By Agronometrics CEO Colin Fain

Toward the end of a very dry California winter, avocado markets became agitated by a Chipotle Mexican Grill Inc (NYSE: CMG) financial filing that mentioned the possibility of an avocado shortage at the beginning of 2014. Consequently avocado price speculation threatened to send prices shooting sky-high.

Based on this filing, several media outlets coined the term "Guacapocalypse" or "Guacarmageddon". This article explores what was happening in the avocado markets and looks to explain why an "apocalypse" didn't occur for the popular fruit and why it isn't likely to happen in the immediate future.

Although the markets saw a steady rise in prices this year, the movements have been nothing like the dramatic price hike seen in 2011 caused by the entrance of the California season. It is possible that the tremendous impact on the markets of the 2011 California season may have triggered this recent speculation.

The explanation can be found by observing the volume of avocados coming from Mexico, the market behemoth, where more than 66% of the avocados sold in the U.S. originate. For better or worse the avocado production in Mexico continues to gobble up U.S. market share and makes the market more and more dependent on its production and internal workings.

Last year Mexico overproduced, sending so much volume that prices sunk to their lowest levels in the last 10 years. As a testament to the health of the avocado markets this year, the market saw similar volumes crossing the southern border, but with much more attractive pricing. This means that year-on-year demand has grown, where similar volumes have fetched an average of U$7.50 higher for a two layer carton at shipping point, than a year ago, which is a significant increase but still not approaching the US$50.00 mark we saw in 2011.

California did see a reduction in volume due to the drought, but according to the Hass Avocado Board's (HAB) forecast the reduction only means a 20% decrease on last year's crop which has so far this year been accurate. That 20% decrease has been more than made up for by Chile and Peru, which have both exported impressive volumes. Chile has sent 66 million pound so far in 2014, compared to four million pounds during the same period last year, and Peru so far sending 17 million pounds compared to 189,000 pounds during the same period last year.

As Mexico's new crop begins moving up from the south it will once again begin to make waves in the markets. To keep prices at around US$30.00 for a 25-pound box through Labor Day in the first week of September, I estimate that the country will need to send an average of about 18-19 million pounds per week.

Last year, in the 13 weeks remaining between now and Labor Day, Mexico sent an average of 12 million lbs a week.

As the programs of Peru and California come to an end, Mexico's volume will become more important. If Mexican producers don't send about a third more volume than they sent last year we could see a significant rise in prices right as we lead up to the demand rise for Labor Day.

So although the "Guacapocalypse" wasn't as dramatic as speculators thought, it shows how resilient and dynamic U.S. avocado markets are. Moving forward it will be interesting to see how the ever-growing demand along with the growing international supply have their effect over a market that seems to know no limits.

Colin Fain is the CEO of Agronometrics, a market intelligence platform for agricultural products that collects, standardizes and visualizes Agricultural data from around the world. For more information visit his website www.agronometrics.com.

www.freshfruitportal.com