27 Feb 2017

The downside of the avocado boom

Esmée writes*

In the past 2 decades, avocados have become a very popular “superfood”, mainly because according to dieticians they contain a large amount of “healthy fats”. According to The Economist, in 2013, the worldwide avocado production reached 4.7 million metric tons. This was a 100% increase since 1998.

However, ever since the demand for avocados has risen, the industry has slowly started to negatively affect communities and the environment. There are two parts to this story. First, a link can be made between the avocado market and crime. Due to bad weather in New Zealand and Australia in 2016 and a drought in California, the worldwide supply of avocados reduced significantly. Experts claim this shortage led to an increase in the price of avocados. This higher price attracted criminals to get involved in the avocado industry. Mexico is the largest avocado producer in the world. Exports especially increased after the US government loosened restrictions on avocado imports from Mexico in 1997. The fruit is mainly produced in the region Michuocán. In this region, criminals have taken advantage of the avocado industry by threatening producers. According to news reports, drug cartels have taken over the area, and have caused theft, kidnappings, and price controls. However, Mexico is not the only place where such criminal activity takes place. To a lower extent, in New Zealand and Australia, people have stolen large amounts of avocados and sold them on the black market. This situation reflects a misdistribution of the economic costs and benefits of avocado production, as the local producers bear the costs by being threatened, whereas the criminals disproportionally enjoy the benefits of this by making large amounts of money.

A second implication of the increased popularity of avocados is the environmental impact of its production. Experts claim that first of all it has caused illegal deforestation, especially in Mexico. Second, a lot of chemical inputs are needed in order to grow avocados, which affects not only the environment but also the local population’s health, as those chemicals could cause kidney and liver problems. Third, the avocado production puts pressure on water reserves in both California and Mexico, as in order to grow 500 grams of avocados, 272 liters of water are required. This has significantly affected the local ecosystems, as less water now reaches the mountain streams, on which for example the famous monarch butterfly depends. This situation reflects a misdistribution of the costs and benefits of avocado production, as the local population and the ecosystems bear the environmental costs of the avocado production, whereas the consumers and producers of avocados enjoy the benefits, as these costs are not reflected in the price of avocados.

It doesn’t look like the demand for avocados will decrease anytime soon. Therefore, in the short run the situation is not expected to improve. However, experts say the US government is planning on allowing avocado imports from Colombia in the near future. This could drive the price down and therefore make it less attractive for drug cartels to get involved in the industry. This would however still not solve the negative environmental implications of avocado production, which can solely be solved through full cost pricing. Until this happens, we might all have to consider eating a little less of the superfood. Avocados are great, but so are a sustainable environment and safety.

Bottom line: The rising consumption of avocados is problematic for two different reasons. First of all, criminals have threatened producers, stolen many avocados, and sold them on the black market. Secondly, the avocado production has caused illegal deforestation, use of chemicals, and extensive use of water, which has negative implications for local ecosystems as well as for worldwide climate change.

* Please comment on these posts from my environmental economics students, to help them with unclear analysis, alternative perspectives, better data, etc.


Lee said...

Interesting post! I was not aware of the black market around avocados. At the end of your post you write:

"However, experts say the US government is planning on allowing avocado imports from Colombia in the near future. This could drive the price down and therefore make it less attractive for drug cartels to get involved in the industry."

To me it is not clear how this would drive the global price down. Assuming that the avocados from Colombia are not "allowed" in the US right now, it would indeed drive the price down, as supply increases and assuming that demand stays constant. However, this would only impact the price in the US and not on a global scale? So would it really partly solve the problem?
Secondly, if advocados are as popular as you claim, then Colombian producers probably already bring their avocados to another market. If the amount of produced avocados in Colombia stays constant, it seems like the a solution for prices in the US moves the high price problem to another market.

You propose an interesting alternative solution (the full price system), to me it seems indead logical that demand would decrease as the prices will increase (due to hypothetically implementing the full price system), subsequently the production would decrease as well. It could be interesting to look at the "losers" (the advocado producers) of this proposed situation.

Arvid said...

I nice article on the 'black' market of avocados, and how international trade affects the price. In the article a large part is devoted to the trade between the US and Mexico which sparked the question of how a certain preisdent called Mr T. for instance could affect the US price and also the 'black' market of avocados in the US>

If a ban on imports is enacted from Mexico to the US this will surely drive up the price of avocados in the US (comparative advantage) while also causing more environmental harm if production is intensified in California.

Across the border production will decrease perhaps, or will drug cartels take over even more of the avocado market and try to smuggle it over the border? What kind of cost/benefit analysis would they make? Is avocado the new white powder of the 21st century...?

Post a Comment

Note: only a member of this blog may post a comment.