A collaboration between Ashley McLeod, Kela Fetters and Danielle Lemmon
Executive Summary
Avocado industries both foreign and domestic are adapting to a variety of challenges, from rising global demand, climate change, and environmental limits to social challenges and trade pressures. The response to environmental and supply chain challenges is short-come, with continued deforestation threatening biodiversity and freshwater supplies. Moreover, avocados have become a cash crop in Mexico, opening opportunities for political corruption that empower existing Mexican drug cartels. On the other side of the Mexican border, US rent-seeking behavior has persisted over the past 40 years in the form of protectionist interests, lobbying, and stalling tactics by the domestic industry organizations; rent-seeking behavior has resurfaced most recently as an administrative threat to impose an import tariff on avocados in an attempt to pay for a border wall. Moreover, despite persistent insistence by US domestic industry organizations, there is no evidence of risk for pest infestations from imported avocados. As an example of success for the avocado industry, demand in the US continues to rise as a result of successful promotional and information programs established by HAPRIO, keeping the pace between imported supply and domestic demand. However, this demand, unfortunately, continues to drive environmental degradation, threatening the future and sustainability of the avocado industry. Increased corruption in producing regions also threatens local livelihoods, as Mexican drug cartels take advantage of the newfound wealth resulting from increased export trade.
Introduction
Avocados have become increasingly popular over the past several decades and are now a staple in many kitchens in the United States and around the world. More than 400 different varieties of avocados are grown globally. Domestic production of avocados in the United States accounts for a portion of our avocado consumption, but demand is met primarily with imports from Mexico. Evidence of avocado cultivation can be traced back to 10,000 BC from cave deposits in Mexico, where they are believed to originate. Before the early 1900s, avocados were not commercially grown in the United States. The fruit was termed “aguacate”, but American farmers changed the name to the more pronounceable “avocado” (NPR, 2006). The avocado crop possesses a long history of struggle, from importation restrictions, environmental costs, and even drug cartel intervention in the industry. As the demand for avocados grows, key industry players have responded in order to face the challenges head-on. Below we discuss supply chain actors, US rent-seeking behavior, the liberalization of trade, and the socio-environmental costs of increased demand from trade liberalization.
Supply Chain
Production
Several states grow avocados, including California, Hawaii, and Florida. California grows approximately 90 percent of the avocados grown in the US (NPR, 2018). Avocados were first planted in the US in the 1800s, and production has steadily grown since then. In California, the avocado season is between November and October; in Florida, it is between June and March, and in Hawaii, January to December. The main source of avocados for the United States is Mexico. In Mexico, the main growing area is Michoacán, with 83.2 percent of the avocados leaving the country coming from there. Currently, there are other Mexican states that grow avocados, but not all are allowed to export to the United States, such as Jalisco, which is currently working on fixing its standards so that exporting will be allowed. They currently export to Canada and other countries. In Michoacán, the majority of avocado orchards are very small, only five to ten hectares. The total area of avocado orchards in Mexico in 2016-2017 was estimated at 220,334 hectares, and this number is expected to increase this growing season due to the increase in demand for avocados (Flores, 2017).
Avocados grown commercially in orchards are not commonly started with seeds but begin by grafting. This process allows for the trees to bear fruit in a shorter amount of time. If grown from seeds, the trees make take up to 20 years to fruit; through grafting, trees can produce in as little as one year. The trees begin to flower between January and March (Zafar, 2018). Trees can grow in very different climates and are versatile in different types of land. They can grow in sand, limestone, red clay, and a variety of other landscapes. The desired soil structure for avocado growth includes a pH level between 7.2 and 8.3, and there must be proper water systems in place for the trees to flourish (Morton, 2018).
New plants need to be fertilized every two months, and once the trees begin to bear fruit, fertilizer must be applied about 3 times a year. The fertilizer used should be high in nitrogen, zinc, and magnesium, which have an influence on the growth of the plant as well as its resistance to cold weather (Morton, 2018). Other main nutrients needed for the growth of the trees can include potassium (linked to growth and development, boron for growth, phosphorus for a healthy metabolism, calcium for good root structure, and iron and manganese for good plant health. To determine what nutrients are needed in fertilizer for particular groves, tests should be done on the soil, water, and leaves of the plants (California Avocado Commission, 2013).
