Tariff threats push avocado prices to highest level since 2017

Mexico grows most avocados eaten in the United States, so a price hike could affect millions of Americans' wallets.

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    The battle against illegal migration is now affecting the price of Mexican avocados sold in the US [Edgard Garrido/Reuters]
    The battle against illegal migration is now affecting the price of Mexican avocados sold in the US [Edgard Garrido/Reuters]

    President Donald Trump's threats to slap tariffs on Mexican goods may already be having an impact on avocado prices.

    One gauge of the Hass variety from Michoacan, the heartland of Mexican avocado production, jumped 3.7% on Monday to the highest since August 2017. Unchanged last week, the benchmark has surged 65% this year. Other prices tracked by AvoPrice were little changed Monday.

    Coming at a time of a smaller Californian crop, Trump's threat to tax Mexican imports by as much as 25% has the potential to further tighten supplies. The last time he threatened Mexico on immigration -- with a border-closing warning in April -- the Michoacan avocado gauge skyrocketed.

    Avocados don't trade on exchanges like soybean futures in Chicago or copper in New York, and like other relatively opaque fruit and vegetable markets, prices start with producers. A tough season has squeezed supply and pushed up prices, according to a survey Friday of half a dozen sellers in Mexico City's busy wholesale market.

    Producers in Michoacan are not expected to lower their prices to offset tariffs, signalling the taxes would be passed on to U.S. consumers. A weaker Mexican peso would help offset any price hike.

    California crops--BBG chart on avocados

    SOURCE: Bloomberg