CURRENT PERSPECTIVES ON THE GLOBAL AVOCADO MARKET

In this report, we explore the evolution of the global avocado market from a niche fruit to a booming international commodity. Driven by rising health trends and growing plant-based consumption, avocados now present real opportunities across agriculture, logistics, and emerging markets.

We analyze major supply shifts, from Mexico’s dominance to the rise of Peru, Colombia, and Kenya. Despite climate volatility and logistics constraints, the sector remains attractive due to stable demand, ESG-driven premiums, and room for value-chain innovation.

For those seeking exposure to resilient, growth-oriented assets, this article offers insight into how to capitalize on one of the world’s most dynamic agricultural sectors.

Rebalancing in the Digital Era: Confronting AI Overexposure Amid U.S. Equity Concentration

In this publication we analyze the structural risks emerging from this concentration dynamic and discuss why strategic rebalancing and diversification particularly through real assets such as agriculture are essential to ensure portfolio resilience and long-term value preservation. For those seeking a deeper understanding of the opportunities and systemic risks shaping the AI era, we invite you to explore the full article. 

The Incredible Rise of Avocados: A True Success Story

Discover how avocados have transformed from a misunderstood fruit into a global sensation. Over the past two decades, they’ve become a staple in kitchens and a symbol of health and sustainability. This meteoric rise didn’t happen by chance—it’s a result of tireless efforts in promotion, research, and innovation.

In this compelling mini-documentary, you'll learn about the pivotal role of the Hass Avocado Board in creating demand and elevating avocados to cultural icon status. The video highlights the economic impact, health benefits, and the industry's dedication to sustainability and community development.

The Hass Avocado Board has made an ultra-informative mini-documentary on this subject. Watch the video below to uncover the fascinating journey of this superfruit and the bright green future ahead for avocados.

Summary: The U.S. Economic Contributions of Hass Avocado Imports from Mexico | 2024 Update

The 2024 report, prepared by Dr. Gary W. Williams and Dan Hanselka of Texas A&M University, analyzes the economic contributions of Hass avocado imports from Mexico to the U.S. economy for fiscal year 2023/24. It highlights the growing significance of Mexican avocados in the U.S. and provides a historical perspective on their impact since 2012/13. The study also includes a special focus on the state economies of California and Texas, the two largest avocado-consuming state.

Key Highlights

1. Economic Impact on the U.S. Economy:

   • Hass avocado imports from Mexico generated $7.5 billion in total output (spending), $4.2 billion in GDP (value-added), and $2.5 billion in labor income in 2023/24.

2. Consumer Demand:

   • U.S. avocado consumption has more than doubled since 2010, driven by health-conscious trends and the fruit's versatility, underscoring the growing importance of Mexican Hass avocado imports​.

3. Multiplier Effects:

   • Every dollar of Mexican Hass avocado imports generated $2.13 in U.S. economic output and $1.18 in GDP. Each $1 million of imports supported 11.9 jobs.

4. State-Specific Contributions:

   • California: Imports added $965 million in economic output, $580 million in GDP, and supported 5,281 jobs.

   • Texas: Imports contributed $469 million in economic output, $260 million in GDP, and supported 2,847 jobs.

5. Growth Trends:

   • From 2012/13 to 2023/24, the value of Mexican Hass avocado shipments to the U.S. increased by over 250%, with their contribution to U.S. output and GDP rising by 330% and 240%, respectively​.

6. Sustainability and Logistics:

   • Nearly 98% of the imports were transported through Texas border crossings. The study highlights the importance of sustainable practices and efficient logistics in supporting the growing demand.

7. Challenges and Resilience:

   • Despite fluctuations in shipment volumes due to weather and supply chain issues, demand for avocados remains robust. The report notes that small changes in supply can significantly impact prices due to strong U.S. demand​.

Citation

Williams, G. W., & Hanselka, D. (2024). The U.S. Economic Contributions of Hass Avocado Imports from Mexico. Texas A&M University. Report commissioned by the Mexican Hass Avocado Import Association (MHAIA) and the Asociación de Productores y Empacadores Exportadores de Aguacate de México (APEAM).

See the full report here.

Economic Impact of Mexico-U.S. Avocado Trade: Key Insights and Growth Trends

Economic Impact of Mexico-U.S. Avocado Trade: Key Insights and Growth Trends

Originally published by FreshPlaza. Read the full article here.