Yields, Exports, and Production Processes
In the United States, the production of avocados has been steady. For 2016 – 2017, in California, three tons of product were harvested per acre of the plant, and the bearing acreage totaled 51,000 acres. The total production of avocados equaled 148,000 tons, with 147,000 tons being utilized for sale. These numbers are slightly lower than the year before and around the same as those from 2014-2015. The price per ton in 2016 was $1,840, and the total value of utilized products equaled $316,041 (USDA, 2017).
In order for avocados to be imported to the United States, they must comply with conditions set by the National Plant Protection Organization and the Animal and Plant Health Inspection Service in the United States Department of Agriculture. The orchards must be registered with the NPPO in Mexico and must go through approval processes by the NPPO. These conditions include being surveyed for pests and diseases, fruit that has fallen must be removed from the land and not be included in fruit packed for distribution, fallen branches must be removed, the orchards must be protected from fruit fly infestation, and must be moved from the orchard on the day of harvesting (Cornell, 2007). Fruits are inspected by the NPPO to make sure they are free of pests, mainly fruit flies, and packaging is inspected as well as conditions surrounding the packaging. Fruits must be cleaned, with all stems and leaves removed, and must be transported in refrigerated containers, whether travel is by air, sea, or land (Cornell, 2007).
Because of strict standards and requirements for avocados to be imported into the United States, every part of the supply chain from harvesting to exportation is handled by the Asociación de Productores y Empacadores Exportadores de Aguacate de Michoacán, which has many certifications and regulations, not just for the fruit itself, but also for workers and conditions of orchards. The main players in the supply chain of avocados from Mexico include Calavo, West Pak, Empacadora de Aguacates San Lorenzo, Frozavo, Procesadora de Aguacate y Frutas, all of which are located in Michoacán. In 2007, there were approximately 2,290 producers in Mexico that export to the United States, with 28 percent of their production going to the United States. This number has likely increased since then (Coronado, 2014).
Mexico is the world’s largest exporter of avocados, not just to the United States but worldwide. Their avocados are sent to Peru, the Netherlands, Chile, New Zealand, the United Kingdom, Japan, Germany, Australia, and more. Avocados are also exported from Peru, with 65 percent going to Europe. The Netherlands exports avocados mostly to other European countries, and New Zealand exports mostly to Australia (Yanofsky, 2016).
Policy: Rent-Seeking Behavior, Information Programs, Free Trade Agreements
The U.S. is a negligible exporter of avocados and consumes virtually all domestically-produced avocados. As noted, most of the imported avocados are sourced from Mexico with other notably sized imports from Peru, Chile, the Dominican Republic, and other Central American countries (USAID, 2014). There is evidence of avocado consumption in Latin American countries dating as far back as 8000 B.C.E., with domestication likely around 5000 B.C.E. (Galindo-Tovar, 2007). However, liberalized avocado trade with these high-production countries, particularly Mexico, has only been realized over the past decade as a result of the protectionist, rent-seeking behavior of domestic industry organizations, such as the California Avocado Commission (CAC). Since the easement of trade with Mexico and others from 1997 – 2009, the US has been able to utilize effective marketing, promotional, and informational programs in order to increase demand and meet the influx of foreign supply (Hoy and Sexton, 2011). The North American and Chilean Free Trade Agreements have provided duty-free venues for Mexico and Chile to access the US avocado market, but the recent administration threatens relationships, particularly with Mexico.
Rent-Seeking Behavior
The California Avocado Commission (CAC), a successor of the Colorado Avocado Advisory Board (CAAB), displayed rent-seeking behavior from the 1970s through the 1990s, obstructing avocado trade relations with Mexico (Lamb, 2006). Rent-seeking behavior in this context is defined as the organizational use of resources to manipulate political and economic systems to gain economic wealth. Because Mexico has always far out-produced the U.S., domestic producers feared that an influx of avocados, produced at lower costs with a more viable climate and with cheaper labor, would drastically deflate domestic prices of avocados.
The importation of fresh Mexican avocados was prohibited in 1914 due to perceived and alleged risks of pest infestation from fruit flies, avocado weevils, and avocado seed moths. Since 1914, Mexico had unsuccessfully fought to regain access to the US Market. Michoacán, the highest-producing region in Mexico, submitted a request in the 1970s to the USDA but was denied on the basis of alleged pest infestations of “quarantine significance.” In 1973, the USDA spent a total of 560 man-days scouring Mexican fields for these pests and only found two fruit flies. Thusly, they recommended that the avocados be allowed entry into several US states. However, CAC lobbying efforts put a stay on lifting the ban.
