The United States is one of the world’s major producers and leading importers of avocados, ranking fourth in the global production of avocados in 2012, with an annual crop volume of around 245,000 t [270,066.3 tons (Food and Agriculture Organization of the United Nations, 2014)]. The bulk (88.04%) of U.S. avocado production is of the cultivar Hass, with the balance being classified as a “green-skin” cultivar. U.S. production of ‘Hass’ avocado occurs predominately in California while production of the green-skin cultivar occurs mainly in Florida [California Avocado Commission, 2014; U.S. Department of Agriculture (USDA), Economic Research Service (ERS), 2014a]. The United States is among the top global importers of avocado, importing in excess of 571,000 t (629,419.8 tons), valued at ≈$1.09 billion in 2013 [USDA, Foreign Agricultural Service (FAS), 2014]. ‘Hass’ comprises the bulk of avocado imports, accounting for more than 95.77% of the volume traded in 2013, followed by green-skin avocados at ≈2.53% and organic ‘Hass’ at 1.70% (USDA-FAS, 2014).
Despite its relatively low importance in terms of U.S. domestic production and trade, and the undeniable increasing popularity of ‘Hass’ avocados, the green-skin avocado industry represents a very important component of the Florida agricultural economy. An example of this is the fact that annual farm gate sales were worth ≈$24.4 million in 2013–14, with an overall economic impact of close to $100 million per annum (A. Hodges, personal communication; USDA-ERS, 2014b). Contributing factors are that the green-skin cultivar is favored over ‘Hass’ by consumers with ties to the Caribbean and to Central and South America, and by consumers interested in a lower calorie-count.
Until recently, the U.S. green-skin avocado market has mainly been supplied by the domestic production coming from Florida, but now imports have begun to assume a greater level of importance in the market. The DR is emerging as the main overseas supplier of green-skin avocados to the United States, with imports from the DR almost doubling between 2004 and 2013, increasing from 8477 to 14,397 t [9344.3 to 15,870.0 tons (USDA-FAS, 2014)]. The DR now supplies ≈99.41% of the total U.S. green-skin avocado imports and accounts for roughly one-third of the total quantity of green-skin avocados consumed in the United States [USDA, Agricultural Marketing Service (AMS), 2014a; USDA-FAS, 2014]. It is apposite to note that the DR avocado industry, which is roughly four times the size of that of Florida, has the potential to further increase its market share in the industry.
Adding to the challenges of rising imports from the DR, the Florida avocado industry is under severe threat due to the arrival of an invasive pest (Xlyleborus glabratus) and its nutritional symbiont, a fungus identified as Raffaelea lauricola that causes the deadly disease known as laurel wilt disease, which was first discovered in the commercial avocado areas in Florida in 2012. The disease is so deadly that infected trees usually die within a matter of weeks (Evans et al., 2010). Although research is currently underway to identify the best means of combating the spread of the disease, a cost-effective treatment remains to be identified, although there are a few promising results. An area-wide management program centered on sanitation (early detection and removal of symptomatic trees), which was put into effect in 2012, has had only limited success in slowing the spread of the disease in the commercial avocado areas. Tree removal and the proper disposal and treatment of adjacent trees have increased orchard management costs by as much as $1000/acre (E.A. Evans and F.H. Ballen, unpublished data). To date, ≈7000 avocado trees, or ≈1% of the commercial avocado trees in Florida, have had to be eradicated. This is equivalent to a loss of ≈70 acres, or 17,500 bushels (based on the assumption of an average yield of ≈250 bushels per acre, where 1 bushel = 55 lb) since some of these orchards would be less than well maintained (Evans and Lozano, 2014).
With the looming threat to the industry, stemming both from increased foreign competition and the effects of the disease, there is an urgent need to characterize the market for green-skin avocados in the United States so that growers and industry operatives can become more fully aware of the price and revenue implications that could result from changes in domestic supply and/or increased overseas supplies of green-skin avocados from the DR. In particular, there is the need to estimate demand parameters, such as own and cross price elasticities and flexibilities, which could be used to further analyze potential price and revenue implications. Accordingly, the objective of this research is to estimate the demand for green-skin avocados in the United States and to use the findings to shed light on the possible price effects resulting from changes in the quantity supplied.
Our study represents a first attempt to provide an empirical model for the demand of Florida green-skin avocados, as most of the literature has been focused on ‘Hass’ in the U.S. avocado industry. It also contributes to the literature on tropical fruit demand in the U.S. market. Results provide quantitative estimates, making it possible to assess the impacts of different policy and business decisions in the Florida avocado industry.
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