Demand and Supply Analysis of the Avocado Market in Australia

This report provides an economic analysis of the avocado market in Australia, highlighting the increasing consumption and demand for avocados over the past few years. It discusses how domestic production and imports, particularly from New Zealand, struggle to meet the growing demand, leading to higher prices compared to other countries. The report examines the impact of factors such as unfavorable weather conditions and supply chain disruptions on avocado availability and pricing. It also offers recommendations for improving supply stability, such as increasing domestic production and reducing import dependence. The report concludes that addressing supply-side constraints is crucial for achieving stability and affordability in the Australian avocado market. Desklib provides access to similar solved assignments and past papers for students.

Running Head: ECONOMIC ASSIGNMENT
Economic Assignment
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Table of Contents
Introduction..................................................................................................................................2
Brief article summary......................................................................................................................2
Analysis...........................................................................................................................................3
Demand and Supply of Avocado in Australia.............................................................................3
Avocado Prices in Australia........................................................................................................5
Current dynamics of Avocado market.........................................................................................5
Recommendation.............................................................................................................................6
Conclusion.......................................................................................................................................6
Reference list...................................................................................................................................8

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Introduction
In the last few years the consumption if avocado in Australia has been increased at a
rapid pace. The awareness of avocado utility, a relatively high fat and market campaigning has
increased importance of Avocado in the Australian fruit market (abc.net.au, 2018). The per
capita consumption of avocado has almost tripled over the last decade. In response of growing
demand production has doubled with an increase in gross value added. The avocado production
of Australia covers a wide range of geographic distribution. The main growing states of Avocado
include north, central and southeast Queensland, New South Wales and Western Australia.
Brief article summary
The growing importance of avocado has now become a sort of addiction for Australian
people. In order to satisfy their consumption habit people are ready to pay a price much above
the free market fair price. The chief executive of Australian Avocado, John Tyas informed that
the volume of avocado accounted a decline in the first week of 2018. The volume in much lower
as compared to the same time in 2017. The volume of avocado however recovered in the second
week and exceed the figures in the last year. The supply of avocado remains relatively lighter
during the period of Christmas and New Year. The moderate supply of avocado during this time
is the result of several combined factor (riverineherald.com.au 2018). It follows the logistics of
moving and harvesting produce during holidays and natural calamities like unexpected storms in
New Zealand disrupting supply chain of export to Australia.
In the wet weather, farmers do not pick avocado because this can lead to problem related
to avocado quality. Australia however has experienced an increasing inflow of avocado in the
fruit market and this is expected to provide relief to the customer having a very high demand for

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avocado. The supply of avocado during summer comes mainly from New Zealand and Australia.
Harvest from both the region are down more than thirty percent. Western Australia is running out
of avocado stocks. A seasonal variety of avocado is Hass. This specific variety of avocado has
already finished in north Victoria. The production in New Zealand has hurt by unfavorable
growing condition and thus focused on producing mostly small fruits. As said by Mr.Cross man,
a gap exists in the avocado market between December and February as Queensland has not
planted commercial Hass and is waiting for availability of Shepherd (riverineherald.com.au,
2018).
Both Western Australia and Queensland have overestimated their crop production in this
year. Given the current scenario there is no possibility that the two regions can come up to the
desired harvesting level. The underproduction of Avocado in different regions have resulted in
an increase in price of Avocado. The price of sized 16 Reed has increased to $70 for a wholesale
and it is $80 in case of Hass. The wholesalers are now trying to match the supply with projected
market demand.
Analysis
Demand and Supply of Avocado in Australia
The demand for avocados in Australia has grown steadily over the years. In 2016-17, the
consumption of Avocado per person recorded as 3.5kg (avocado.org.au 2017). The growing
demand for avocado cannot be fulfilled by the domestic production of Australia. The Australian
consumer therefore need to depend on imported avocado. New Zealand is one important exporter
of avocado to Australia.

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Figure 1: Domestic supply, import and per capita consumption of Avocado
(Source: avocado.org.au, 2017)
Figure 2: Trend in Avocado production in Australia
(Source: avocado.org.au, 2017)

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In order to have a stable market condition supply needs to be increased along with
demand (Fine, 2016). For the last few years the avocado production in Australia has constituted
an upward trend and is forecasted to be increased in future as well. The avocado production
estimated to reach 100,000 tons per year by 2015.
Avocado Prices in Australia
The supply of avocado in Australia falls short of its demand. The healthy fat content of
Avocado increases utility from avocado consumption. The production of avocado on the other
hand often struggles due to bushfires and heavy rain. This pushes up avocado price in Australia.
The price of avocado per fruit in Australia is as high as AUD 7 as compared to $1 in US and
$1.43 in UK (sbs.com.au 2018).
Current dynamics of Avocado market
Figure 3: Supply shortage and increased price of avocado
(Source: as created by Author)

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In addition to domestic production consumption of avocado depends on import from
other nation especially from New Zealand. In recent years due to unfavorable weather condition
avocado harvest in New Zealand has been interrupted. The growers shift their production to a
relatively light crop particularly small fruits. The reduced import volume of avocado further
constraint avocado supply in Australia. States like Queensland and North Victoria has run out of
avocado stocks. The constrained supply of avocado has created an upward pressure on price
(Pindyck & Rubinfeld, 2014).
Recommendation
Price of avocado in Australia is much higher than other nation like United States and
Britain. The supply side constraint is mainly responsible for overpriced avocado. Australia
should focus on reducing its import dependence to ensure stability in supply. The agricultural
department should provide necessary assistances to the farmers in growing avocados. Adaption
of advanced technology might help to overcome obstacles such as wet weather and heavy
rainfall.
The avocado stocks in has already finished in some regions of Australia. Other regions
with a relatively high production can provide a temporary supply to support consumption in
these regions.
Conclusion
The derived high utility from avocado has attracted most people in Australia to increase
their consumption. Per capita consumption of Avocado has increased to 3.5 kg per person. The
growth of supply is however less than that of demand. This has made avocado expensive in
Australia as compared to other nations. In order to satisfy domestic demand Australia has to rely

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on imported Avocadoes from other nation. New Zealand is a major exporter of avocados in
Australia. A supply side reform in Avocado market is needed to achieve stability in market.

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Reference list
Cost of avocados in Australia unlikely to rise amid global price hike. (2018). SBS News.
Retrieved 25 April 2018, from https://www.sbs.com.au/news/cost-of-avocados-in-
australia-unlikely-to-rise-amid-global-price-hike
Facts for Australian Avocado Industry. (2017). Avocado.org.au. Retrieved 25 April 2018, from
http://www.avocado.org.au/wp-content/uploads/2017/12/2016-17_Avocados-
Australia_Facts-at-a-glance.pdf
Fine, B. (2016). Microeconomics. University of Chicago Press Economics Books.
Herald, R. (2018). Local producer in demand as prices for avocados are going
stratospheric. Riverine Herald. Retrieved 25 April 2018, from
http://www.riverineherald.com.au/2018/01/22/11963/local-producer-in-demand-as-
prices-for-avocados-are-going-stratospheric
How the avocado smashed its way into our hearts. (2018). ABC News. Retrieved 25 April 2018,
from http://www.abc.net.au/news/2017-06-22/how-the-avocado-smashed-its-way-into-
australias-heart/8634456
Pindyck, R., & Rubinfeld, D. (2014). Microeconomics, Global Edition. Harlow, United
Kingdom: Pearson Education Limited.