By the 1980s, the method of using overly technical and complicated standards became a common justification for protectionist policies and this sort of rent-seeking behavior (Orden, 2004; Lamb 2006). Negotiations during the Uruguay Round specifically addressed both Technical Barriers to Trade (TBT) and barriers in Sanitation and Phyto-sanitation (SPS); SPS falls under the umbrella of TBT. The final document that launched the World Trade Organization includes the SPS Agreement, banning the use of unreasonable technical or SPS standards as a protectionist measure against foreign trade. In other words, while it is reasonable to protect domestic plants, animals, and people from foreign pests, it is unreasonable to disadvantage developing countries in trade with institutional requirements that the developing country cannot afford (Orden and Romano, 1996).
Over the following decades, the USDA became caught in a hotly-contested battle between Mexican avocado industry efforts to lift the ban and CAC lobbying, stalling, and marketing efforts to keep the ban intact under the guise of a pest problem. In 1993, the USDA allowed for trade with Alaska, giving the Mexican avocado industry a foot in the door. The conflict ramped up in 1994 when the USDA published an Advance Notice of Rule Making and Public Meetings in the Federal Register that the USDA intended to allow trade between Mexico and 19 northeastern states, far away from the existing avocado orchards in California and Florida. Protests, lobbying, and a quarter of a million-dollar ad campaign ensued. A contemporaneous ad read: “Dear Mr. President, the USDA is about to sign the death warrant for a billion-dollar American industry.” Signs at protests read, “Free Trade, Yes. Free Pests, No.”
After several failed last-ditch attempts at stalling the ban by the CAC, the USDA issued its final 1996 ruling that it would ease imports for Mexican avocados in stages, starting in regions furthest away from orchards with low risk of pest infestation. Rent-seeking behavior continued in the form of frequent complaints. Similar behavior to the US avocado industry was also exhibited in the 2000s by the potato industry, thus this context is not unique (Orden, 2004).
Effective Information Programs
Fortunately for the domestic avocado industry, effective avocado marketing and information programs have helped increase demand within the US. After the major conflict of the 1990s, President Clinton signed the Hass Avocado Promotion, Research, and Information Act of 2000 (HAPRIO) into law, levying 2.5 cents per pound of avocado and establishing the Hass Avocado Board (HAB) under USDA supervision. During its first five years of operation, HAB spent upwards of $9 million on promotional programs. Empirical assessments of the benefit-cost ratios of marketing by the CAC, HAB, and other programs show that the benefits of these marketing programs make a marked impact on avocado sales and market stability before and after the 2003 initiation of HAPRIO. (Hoy and Sexton, 2011; references therein)
The HAB website serves as a crowd-sourcing space for growers, packers, shippers, distributors from the US, Mexico, Chile, New Zealand, and the Dominican Republic, and US retailers to relay information concerning harvest and shipment planning. As a result, the avocado market instabilities such as price volatility and shipping snafus have decreased. This has lowered marketing margins and produced a benefit for both producers and consumers. An analysis of sales before and after the initiation of HAPRIO shows that the price variability drops markedly, smoothing the market. (Hoy and Sexton, 2011; references therein) Despite heightened fear following the 1997 USDA decision to begin avocado imports, a combination of phased entry in addition to the effective promotional and informational programs have stabilized the avocado industry serving as an example to other commodity industries. However, as will be discussed, this increased demand has environmental and social costs.
North American and Chile Free Trade Agreements
Mexico currently trades tariff-free with the US as a result of the North American Free Trade Agreement (NAFTA). The Chile Free-Trade Agreement, signed in 2003 and initiated in 2004, granted Chile an increasing duty-free quota from 2004 to 2016. However, poor weather and drought negatively impacted Chilean production, dropping Chilean avocado imports from 27% US market share by volume in 2009 to 4% in 2013. (USAID, 2014) A 2017 USDA reports that Chilean avocados are currently bouncing back, and production has increased 158% in 2017 compared to the same growing season the year prior. The US is currently the main market for Chilean avocados.
