Unpacking the Avocado Industry

In August, I traveled to Michoacán to visit PRAGOR, the avocado cooperative that we partner with in Mexico. I visited both the avocado growers and the management of the co-op that buys the avocados from individual growers and gets them from the farms to the pack house into Equal Exchange branded boxes, and then sends them on the road to us here in the U.S. every week.

The Basics

There are 22 core farmer members of the organization, and they sell all of the avocados they produce through the co-op. All 22 members are small-scale producers, defined in Mexico as owning 15 hectares (40 acres) or less. The co-op has a Board of Directors that is elected from the group of farmer members. The board includes a president, treasurer and secretary who oversee the general manager, an employee of the co-op, who then oversees the co-op staff. Like any Board of Directors, they have financial and legal responsibility for the co-op and its commercial activities.

Pricing 101

Produce is a weekly business. The general manager takes weekly orders from customers and estimates the amount of avocados that will need to be harvested weekly from each farm to satisfy customer orders. A full export truck is 1,800 cases of 25 lbs. each, or 40,000 lbs. of avocados in total. The GM negotiates the field price with farmers, which are set and paid in pesos per kilo in the field each week. The farmers are paid by the co-op within 15 days of harvest.

The field price is set each week by APEAM (Avocado Producers and Exporting Packers Association of Michoacán), which is a trade association comprised of exporters. APEAM is responsible for predicting the amount of avocados produced in Mexico each season and controlling that flow into the U.S. market in order to keep supply and prices steady in relation to each other. Organic avocados demand a roughly 30 percent higher price above conventional for the export market.

While Fair Trade has a minimum field price, which is the floor above which all Fair Traders have to pay, it is not often in play, as avocado prices have been very high the last few years. There is no medium or ceiling price for Fair Trade.

Big avocado companies buy all the avocados that are ready for harvest – all sizes and all quality grades from a large group of big and small growers. They have their own pack houses where they can consolidate purchases and grade by size and quality. They might bag some of the cosmetically damaged fruit. They may make guacamole. They might sell some as conventional, some as organic, and even some as organic Fair Trade. They will make money each week by blending all the various prices, sizes and quality of avocados purchased from farmers. In this case, farmers are raw materials providers. They get whatever price they get, but they take no risk beyond growing the product and gambling on the field price which fluctuates from week to week.

Small Farmers, Big Change

Our supply chain is different.

We buy all our avocados from this co-op of 22 growers: 100 percent organic, Fair Trade, high-quality avocados. We negotiate the price with the general manager each week in dollars, who buys bulk avocados from growers in pesos. The general manager adds the co-op’s costs for harvesting, transportation, and pack house fees to sort, grade, and pack. The general manager then adds the co-op’s margin to cover their operational expenses for staff, certifications, and office expenses.

We don’t dictate the price but we do share the market price in the U.S and negotiate if the co-op’s price is too far off the mark and thus the product won’t sell. There are no brokers. There are no middle men. There are the growers, the co-op as exporter, and our team as importers selling directly to U.S. stores and produce distributors.

These avocados bear a sticker with the Equal Exchange logo and are packed in an Equal Exchange branded box that says Small Farmers, Big Change. Those four words are what we are doing in avocados. Small farmers are business people, not just raw materials providers. They take on more risk than just growing the avocados and are empowered to learn, make mistakes, deal with pricing, margin and market fluctuations, grow their business, find other customers, and navigate the terrain of their particular product and marketplace as we navigate ours – as partners. They are also in direct control of their fruit and its quality, of which they are very proud.

Is this supply chain designed to produce the most efficient and cheapest avocado with the least amount of supply variation or risk? No. Bit it is designed to reflect the true cost of growing avocados.

Nicole Vitello, President of Oke USA

It is designed to shed light on an industry that far too few of us know and understand. It is an avocado that links you to a particular place and a particular group of people who are trying to connect directly through a web of factors designed to separate us from each other in the very thing that links us all together: the food system.

As I toured farms and talked to some of the 22 growers, I shared with them how most people (especially East Coasters) have no idea that avocados grow on a tree, in the beautiful mountains of Mexico where monarch butterflies migrate each year, and have four different harvest seasons. No one knows how the price is set or how the market functions or how it works for farmers.

In turn, the farmers asked me why I couldn’t sell more sizes or lower quality fruit in order to help them move all they had to harvest. We shared lessons from past seasons, like how two years ago there was a lot of large-sized fruit early in the season and prices were reasonable, which helped us move volume together. Last year, there was not much fruit, as many farmers lost avocados due to a hail storm in March. That happened again this year, which means some farmers once again lost their crop, while the luckier ones have lots of small size fruit to sell. Can we sell it? Maybe.

This is the work we do together. It is not easy. It is not streamlined. It is messy and hard and changeable and that is what I believe farmers want and need. I truly believe that is what the people who care about and love eating avocados here in the U.S. also need: a real story about where their avocados come from, how and why.

This post was originally published on the Equal Exchange blog.