It is expected that domestic market prices will be higher over the next 6 months. Will the expected increase in the domestic price of avocados prompt marketers to divert volume from their export programs? Keeping exports going, even now, is important if the industry’s export programs are going to be successful into the future.
Avocados Australia spoke with two key export stakeholders, Antony Allen (AA) from The Avolution and Josh Franceschi (JF) from The Avocado Collective, to hear their perspectives. Here is the result of our recent Q&A session:
Question: How do you anticipate the expected increase in domestic prices to impact your export program?
AA: “The Export program will continue it just lightens or lessens depending on what’s happening with other supply countries. It really then depends on what the dynamics are across the planet.”
“So into Asia, Mexico and Peru are the main competitors. If they have a bigger crop or their other market’s are soft in terms of pricing then more of their fruit will move into Asian markets.”
“That then creates pressure on us in terms of pricing, or access to lesser sales. Our sales will drop off.”
There will always be demand for some Australian fruit in those markets, even at higher prices, and in the past 10 years Australian fruit has been sold at $40 per tray into some of those markets, but when you are talking about $40 it’s obviously the ultra-premium sales or supermarkets, or food service operators that will take that fruit. The balance flips to the cheaper fruit. That’s essentially what will happen.
“Going into this lighter summer we are going to see sales continue but it is likely to be a lesser volume. That price pressure brings us to a lower volume point.”
“We always want to stay in the mix in these markets, so that we don’t have to fight to get back in.”
“It’s very important to keep a crack in the door open, so we have an opportunity to open the door further when we have a higher volume.”
“That means there is a need for growers and marketers to understand that you also need to be thinking about twelve months’ time.”
“You don’t want to be a spot seller.”
“We are careful to make sure that everyone understands that we need to stay in that market.”
“We don’t want them to think we are an unreliable partner.”
“It’s about communication and keeping export partners informed.”
JF: “With any kind of lighter season there will be less supply in total. Our export volumes last season didn’t ramp up until December, so we had big export volumes through December, January and a bit into February.”
“This season we expect domestic price to be in line with export price for the first few months of the Western Australian season so from a comparative point of view we will be looking to use our export markets to leverage up our domestic market.”
“Our total export volumes in general will be down, last season we put through close to a million trays of export on a 3.5 million tray season and this season I’m expecting it to be potentially half of that, or a touch more than half.”
“We’ve got a really heavy focus on our protocol markets in Japan and Thailand early, to take early volume out of domestic market systems.”
“There will be plenty of focus on Japan and Thailand so we can build those markets over time.”
“Exporting is definitely a focus of our business.”
“It will be interesting to see what happens with Shepard in terms of their volume and programming, there’s the suggestion they will have a lighter season. That could also impact our plans in playing its role to make sure we supply volume through February and March.”
Question: From your perspective, how critical are export markets in the medium to long term for the Australian avocado industry?
AA: “In the medium to long term, exports for the Australian avocado industry are fundamental.”
“There is no choice. We need to have around 40% of our volume going to export and that will allow our domestic market to stay healthy and functional and give us the ability to grow markets. And supply markets with quality product as they develop, such as markets that are not used to having a lot of avocados in their diets.”
“So we need to have a base level in terms of supplying those markets and that means getting to around 40% of our crop exported is fundamental for us in terms of our growth profile and a good balance in terms of production. It gives us a much more flexible customer base.”
Question: There is the issue of irregular bearing, this year we will have a lighter crop and next year most likely a larger crop, so what steps should growers and exporters do now to plan for this year and next year?
AA: “Essentially for this year it’s all about making sure we are in the mix, supplying our export markets. It’s about making sure the space is still available for us when we have the extra crop that we need to move into those markets to remain viable.”
“It’s about balancing it out over those two seasons to understand that it is not an instantaneous model. You have to look at it over the long term.”
“Some of those export markets will always pay a lot more money than the domestic market and that’s more about those markets developing and how much money they have to spend on good quality product.”
“As long as we can continue to supply quality product, comparative to the rest of the world, we will always have a premium position at the top end. The key from our grower perspective, is to make sure we still remain focussed on a good quality product that is going to compete in that quality zone.”
“We can’t go to the lowest common denominator, we will never be the cheapest producer, but we can certainly always be the best quality producer.”
“We are not competing on price, as such, we are competing on quality and our ability to supply all year round.”
Question: Based on your experience with years of exporting what recommendations do you have for the industry, growers and exporters, for having a stable and profitable market in the coming years?
AA: “It’s about crawling, walking and running. It’s about starting evenly and not rushing into something. Making sure we understand those markets and then grow with those markets as we go. We have got to have a quality product to start with. It’s not an instantaneous opportunity, it’s got to be over a medium long-term approach. In that way export becomes a very stable, very successful model.”
“Larger markets create the opportunity of being the equivalent of the domestic market in one instant. A Singapore is the same as having a Melbourne. That’s how we look at it. It’s just exactly the same but like having another market and you compare it and supply it with what it is looking to use.”
“When you look to the bigger markets like India and China it’s about understanding that those markets have the potential like a tenfold of the Australian market, but you need to first think of them like Adelaide.”
“They’re small, easy to crash, easy to create drama in, if we don’t approach them in a sensible and considered way and have that approach that allows us to learn as well. Not everything will be perfect in the first instance. It’s also about teaching them as well. Their [importers] expectations need to be managed as well.”
“Each market is different, and the way the Japanese market has evolved and developed will be different to how the Indian market will develop and evolve.”
“It takes time. Nothing is instantaneous.”
“The domestic market has never been instantaneous either, but because we are in it, we all forget it’s been a thirty-year development. It’s just easier, it’s closer, we are more easily able to react and change things, whereas the export markets are a slow burn.”
“It’s taken us four years for one supermarket to take fruit directly in one market. That is something you don’t give up on, if that was in Australia you’d go to someone else but in export markets once you are in, you are in. That’s the different approach to business in Asian markets.”
“If you are in there is something else you have done and there are huge advantages and returns.”
Question: How important is it for exporters to maintain their commitment to export customers, during a fluctuation of supply and prices?
JF: “We treat our export customers like our supermarket customers domestically, where we set supply programs and sales programs and we have targets that we try to meet so we see year-on-year growth. Growth doesn’t necessarily have to happen from a volume, growth can be on value as well.”
This article appeared as part of the 26 July 2024 issue of Guacamole, AAL’s enewsletter.