Throughout the twentieth century, United States’ national crop health was maintained through policies of pest exclusion; commodities known to harbor pests in a producing country were barred access by an importing country to protect the health of its domestic agricultural industry. Trade liberalization between Mexico and the United States under the North American Free Trade Agreement (NAFTA) in 1994 opened the doorway for Mexico to access the US avocado market. At least nine pests are present in Michoacán, Mexico, but through the designation of “areas of low pest prevalence”, the country can export avocados north of the border (Bellamore, 2002). Despite NAFTA, the former reality TV star Donald Trump has recently threatened a six-cent per pound tariff on avocado imports from Mexico, but not imports of the fruit from countries like Chile and the Dominican Republic (Flores, 2017).
Due to NAFTA and a shared border, the US avocado import market has been largely influenced by political dynamics between the United States and Mexico. Under the Trump administration, avocados have become a point of political contention. Mexico sends 78 percent of its avocado exports to the United States, inevitably linking these two economies. Avocado exports from Mexico in 2016 and 2017 generated $2.5 billion dollars (Flores, 2017). The US-Mexico avocado pipeline carries significant political implications as Trump’s import tax proposal could raise prices and hinder access to avocados in American markets. The President has called for a 20 percent tariff to force Mexico to “pay for the wall” (Mettler, 2017). The 20 percent import tax on Mexican goods including avocado would result in American consumers financing the border wall, not the Mexican government. The political tension has produced real-life confrontations: in January of 2018, five trucks carrying one hundred tons of Mexican avocados from Jalisco were halted at the border. Even though an agreement the previous July had initiated the import of the fruit from the state of Jalisco, US border agents refused to let the trucks through (Mortimer, 2017). The future of the avocado industry is inevitably linked to our relationship with our neighbors to the south.
Social/Environmental Challenges and Approaches
Like the fruit itself, peeling back the outer layer of the avocado industry reveals a deeper and more complicated inner. Every dollop of guacamole slathered on our Chipotle burritos contains in its creamy flesh a discourse on US-Mexican political relations, smallholder farmer reliance on a cash crop, and deforestation of vital forests.
Local newspapers in Michoacán, the primary avocado-producing state of Mexico, have raised concerns about the destruction of forests due to illegal avocado plantings, which is motivated by the profitability of selling the crop in the international market and recent trade liberalization. Farmers have thinned out or cleared Mexico’s central pine forests to make room for the cash crop as demand increases in the United States and around the world (Stevenson, 2016). The native pine forests act as a natural carbon sink and serve as the winter migration grounds for the Monarch butterfly. In contrast, replacing these forests with avocado plantations requires massive irrigation water inputs; it takes 74 gallons of water to produce one pound of avocados (Nagappan, 2014). The Mexico National Institute for Forestry, Farming, and Fisheries (MNIFFF) reports that mature avocado orchards use almost twice as much water as a pine forest. Pine and oak help water filter through the earth and into natural springs that supply Michoacán towns such as Aputzio, while avocado plants have shallow roots and consume a lot of the water. Due to tree clearing for avocado plantations, Aputzio and other municipalities could face water shortages (Burnett, 2016). MNIFFF figures show that the expansion of avocado farms caused the loss of 690 hectares a year of forest from 2000 through 2010 (Stevenson, 2016). To complicate the problem, farmers oftentimes plant seedlings under the forest canopy and trim the trees just enough to let sunlight reach the crop. This stealthy method is much harder to detect as environmental degradation is less apparent.
Several organizations, including the Secretariat of the Environment and Natural Resources and the National Institute of Forestry, Agriculture and Livestock Research, have denounced these practices and the federal government has cracked down on culpable farmers. In July of 2016, federal police in the Michoacán state capital of Morelia detained thirteen citizens who had stripped the land of hundreds of pine and fir trees to make room for over a thousand avocado seedlings (Stevenson, 2017). Additionally, the Mexican Avocado Producers and Packers-Exporters Association have planted a half-million trees between 2009 and 2016 to offset deforestation (Burnett, 2016). While the reforestation effort by corporate organizations is ongoing, it has been critiqued as “political posturing” rather than an earnest solution (Tucker, 2016).
As in the case of many crop industries, changes in climate present a challenge for avocado production worldwide. Prime avocado-growing land located north and south of the 33rd parallel or at high elevations are experiencing more frequent frosts and higher-than-average temperatures earlier in the year. These higher temperatures cause unseasonal root and shoot growth and affect fruit development and quality. Growers are also faced with more frequent and extended droughts and the increasing scarcity of affordable irrigation water (Bravo-Espinosa et al., 2014). Other scientists have expressed concern over the long-term impact of herbicides in Michoacán’s soil. To top it off, high avocado prices make monoculture increasingly lucrative, degrading biodiversity and resistance to pests and disease (Tucker, 2016). Overall, avocados face the resource degradation and volatile climate standard of many affected tropical systems.
