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Chipotle’s CEO said that “avocado inflation” was his big problem. A June price spike elevated the restaurant chain’s food costs and also what it charges for some menu items.
Chipotle was not the only one.
A much smaller LA restaurant known for its avocado toast charges $10 for a whole avocado on a slice of country bread with some garlic creme fraiche, hot pickled carrots, and za’atar.
So yes, the avocado is becoming a luxury item. This is why…
Avocado Inflation
An avocado expert told NPR that the price of avocados has nearly doubled since last January:
During 2018, our nearly 2 billion pounds of imported avocados mostly came from Mexico where their production could be at a maximum. Then, compounding the supply squeeze, California produced an unusually smaller crop. And we do get some avocados from Chile, Peru, and the Dominican Republic but not very many:
Meanwhile, on the demand side, we have a global industry. The U.S. consumer is eating more avocados as are Europeans and China’s growing middle class. You can see where I added the arrow for China to show its increase:
Our Bottom Line: Avocado Prices
Just like Chipotle’s CEO, a Trader Joe’s shopper said that her $2.50 bag of avocados was now $6.50.
As economists, we can use a graph to explain why his avocado prices are soaring. On the demand side avocado popularity in the U.S and beyond has shifted the demand curve to the right. At the same time, the supply curve illustrates a crop that takes time to grow. Consequently, it has a more vertical slope that reflects its inelasticity.
Put the two together and you get a luxury item:
My sources and more: For insight about avocado prices, the Chipotle 2nd Quarter investor conference call and Bloomberg’s summary are good starting points. From there, NPR presented the bigger picture as did USA Today. Then for global markets, do look at Fresh Plaza, chinadialogue, and Quartz. And finally, this Bloomberg article says prices could be coming down because of a “Crazy Flower” bloom on trees that could produce more Mexican fruit.