The Mexico-U.S. avocado trade has reached unprecedented levels, significantly benefiting both economies. According to the Avocado Institute of Mexico's 2023-2024 Economic Report, U.S. imports of Mexican Hass avocados amounted to $3.52 billion in the last fiscal year (July 2023 – June 2024). This trade contributed $7.5 billion to U.S. economic output, $4.2 billion to GDP, and supported over 42,000 American jobs, generating $2.5 billion in labor income and $1.1 billion in taxes.

Image courtesy of FreshPlaza.

In Mexico, approximately 35,000 avocado growers, primarily small family farms, along with over ninety packing houses, exported 2.4 billion pounds of Hass avocados to the U.S. last year. This activity resulted in $6 billion in economic output for Mexico. Ron Campbell, Executive Director of the Mexican Hass Avocado Importers Association (MHAIA), emphasized the mutual benefits of this trade relationship and the industry's commitment to sustainable growth.

The report also highlights the growing economic impact in key U.S. and Mexican states, indicating that the pro-growth trend of Mexican Hass avocado imports is expected to continue in the coming years.

This summary is based on the article "Economic impact of Mexico-U.S. avocado trade reaches new heights" published by FreshPlaza.

Publication date: Fri 13 Dec 2024

Originally published by FreshPlaza. Read the full article here.

AVO Oro Verde: La primera estructura de inversión para la producción de aguacate

La historia de las inversiones en agricultura

Durante muchos siglos, la única forma de invertir en la industria alimentaria era a través de la propiedad de la tierra. Ya sea para ganado o cultivos, los propietarios de tierras eran los únicos que podían invertir en esta industria, y cuando necesitaban invertir en su propia tierra, tenían que vender parte de ella, o pedir un préstamo respaldado por la tierra. Este tipo de préstamo fue considerado por primera vez el principal tipo de inversión agrícola privada en el siglo 19 en los EE.UU. Cuando los inmigrantes recién asentados comenzaron a expandirse por el vasto territorio con precios meramente simbólicos (menos de 20 dólares por 50 Hectáreas) la principal inversión se convirtió en la tecnología y los recursos necesarios para explotar la tierra (más de 700 dólares por la misma extensión de tierra). Fue en este momento cuando las utilidades de la agroindustria se transfirieron a los bancos que prestaron el dinero para las herramientas que necesitaban, que en algunos casos suministraron ellos mismos, y que los propietarios de las tierras se quedaron con la tarea, a veces imposible, de pagar estos préstamos. Hoy en día este sigue siendo el caso en muchos lugares.  

El siglo XX fue testigo de los primeros fondos de inversión altruistas globales. La agricultura fue una de las industrias más importantes en las que se materializaron estas inversiones. Los fondos recaudados por las Naciones Unidas fueron gestionados por la FAO[1]  y asignados a muchas inversiones en los países en desarrollo tratando de lograr la seguridad alimentaria como su primer objetivo.  Con la maduración de esta industria, los fondos privados de los países del primer mundo comenzaron a rastrear su rentabilidad y se convirtieron en actores del mismo movimiento. Redujeron su riesgo utilizando inversiones mixtas[2]  que se convirtieron en el nuevo estándar de las inversiones agrícolas en los países en desarrollo. Estas inversiones estructuradas lograron el objetivo de introducir a los inversionistas privados en la industria agrícola de los países en desarrollo, pero no lograron una verdadera independencia del sector público. Esto generó una duplicidad de conocimientos especializados, al tener por un lado a empresas que eran productoras expertas en países del primer mundo y por otro lado a expertos en tratar con los países en desarrollo (gobiernos y población), pero nunca lograron que trabajaran en verdadera simbiosis.

No fue sino hasta que las empresas agroindustriales comenzaron a crecer y se hicieron lo suficientemente grandes como para desempeñar un papel en los mercados financieros que se pusieron a su disposición productos financieros eficientes, pero incluso entonces esos productos eran sólo para los grandes actores. Hoy en día, los pequeños productores siguen dependiendo de los recursos públicos en muchos países para subsistir, incluidos los Estados Unidos y la Unión Europea. Así pues, para los productores de los mercados emergentes, la única forma de financiar su crecimiento, o incluso sus operaciones habituales, es a través de préstamos respaldados por tierras que, dependiendo del patrocinador, se limitan a una fracción del valor de la tierra, y no alcanzan para la necesidad de crecer para obtener economías de escala. Esto es una incoherencia, ya que hay muchos productos agrícolas de alto rendimiento que pueden dar mejores retornos con menos riesgo (la mayoría de los riesgos pueden ser mitigados o eliminados) que casi cualquier otra industria. Lo que explica esta situación es que la mayoría de estos productos de alto rendimiento residen en países en los que los mercados financieros aún no se han desarrollado y, por lo general, no tienen un mercado lo suficientemente grande como para atraer grandes inversiones que no sean préstamos.