Perhaps the most chilling dimension of the lucrative Mexican avocado industry involves drug cartels. The extent of their influence is unclear, but they have profited from local fruit production and distribution. According to a report from the National Center for Planning, Analysis and Information for Combating Crime, the Cartel Jalisco Nueva Generación, and the Cuinis cartel pioneered the extortion and kidnapping of avocado farmers in the 1990s (Kahn, 2018). In cities such as Tancitaro, which exports about $1 million of avocados every day, rich drug traffickers have extorted growers and packers of the profitable crop. Between 2009 and 2014, cartels and other organized crime groups made an estimated $154 million annually from Michoacán’s avocado business (Asmann, 2017). In 2013, residents of Tancitaro took up arms and formed local police forces to drive the gangs out. The citizen’s militia, composed of 80 residents as of 2014, earned salaries in part from the influential local avocado growers’ council (Kahn, 2018). The sort of quasi-government military force formed by wealthy avocado landowners is not a sustainable solution, but residents of the area are proud of the stability and peace it has secured for the city and the avocado export market (Fisher and Taub, 2018).
Mexican avocado farmers are not the only ones dealing with the fruit’s high environmental costs. Of the domestically produced avocados, 95 percent are grown in California, and a third of these crops are from San Diego County, which has seen water rates rise dramatically as California struggles with drought and shrinking groundwater reserves (Bellamore, 2002). This has led to the abandonment of avocado groves as farmers are overwhelmed by spiking water rates and wholesale competition from imported Mexican fruit. In 2014, Chipotle warned investors that it might suspend guacamole distribution at its restaurants if avocado prices rose due to the drought in California. To address the persistent problem, farm advisers such as veteran horticulturist Gary Bender work with farmers to implement high-density crop planting. His methods allow farmers to grow more crops on fewer acres and thusly use less water to maintain groves (Nagappan, 2014).
What are other proposed solutions to the myriad environmental and social problems posed by our guacamole obsession? At the consumer level, Americans can’t “buy local” because California and Florida are the only US states that produce avocados on a significant scale, and California is dealing with its own environmental challenges. However, suppliers like Unilever and Marks & Spencer pledged at the Paris climate talks to source crops from states and countries that have taken a stand against deforestation (Tucker, 2016). Equal Exchange, the cooperative that pioneered the Fairtrade label, has established a partnership with Pragor, a group of small-scale avocado farmers in Michoacán that are 100% organic (Blythman, 2016). But the organic label does not explicitly address the myriad problems along the fruit’s supply chain, including deforestation. Avocado consumption shows no signs of letting up and to address the critical social and environmental injustices in its cultivation, federal and local governments must be aggressive in their crackdown on crime gangs and deforestation. The common political ground between the United States and Mexico will ease trade, stabilizing grocery store prices at home and exports across the border. Finally, increasing farmer knowledge of innovative, water-saving practices and consumer awareness of the discussed challenges will create a drive for more sustainable production of North America’s “green gold”.
Conclusion
Looking forward, the avocado industry must protect natural resources through agroecological methods such as high-density crop planting. Additionally, global consumers must respect the natural and seasonal limitations of the fruit’s production; we may have to wave goodbye to imported supermarket avocados in the winter months. Furthermore, there appears to be a trade-off between environmental limits and trade sustainability. As demand increases to keep pace with US consumption, local environments in Michoacan and California continue to degrade. This degradation should be a call to action for industry and government organizations such as the CAC and the HAB. Mexican farmers that feel pressure to illegally clear trees or are endangered by crime activity can be protected by programs that promote sustainable farming methods and trade policies that standardize prices for foreign growers. American farmers facing drought and foreign import competition can utilize the same sustainable methods to boost domestic production without increasing water inputs. The industry, including government bodies, can liberalize trade in stages in order to pace demand with supply, establish organizations that serve as resources for both Mexican and US growers, and create an infrastructure to protect avocado producers from crime gang interests. Finally, as with all food production on a warming planet, seasonal marketing and innovative farming strategies will pace sustainable production within environmental limits.
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