB) is an agriculture promotion group established in 2002 to promote the consumption of Hass Avocados in the United States. A 12-member 

board representing domestic producers and importers of Hass Avocados directs HAB’s promotion, research and information programs under supervision of the United 

States Department of Agriculture. Funding for HAB comes from Hass avocado producers and importers in the United States. https://www.hassavocadoboard.com/
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2016 365,832,317 2,239,257,412 2,605,089,729

These figures represent stocks meeting or exceeding the underlying grade as specified in the contract as US grade No. 2 or above.

The minimum of US grade No. 2 was chosen to conform with US import regulations of avocados. According to the Title 7 Avocado 

Grade Regulation8, all avocados entering the United States must meet at least US grade No. 2 or be rejected at the border. As such,

all imports will meet the underlying grades on the contract. Additionally, domestic production figures reported by the Hass Avocado 

Board only include production of US grade No. 2 and above. As such, the entirety of the total supply will meet the underlying grade.

While these figures do not distinguish between different sizes of Hass Avocado, most of the total supply will likely meet the sizes

underlying the contract. Figures on retail volume as recorded by the Hass Avocado Board do offer a breakdown by size and can help 

provide an estimate for the percentage of total supply meeting the underlying sizes. The figures for 2016 are reported below 

Table 2: Hass Avocado Supply Meeting Underlying Grade and 

Size

Month

Total Volume 

(lbs) 4770 (lbs) 4225 (lbs) 4046 (lbs)

% of Total 

Volume

Jan

 

175,341,095 

 

51,212,938 

 

70,444,850 

 

7,346,171 73.46%

Feb

 

158,371,691 

 

50,409,872 

 

58,873,152 

 

7,292,958 73.33%

Mar

 

143,704,702 

 

45,869,431 

 

51,774,195 

 

7,139,861 72.92%

Apr

 

147,328,060 

 

49,068,975 

 

50,329,306 

 

6,894,199 72.15%

May

 

206,084,246 

 

65,814,459 

 

75,044,255 

 

8,386,188 72.36%

Jun

 

150,919,040 

 

51,778,433 

 

49,803,238 

 

6,645,970 71.69%

Jul

 

171,757,845 

 

54,786,768 

 

56,842,011 

 

5,713,310 68.29%

Aug

 

135,792,115 

 

49,836,343 

 

41,938,193 

 

2,677,255 69.56%

Sep

 

132,908,624 

 

49,492,119 

 

40,201,178 

 

2,031,633 68.90%

Oct

 

131,942,881 

 

42,578,170 

 

42,514,878 

 

2,333,901 66.36%

Nov

 

94,522,590 

 

32,462,037 

 

30,257,397 

 

1,734,914 68.19%

Dec

 

121,586,499 

 

38,702,538 

 

40,498,297 

 

1,800,903 66.62%

Retail volumes are recorded utilizing Price Look Up (PLU)9 codes to classify various sizes for products on retail shelves. Codes 4046, 

4225, and 477010 correspond to the sizes of avocado underlying the contract. Over the course of 2016, Hass Avocados meeting the 

deliverable sizes accounted for 70% of total retail volume. Using this estimate can help establish how much of the total supply within 

the United States meets the underlying size. Table 3 provides estimates of these figures.

Table 3: Market Size - Hass Avocado

Year Total Supply

(lbs) %

Supply Meeting 

Deliverable Size

(lbs)

Contract 

Equivalent

2004 679,251,489 70% 475,476,042 19,019

2005 802,976,829 70% 562,083,780 22.483

2006 950,919,378 70% 665,643,565 26,626

2007 950,810,533 70% 665,567,373 26,623

2008 947,284,529 70% 663,099,170 26,524

2009 1,062,311,668 70% 743,618,168 29,745

2010 1,246,862,269 70% 872,803,588 34,912

 

8 7 C.F.R. §944.28

9 PLU or Price Look Up codes have been used by supermarkets since 1990 to make check-out and inventory control easier, faster and more accurate. PLU codes are used 

to identify bulk produce (and related items such as nuts and herbs). LU codes are 4 or 5 digit numbers and will appear on a small sticker applied to the individual piece of 

fresh produce. The PLU number identifies produce items based upon various attributes which can include the commodity, variety, growing methodology (e.g. organic), and 

the size. These numbers are assigned by the IFPS after rigorous review at both national and international levels. PLU codes ensure that the accurate price is paid by 

consumers by removing the need for cashiers to identify the product and whether or not it is conventionally or organically grown.