¿Cómo invertir en aguacates?

Este contexto es el que fertilizó a Avo Oro Verde, y le ayudó a emerger en lo que es ahora; la primera estructura de inversión para la producción de aguacate. Hemos canalizado la necesidad de mayores rendimientos en los mercados financieros hacia una industria en la que es muy difícil conseguir inversiones, pero que genera un exceso de rendimiento sustancial cuando se gestiona de forma inteligente. Nuestra labor consiste en crear valor tanto para los agricultores como para los inversionistas, y utilizar los recursos invertidos para hacer huertos más grandes y eficientes que generen más beneficios tanto para los nuevos inversionistas como para los propietarios originales. Para los agricultores que desean liquidez les ofrecemos la oportunidad de vender parte de sus tierras a un buen precio o de asociarse con nosotros. Para los inversionistas les damos la oportunidad única de invertir en la producción de aguacates sin necesidad de hacer el trabajo de exploración y búsqueda de tierra y esperar más de 5 años hasta recibir los primeros retornos de su inversión.

Los aguacates, a diferencia de la mayoría de los cultivos, tienen una cadena de valor en la que los productores tienen el mayor poder. Los exportadores, distribuidores y comercializadores son muchos y ninguno tiene el poder suficiente para forzar un precio para los productores. Por lo tanto, los productores pueden vender su producto al mejor postor teniendo en cuenta el precio spot[3]. Esta es la razón por la que Avo Oro Verde invierte principalmente en este eslabón de la cadena de valor.

Proporcionamos inversiones con un perfil de riesgo y rendimiento convincente. El riesgo de pérdida está limitado por el precio de la tierra y los árboles de aguacate. Los aguacates son cultivos permanentes que son más tolerantes a las condiciones climáticas extremas que los cultivos cíclicos. Si bien la oferta limitada y la creciente demanda de aguacates, crean escasez y aumentan los precios. Los altos márgenes y picos de precios de los aguacates proporcionan una alta TIR sin necesidad de apalancamiento en los rangos de 20-30%, y como la mayor parte del mercado se realiza en dólares americanos, el aumento del precio del dólar sólo puede ayudar a los rendimientos finales.

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[1] Organización de Comida y Agricultura de las Naciones Unidas (por sus siglas en inglés)

[2] Blended investment (o inversiones mixtas) viene de Blended Finance, que es un término usado para inversiones en que el sector público invierte en proyectos del sector privado y deja que inversionistas privados tengan ventajas a la hora de invertir en ellos, usualmente con menores riesgos y mayores ganancias.

[3] La APEAM tiene una plataforma publica en que los precios del aguacate son publicados dependiendo del precio de Mercado. Estos precios dependen del tamaño del aguacate y el país de destino.

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Referencias

Brian Solender, “Farming Don’t Pay:” The Anatomy of the 19th-Century Western Farm Mortgage Industry. Columbia University, 2017

Calvin Miller, “Agricultural investment funds for developing countries” Food and Agriculture Organization of the United Nations Rome, 2010

CTA “Innovative Partnerships for Agricultural Finance” Union Europea 2017

Portfolio diversification during the COVID 19 crisis: Preventing income shortfalls with avocado orchards

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The disconnect between capital markets, the real economy and dividend distributions

There is a strong disconnect between the real economy, the dividend distributions of companies and the prices of major indexes. On the one hand, the economy is contracting[1] jobs are getting lost[2] and companies are cutting back on distributions[3]. On the other hand, the S&P 500 is trading at around the levels as it was in mid-2019, i.e. -10.3% return YTD[4]. The disconnect has three main reasons:

First, most job losses are related to retail, leisure and hospitality industries. They form part of the consumer discretionary sector, which is only about 10% of the index. While 50% of the market capitalization of the S&P 500 forecasts show no significant deterioration in their EPS for 2020[5].

Second, the reduction in interest rates has resulted in an expansion of multiples. Consequently, equity prices have risen as the lower discount rate has impacted the terminal value of each individual company[6].

Third, the Fed’s balance sheet is expected to grow by a total of $7 trillion in 2020[7]. This is about a third of the US GDP[8] and about 29% of the S&P 500 market capitalization[9].

However, the S&P 500 trading at around the levels as it was in mid-2019 does not mean that companies will be able to pay the same level of dividends as they did in 2019. Dividend futures project disruption in dividend payments between now and 2028. If history serves as a guide, we can expect the income shortfall to be close to the one of the 2008 Financial Crisis, where dividends fell by about a quarter and took about four years to recover (Forbes 2020)

For investors seeking equity-like returns with reliable sources of income, it is important to assess how well their portfolios are positioned to withstand the impact of dividend reductions over the next three to four years.

