Avocado-growing becoming too popular

By ROSALIE SMITH*

For the last 20 years my avocado-growing husband, whenever any prospective grower has asked his advice on joining the industry, has always replied: "No, the good returns can't last."

To him, they didn't. Exceptional returns of up to $3 a fruit at the orchard gate have long been a thing of the past, but avocado growers have generally prospered despite the normal market ups and down.

Can this prosperity continue indefinitely? Over the past five years or so what was previously a trickle of new growers has swelled into a deluge.

More than 80,000 trees were planted last spring and 100,000 are going in this month and next. Those trees and the 50,000 planted the previous spring have not begun fruiting yet. When they do they will produce twice the yield as four years ago because of improved management techniques.

For each of the past five seasons production has risen about 40 per cent and this increase will continue for the foreseeable future. Last season, 1.2 million trays were exported; this year, an estimated 1.8 million; five million by 2005, and only then will the trees planted this year start carrying fruit.

The question must be asked, are those investors lining up for plants as fast as the nurseries can produce them assessing what the market will be like in five years when they carry their first significant crops, or 10 years ahead when the trees reach maturity? It is a significant investment they are making, about $60,000 a hectare.

Or are they looking at last year's returns and basing their budgets on that? A cashflow projection has an orchard reaching its first surplus in its 10th year. It is based on a $14-a-tray return - a figure growers may not achieve this season, much less in five years.

That the industry has absorbed huge production increases is testimony to the growing popularity of the avocado and to well-organised structures. Four big exporters handle 80 per cent of the crop, with smaller players handling the rest.

A growers' association and industry council have managed a unified industry, working with exporters who have mostly kept in close touch through their own committee. More can hardly be asked of exporters who are competing for crop and in the marketplace.

For 20 years Australia has provided a vital niche market, with New Zealand avocados selling over the summer months when local stocks are short.

But production has grown too fast for that market and five years ago the first containers were shipped to the US, filling that market between the Californian avocado seasons. Each year the export has increased until last season more than half a million tray equivalents were exported.

Last season was exceptional.

A shortage of fruit in both countries ensured excellent grower returns of more than $20-a-tray equivalent. Is that why nurseries cannot keep up with the demand? But last year also offered a warning after fruit of poor quality arrived in California, threatening that market and leading to harvesting and handling systems being overhauled.

While greater care and applied research will reduce rots, they will always remain a problem for growers in our moist temperate climate.

Maybe the would-be grower should compare the avocado industry with kiwifruit.

A 40 per cent increase in world kiwifruit supply in 1997 led to a crash in prices. But the New Zealand kiwifruit industry pioneered and dominated world markets until that time and remains a major player.

Unlike kiwifruit, the New Zealand avocado industry is minuscule in the world market, hardly a blip on the screen. It cannot influence the market.

The prospective investor should certainly be looking at world market trends. What will the world market be like in 10 years?

The Californian crop is stable. Australia's is increasing. Mexico, with huge domestic production, has made its first step into the American market. Chile's production and quality are rapidly rising and its season coincides with ours.

We do have one advantage, that we can produce consistently bigger Hass avocados, thus keeping production costs down and offering a premium if we can maintain top quality. This partly offsets our distance from world markets.

The other area of real concern is the local market, but that is a story in itself, and perhaps one the potential investor from bitter experience knows all too well.

* Rosalie Smith is a freelance journalist specialising in horticulture.