10 PLU code can be accessed via IFPS website at http://www.ifpsglobal.com/Identification/PLU-Codes/PLU-codes-Search
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2011 1,137,746,941 70% 796,422,859 31,857

2012 1,523,623,099 70% 1,066,536,169 42,661

2013 1,685,470,318 70% 1,179,829,223 47,193

2014 1,856,028,395 70% 1,299,219,877 51,969

2015 2,181,036,788 70% 1,526,725,752 61,069

2016 2,605,089,729 70% 1,823,562,810 72,943

These estimates demonstrate that over 1.8 billion pounds of Hass Avocados meeting the underlying grade and size were present in 

the United States in 2016.
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Appendix E: Hass Avocado Index Methodology

Overview

The purpose of this index is to create a settlement mechanism for the Hass Avocado contract. A comprehensive analysis of the 

underlying cash market for avocados was undertaken to identify the key characteristics and features to be included in the index in 

order to best reflect the US market.

Data

Avocado pricing data was obtained through the United States Department of Agriculture (USDA) Agricultural Marketing Service 

(AMS)11 Market News portal12. Daily wholesale terminal market pricing data reported by AMS was utilized in construction of the index. 

Terminal market data provides wholesale market information on fruits and vegetables, with reports issued daily based on information 

gathered at thirteen major US. cities13. These reports include price data on commodities traded at the local wholesale market level. 

Prices reported in wholesale markets are those received by wholesalers for sales of product that is of good merchantable quality and 

condition, unless otherwise described.

Pricing data is gathered through confidential telephone and face-to-face interviews carried out by skilled market reporters employed 

jointly by the U.S. Department of Agriculture and State agencies. Reports are impartial, current, and reliable. They are disseminated 

free of charge by satellite, newspapers, radio, television, and Internet sources and are available on a subscription basis in printed 

reports by facsimile machine. Nearly 400 different reports are issued daily, weekly, monthly, or annually to assist industry members 

in making marketing decisions.

Terminal market pricing data is obtained by trained, professional USDA reporters through face to face interviews with market 

participants at each of the thirteen terminal markets. The number of interviews conducted by each reporter varies from market to 

market with certain terminal markets, such as St. Louis or Dallas, only employing one reporter who will conduct 3-10 interviews a day, 

while other terminal markets, such as Boston, New York, and Los Angeles, possess a more robust collection of vendors and as such 

employ multiple reporters who conduct more interviews. As a form of checks and balances, reporters also interview retailers who 

purchase from these wholesale vendors to ensure reliability of the reported prices. Typically, each reporter interviews the same 

vendors each day as cooperation is voluntary and confidence and trust between the reporter and vendor must be established.

Prices reported daily by AMS at the thirteen terminal markets are recorded for an assortment of varieties, types, sizes, and packaging. 

However, in order to ensure that the index reflects prices for industry standards, certain observations are excluded.

Variety - Prices reported by AMS record prices for two different varieties or classifications of avocado: Hass and “various greenskin 

varieties.”14 Hass was chosen as it represents the dominate variety, encompassing over 77% of all observations over the last three 

years as well as the most popular variety on retail shelves.

Type - Prices reported by AMS also include both organic and conventional Hass Avocados. However, organic prices are excluded as 

the only represent 5% of the market.