Avocados have been a robust source of income during the COVID 19 crisis

One alternative source of income with inflation hedging properties are real assets[10], specifically natural resources[11]. Investments in natural resources have exhibited equity-like returns, positive correlations with commodity prices, and outperformance during periods of high inflation (Toczylowski, A. 2018).

Agriculture as a subset of natural resources has been a resilient sector during the COVID 19 crisis, as income from these companies has been less fragile to disruptions in supply chains. Moreover, it is likely that this sector will continue to be resilient during the current and future potential outbreaks, as governments view food security as a priority.

The problem with agricultural companies is that they generally have thin margins. This is mainly because of the highly competitive environment. Avocado orchards, in contrast, have high margins, the average EBITDA margin of an avocado plantation is about 70%. This is higher than the EBITDA margin of the five largest companies in the S&P500 (AMZN 12%, GOOG 25%, AAPL 30%, MSFT 46%, FB 50%)[12].

Why are avocado orchards so profitable? Margins of avocado orchards are protected by high barriers to enter the market. It takes four years until a farm gets its first crop and 15 years[13] until it reaches its maximum production. Moreover, there is a limited supply, as there is scarcity for fertile places where avocados can grow. While the demand for avocados is growing, the supply for avocados cannot increase at the same rate, which results in increasing prices.

Moreover, in contrast to other commodities, avocado prices and the income from avocado orchards have been resilient during the COVID 19 crisis. The chart below compares WTI spot prices vs. avocado farmgate prices[14].

Avocados vs. WTI during the COVID 19 crisis

In conclusion, avocado orchards provide a true diversification from systematic risks. The naive geographical diversification however is not effective when needed the most i.e. when volatility rises, and correlations increase. Avocados are price inelastic products, consequently they are a stable source of income during recessions.

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[1] April’s figure for the global manufacturing PMI (39.8) shows a contraction

[2] April’s jobs report in the US shows the unemployment rate at 14.7%

[3] Delta Air Lines Inc., Ford Motor Co., Macy’s Inc., announced dividend suspensions in the second quarter. US banks, usually big dividend payers are likely to follow the path of British banks and slash dividends.

[4] 12.05.2020

[5] IT (25.7%), HC (15.4%) Consumer Staples (7.4%), Utilities (3.3%) make about 50% of the SP 500 market capitalization and these sectors have been more resilient to the current crisis

[6] Terminal values often make about 60% of the value of a stock when using DCF method to value a company

[7] An increase YTD of $ 2.5 trillion and an additional balance sheet expansion of $ 4.5 trillion based on announced monetary policy interventions

[8] US GDP 2019 $21.428 trillion

[9] As of the 8th May 2020 S&P500 Market Capitalization $24.3 trillion, Willshire 5000 $29.1 trillion, Total Ex Foreign Issues $45.4 trillion and Equities total Issues in the U.S. $54.9 trillion (Yardeni 2020)

[10] Over time the general understanding of real assets has shifted from any inflation hedging asset i.e. assets that tend to increase in nominal value with unexpected inflation (Froot K. 1978) to a narrower definition comprising tangible assets with intrinsic value. (Donohue et al., M.2009; pp.119). Today we understand real assets. as alternative investments such as real estate, infrastructure, and natural resources (Mcvey. H. et al., 2017)

[11] As of December 2019, natural resources assets under management (AUM) surpassed $760bn (Preqin 2020)

[12] As of May 2020, the top 5 largest companies by market capitalization are close to 20% of the S&P500 total market cap

[13] With new technologies it is possible to reach maximal production after 8 to 10 years

[14] Avocado farmgate prices describe the price of export quality avocados if they were purchased directly from a farm in Mexico, without any additional markup

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References

CME (2020) “Dividend futures in the new Covid-19 environment”.

Baldwin, W. (2020) “How much will your dividends get cut?” Forbes.

Donohue M. et al., (2009), CAIA Level II; “Advanced Core Topics in Alternative Investments”, John Wiley & Sons; Inc.

Froot K. “Hedging Portfolios with Real Assets “Journal of Portfolio Management. Summer pp.60-77. 1995.

Mcvey. H. et al., (2017) “Insights Global Macro Trends” The Ultra High Net Worth Investor: Coming of Age Volume 7.3, KKR Global Institute Research Report.

Preqin (2020) “Global natural resources report”.

Toczylowski, A. (2018) “Natural Resources” Meketa Investment Group Research Report.