Limited consumer spending hits avocado market
Staple food prices continue to rise placing pressure on higher-end produce like avocados. Compared with the same period last year, potatoes were trading 77% higher, with carrots trading 6% higher.
Dr Johnny van der Merwe, managing director of AMT, noted these and other price increases. “Pepper prices increased by 30% during August due to colder weather. Apples, red peppers and pears are expected to continue their upward trend during the year,” he said. Onion prices were, however, on a downward trend, after spiking over the past few months.
Hester Vermeulen, economist at the Bureau for Food and Agricultural Policy (BFAP), noted that cold weather and load-shedding were the main reasons for price increases. BFAP’s data showed that food prices had increased by 11% year-on-year, with staples like vegetables, bread, sugar and dairy showing the biggest gains.
Avocados, however, registered a price reduction year-on-year. Vermeulen explained that when consumer budgets were strained, they tended to limit their spending on high-value items, such as avocados.
With avocado production around the world increasing and input costs rising, avocado farmers would have to tighten their belts in the medium term.
Derek Donkin, CEO of the South African Subtropical Growers’ Association, said that larger-than-expected volumes from Peru had kept prices low for a number of weeks at the start of the season. Just when prices had started increasing again, Peru sent more volumes onto the market.
Farmers were therefore not able to capitalise on higher prices on the export market this season, and were further constrained by lower uptake on the local market.
Donkin explained that the association’s local promotional activity was not bearing the fruit it usually did.
“Traditionally we see a big uptick in demand for avocados when our instore marketing campaigns commence, but not this year. We can surmise that consumers have less money to spend because the basics have become more expensive. Going forward, the reality is that world avocado supply will outstrip demand over the next five years, especially as more volumes flow from South and central America. Producers will need to be more efficient. The heyday of high prices is not going to come back any time soon. But we have experienced ups and downs before and we will get through them,” he said.