Size - A variety of Hass Avocado sizes (e.g. 9, 32, 48, 70, etc.) are reported by the AMS, with the number corresponding to the 

number of avocados of the particular size that can fit in a 25-pound carton. Sizes 32, 36, 40, 48, 60, 70, and 84 were included as they 

represent 99% of Hass Avocado observations and constitute the most popular sizes within the retail market.

Package - Hass Avocados prices are recorded for a variety of packages. However, only prices for product in “carton 2 layer,” “carton 

loose,” and “flat 2 layer” are utilized as these represent the typical 25-pound packaging container and represents 99% of Hass Avocado 

observations.

Additionally, weekend and holiday prices are not recorded. As such Friday and Monday are considered consecutive days as well as 

the day before and after certain holidays.

Seed does not specify a minimum amount of observation, or an observation threshold, for the publication of its Hass Avocado index 

for a particular day. Physical commodity markets vary in liquidity. Any particular market analyzed on its own will typically demonstrate 

rising and falling levels of pricing observations through time. Seed is committed to providing an assessment of value equally well in 

times of heightened or reduced liquidity.

 

11 The Agricultural Marketing Service (AMS) administers programs that create domestic and international marketing opportunities for U.S. producers of food, fiber, and 

specialty crops. AMS also provides the agriculture industry with valuable services to ensure the quality and availability of wholesome food for consumers across the country.

12 For 100 years, AMS has provided free, unbiased price and sales information to assist in the marketing and distribution of farm commodities. Each year, Market News 

issues thousands of reports, providing the industry with key wholesale, retail and shipping data. https://www.ams.usda.gov/market-news

13 These cities include Atlanta, Baltimore, Boston, Chicago, Columbia, Dallas, Detroit, Los Angeles, Miami, New York, Philadelphia, San Francisco, and St. Louis.

14 This categories encompasses several varieties including Gwen, Pinkerton, Reed, and Bacon.
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Methodology

The Hass Avocado Index is constructed by calculating the arithmetic mean for the given variety, type, sizes, and packaging for each 

terminal market and then averaging these prices across each of the thirteen markets with each of the terminal markets receiving equal 

weight.

Pricing observations reported by the AMS features a “Mostly Low” and “Mostly High” price, which indicates the range of prices that a 

majority of the products sold that day. In order to calculate a single price for an individual observation, the mean between these two 

prices is calculated according to equation (1)

Pslt =

Pslt

MH + PsltML

2

With Pslt

MH representing the Mostly High price for size s at location l and time t and PsltML representing the Mostly Low price for size s at 

location l and time t.

If the Mostly Low and Mostly High prices are absent, the “Low Price” and “High Price” will instead be utilized. These prices record the 

absolute range of prices for an observation. In order to calculate a single price for an individual observation the mean between these 

two prices is calculate according to equation (2)

Pslt =

Pslt

HP + PsltLP

2

With Pslt

HP representing the High Price for size s at location l and time t and PsltLP representing the Low Price for size s at location l and 

time t.

Once a single price for an individual observation is calculated, prices for each size are averaged across location per equation (3)

Plt =

∑ Pslt

S

s=1

S

With S representing the number of sizes recording at location l at time t.

Once the prices for each size are averaged across location to obtain a single price at each location at a point in time, these prices are 

then averaged across location to obtain a single price for a particular day according to equation (4)

Pt =

∑ Plt

L

l=1

L

Finally, this daily price is divided by 25 to represent the price per pound for Hass Avocados.

This final price represents the index value for the day.

If no terminal market prices are recorded for a given day, the index value for that day will be determined by the average between the 

two previous days in which prices were recorded and the two following in which prices are recorded.

15

Manipulation

The Hass Avocado Index is not subject to manipulation due to the impartial manner in which the underlying data is collected by USDA 

AMS, the nature of the market, and the methodologies of the index itself.

