Your avocado toast could soon get more expensive - again

By Zoe Han

Bad news for guacamole lovers: Mission Produce says avocado prices will go up this quarter

If you already thought avocado toast was expensive, brace yourself: It's going to get even pricier, because avocado prices are rising again.

One of the world's largest avocado producers, Mission Produce Inc. (AVO), said on its earnings call Monday that it expects its avocado prices to go up in the current quarter. Prices could increase by 10% to 15% compared to the second quarter of 2023, when its avocados cost $1.30 per pound on average, Mission Produce Chief Financial Officer Bryan Giles said on the call. That means the new price range could be $1.43 to $1.50 a pound.

The price that Mission Produce mentioned on the earnings call was the producer's price, but consumers will likely pay more as well, said Phil Lempert, editor of SupermarketGuru.com. "[Retail prices] will definitely rise, no question," he told MarketWatch.

Before an avocado reaches the store shelf and is bought by a consumer, supermarkets set prices based on the producer's price, in addition to other factors such as labor costs. Because supermarkets typically operate on very thin profit margins, they are more likely to pass on the increase in the producer's price to their consumers, Lempert said.

The average price for a Hass avocado - the variety that's often found at supermarkets - was $1.04 in September 2023, according to the latest retail-price report from the U.S. Department of Agriculture. One Hass avocado weighs about 200 to 300 grams, so a pound of Hass avocados would cost around $2 on the shelf.

Mission Produce did not immediately respond to MarketWatch's request for comment.

The price increase is partly due to weather that has affected production levels in key avocado growing regions in California, Mexico and Peru this year, said Brad Rubin, analyst at Wells Fargo's Agri-Food Institute, in an email to MarketWatch. California is expecting a smaller crop this year compared to last year because of cold weather, while the prime production state in Mexico, Michoacán, has been dealing with increased heat and drought, he noted.

This isn't the first time fans of avocado toast and guacamole have been hit with higher prices in the past few years. Hardie's, a produce-delivery vendor based in Texas, said on its website last June that avocado prices were rising rapidly because the harvest in Mexico had slowed. (Hardie's did not immediately respond to a request for comment.) Avocado prices also soared in 2022, as inflation was hitting 40-year highs.

The rise in avocado prices, together with other price increases, has also pushed up prices at the fast-food chain Chipotle Mexican Grill Inc. (CMG), where guacamole is a menu staple. The burrito chain made a "modest" price increase across its menu last October, a Chipotle representative told MarketWatch in an email. While Chipotle expects inflation to continue to affect its costs, it does not have plans to raise menu prices further at the moment, the spokesperson said. A side of guacamole at Chipotle in New York City will run you $2.95 for a small size and $5.95 for a large, according to the restaurant's website.

Avocado prices have seen volatility over the past two years, largely due to disruptions to import controls, said David Magaña, senior analyst with Fresno, Calif.-based agriculture-analysis company Rabobank. Most avocados sold in the U.S. are imported; between 2020 and 2021, about 90% of the country's avocado supply came from abroad.

Avocado prices skyrocketed in 2022 after an import ban on avocados from Mexico right before the Super Bowl, and again last April after Texas state officials instituted border controls that slowed imports arriving by truck, Magaña said.

The potential price surge this year follows a year of "unusually" low prices for avocados because of high production and high avocado exports from Mexico in 2023, he added.

Inflation rose slightly in February, with consumer prices increasing 3.2% from the previous year, according to the latest data from the Bureau of Labor Statistics released Tuesday. Prices of groceries specifically were up 1% from a year ago.

How many avocados can you afford? About the same as in the past, says one economist

Despite the price increases in recent years, avocados are still a relatively affordable treat, according to one economist. People can afford about the same amount of avocados as they did in the past, said Zachary Bartsch, assistant professor of economics at Ave Maria University and co-author of an economics blog called Economist Writing Every Day.

That's because the price of avocados has been growing at the same rate as the median U.S. income level over the past few decades, he said.

In a recent post for Economist Writing Every Day, Bartsch pointed out that the share of income that people spend on food has gone down since the early 1970s, and that the average price of avocados relative to other foods declined from the 1990s to the 2000s.

"We are paying higher and higher prices for avocados, but we can afford to buy the same amount of avocados as before because our incomes also went up," Bartsch told MarketWatch.

At cafes and restaurants, avocado toast can cost anywhere from $6 to $20, depending on the location. Some have pointed to millennials' supposed penchant for avocado toast as a cause of their financial woes and inability to afford purchases such as homes. But Bartsch said millennials buying avocado toast isn't a sign that they're irresponsible with money, but rather argues that millennials get a lot of attention for spending on avocados because they have more access to them than previous generations did.

"The reason that millennials got the reputation for eating avocado on toast is that 1) it's true, 2) because they could afford it, and 3) older generations didn't even have access," he wrote in his recent blog post.

-Zoe Han

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03-14-24 1336ET

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