Skyrocketing avocado prices have been coming down, and a bigger drop may be on the way.
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Avocado prices climbed by more than 100 percent last quarter amid a smaller California crop and increased global demand, Hormel CEO Jim Snee said on the company's third-quarter conference call. That sent the wholesale price for a 25-pound box of avocados surging to its highest level in over decade. At the retail level, the cost for one avocado hit $2.10 nationally on July 5, and was already down to $1.18 on Aug. 16, according to U.S. Department of Agriculture data.
The climbing avocado costs were felt by Hormel’s MegaMex joint venture, which distributes the Wholly Guacamole brand. Hormel said its segment profit from grocery products was down 30 percent from a year ago, due in part to the impact of significantly higher avocado costs.
But, speaking on his company's third-quarter earnings call, Hormel CEO Jim Snee said that pricing for the new avocado crop, which will be harvested in September, looks to be "more favorable." Still, the company expects the elevated costs to hurt its bottom line going forward.
"Earnings pressure from higher avocado prices and peanut butter category dynamics will continue to impact results in Grocery Products in the fourth quarter," the company said.
Avocado prices have been closely followed in recent months as President Trump threatened to levy a 5 percent tariff on all Mexican goods if Mexico did not slow the influx of migrants at the US-Mexico border. Mexico produces about 80 percent of the avocados consumed in the U.S.