Packing Houses Profiteering at the Expense of Growers

Packing Houses Profiteering at the Expense of Growers

The avocado industry, once a bastion of grower-owned cooperatives, has dramatically shifted over the past decade. This change, marked by the rise of private organizations in place of cooperatives, has led to a concerning trend: packing houses are increasingly taking unfair profits, particularly from growers producing smaller-sized avocados.

Historically, the avocado industry operated under a cooperative model where growers had a say in how their fruit was marketed and sold. These cooperatives, run by staff and directors who prioritized the well-being of the growers, fostered a competitive market. Back then, California avocados made up a significant portion of sales, compelling packing houses to compete fiercely for growers' produce. This competition ensured that prices paid to growers reflected the true market value of their fruit.

However, those days are gone. Today, there are no grower-owned avocado cooperatives. Instead, private packing companies, motivated by profit margins rather than grower returns, dominate the industry. With California avocados now representing less than 10% of sales for traditional packers, the competition that once benefited growers has all but vanished. This shift has resulted in an ever-widening gap between the prices at which avocados are sold and the quotes provided to growers, particularly during market upswings in the Mexican off-season.

A recent analysis of field quotes versus sales prices highlights the stark reality faced by growers. Between March 1 and August 1, a period during which 85% of California's avocado crop was harvested, the average packer share of sales was over $13.50 per case, or $0.55 per pound. This share fluctuated from a low of $4 per case during a downturn in late June to a high of nearly $23 per case in early July, when the market saw a sustained increase that was not reflected in the quotes provided to growers.

The lack of transparency in the current system is a major issue. The California Avocado Commission, which claims its mission is "to maximize grower returns," has done little to address the growing gap between sales prices and grower payouts. Despite having access to both sales and payout data, the Commission has remained silent on this critical issue, leaving growers in the dark about the true value of their produce.

The situation is particularly dire for growers of smaller-sized avocados, such as size 84 fruit. On average, the discrepancy between sales prices and grower payouts for these smaller avocados was $0.80 per pound, or $18 per carton. This indicates that smaller avocados are effectively subsidizing the returns on larger fruit, allowing packing houses to pocket a disproportionate share of the profits.

For avocado growers, this is an untenable situation. The move to a fixed field quote system may provide some peace of mind, but it comes at a tremendous cost, especially for those producing smaller fruit. The lack of transparency and accountability in the current system must be addressed if growers are to receive fair compensation for their labor.