The data collection process at each terminal market employed by AMS, and described above, helps eliminate opportunities for 

manipulation by utilizing multiple interviews on a daily basis as well as a system of checks and balances to ensure the reliability of 

the reported prices. Additionally, expert judgement by professional reporters are designed to detect the presence of any unreliable 

data points. Data provided by AMS is utilized in several other financially settled agricultural contracts, including the Chicago Mercantile 

 

15 However, gaps in recording have not be an issue over the previous three years

(1)

(2)

(3)

(4)
Page 12 of 13

Exchange’s (CME) Lean Hog Futures16 and Feeder Cattle Futures17. As such, pricing data reported by USDA AMS provides an 

unbiased and reliable source for the data underlying the index.

The nature of the market, particularly at the level in which prices are recorded, helps eliminate opportunities for manipulation. Prices

are recorded at the point of sale between wholesalers and retailers which feature an array of supermarkets and other retail stores. As 

such the data is drawn from a diverse, large, and liquid market which helps reduce chances of manipulation.

The construction of the index itself also help eliminate opportunities for manipulation. The index features prices recorded at 13 major 

terminal markets across the country, all of which are equally weighted in the final calculation of the index. In order for the index to 

become susceptible to manipulation, prices across these thirteen markets must all be manipulated in the same manner and direction 

in order to produce movements in the index.

Additionally, as the proprietor of the Hass Avocado Index, employees at Seed are prohibited from taking position in the markets it 

serves in accordance to SEF Rule 216, generally, as well as the SEF Compliance Manual (Section V. A. Conflicts of Interest and B. 

Personal Trading Policy) and thus have no financial incentive to distort or manipulate the index.

Result

Figure 1 provides an historical overview of the index from 2014-2016.

This final index value reflects the average price faced by wholesalers and retailers for the typical size and packaging of Hass Avocados 

around the country and can be used as a benchmark for wholesale pricing.

The Hass Avocado Index fully reflects the economic and commercial conditions faced in the cash market as it encompasses the most 

prevalent variety, sizes, and packaging conditions in the cash market across the country. Table 1 looks at the correlation and hedge 

effectiveness18 between the Hass Avocado Index and various daily prices faced throughout the country and across different levels of 

the supply chain from 2014-2016.

 

16 http://www.cmegroup.com/rulebook/CME/II/150/152/152.pdf

17 http://www.cmegroup.com/rulebook/CME/II/100/102/102.pdf

18 A commonly used method of determining the hedge effectiveness of a financial tool in mitigating price risk in a market is ordinary least squares (OLS) regression. By 

regressing the cash price of the commodity that is looking to be hedged on the price of the hedging instrument, measures of the effectiveness of the futures contract as a 

hedging instrument can be established. The resulting coefficient of determination (R2) measures the hedge effectiveness, the percentage of the variation in the cash price 

explained by the futures prices, and the slope coefficient measures the hedge ratio.

 $-

 $0.50

 $1.00

 $1.50

 $2.00

 $2.50

 $3.00

 $3.50

 $4.00

1/2/2014 1/2/2015 1/2/2016

Figure 1: Hass Avocado Index
Page 13 of 13

Table 1: Hass Avocado Index Comparison 2014-2016

Market Correlation

Hedge 

Effectiveness

New York Wholesale Market 0.96 92%

Los Angeles Wholesale Market 0.95 90%

Dallas Wholesale Market 0.97 94%

Imports from Mexico FOB 0.96 92%

Southern California FOB 0.93 86%

Prices from various markets across the country and levels of the supply chain were compared to the Hass Avocado Index to test its 

reliability as a market indicator. Correlations with the Hass Avocado Index of over 0.90 for all markets chosen shows that the index 

does indeed reflect price movements experienced at various supply chain levels across the country. Additionally, the strong hedge 

effectiveness of the index as a tool to mitigate price risk in each of these markets show that the index would be a valuable tool in 

helping various market participants across the country and at various levels of the supply chain reduce their risk. As such, the Hass 

Avocado Index represents a viable market indicator as well as a strong hedging tool.