2012 Season Kick-Off

Pala Mesa Resort

January 12, 2012

Agenda• Good Agricultural Practices

• Country trends

• Volume summary

• US market trends

• Index marketing

• Harvest recommendations & success factors

• Price expectations

• Long term outlook

• Questions

Good Agricultural Practices• Why do growers need to implement?

• Food safety illnesses and deaths – cantaloupes, spinach, jalapeno, processed guacamole, etc…

• New FDA guidelines

• Customer concerns – Costco, Wal-Mart, Chipotle…

• All links in the distribution chain are exposed; growers, shippers, third party auditors, retailers and food service customers

• GAP audits across the industry mitigate the risk that individual growers and the avocado industry will suffer a fatal blow from a food

safety incident

Good Agricultural Practices• What is GAP?

• Grower• Field sanitation • Worker hygiene

• Agricultural inputs – water, fertilizer, mulch, etc…• Employee training• Record keeping

• Harvest Crews• Worker hygiene• Field sanitation

• Equipment sanitation• Training

• Record keeping

Good Agricultural Practices• What are my options?

Work under CAC guidelines• CAC rebate

• CDFA auditor under USDA contract• www.CaliforniaAvocadoGrowers.com/gap

Work with a third party auditor• Primus

• NSF Agriculture

Country Trends - California• Season = November to October

• 2012 crop up 34% • 2011 = 287 m lbs. (carryout removed)

• 2012 = 385 m lbs.

• 2011 heavy to south vs. 2012 heavy to north

• Fruit size = normal

• On tree quality = good – limited trips damage

• Acreage stable (increasing in North/decreasing in South, nurseries

sold out)

Country Trends - Mexico• Season = July to June

• 2012 crop up 20%• 2011 = 585 m lbs.• 2012 = 700 m lbs.

• Acreage increasing in Michoacán and Jalisco

• Mexican and Asian markets consume Mexican avocados

• Majority destined for US market

• Currently shipping at high rates

Country Trends – Chile

• Season = July to June

• 2012 crop up 25%• 2011 = 120 m lbs.• 2012 = 150 m lbs.

• Acreage stable to slightly increasing (3%/year)

• Chilean, European, Argentinian markets expanding

• Smaller % of production coming to US

• Inconsistent supply in 2011

Country Trends - Peru• Season = May (?) to September

• 2012 volume up 450% • 2011= 18 m lbs. (partial season)• 2012 = 80 m lbs. (full season)

• Europe will receive 80 m lbs. of Peruvian fruit

• Acreage increasing 5%-10% per year

Avocado Volume in US by CountryMillions of pounds

Country Acres 2011 2012 % Change

California 60 k 287 385 34%

Mexico 146 k 585 700 20%

Chile 74 k 120 150 25%

Peru 20 k 18 80 444%

Others 10 10 - (D.R. & N.Z.)

Total 300 k 1,020 1,325 30%

Weekly Ave. 19.6 25.5

US Market Trends

• US market consumption is growing at an estimated 10% per year

• Current “sweet spot” is 20 to 24 million pounds per week

• Avocado holidays, Super-bowl, Cinco de Mayo, 4th of July can take up to 30 million pounds per week

US Avocado Market Trends• Market will continue to grow due to:

• Large number of households that can begin or expand their avocado usage

• Quality product

• Health benefits

• Increased usage and cache (indulgence)

• Money maker for retailers and food service

US Avocado Market Trends

• California has invested in the market since the 1960’s

• Today $30-$40 million are spent each year marketing avocados

• California Avocado Commission• Hass Avocado Board

• Mexican Hass Avocado Importers Association• Chilean Avocado Importers Association

• Peruvian Avocado Board• APEAM

Index Marketing• Concentrate on Avocados in the US market

• 10% of overall avocado market

• Packinghouse/storage/ripening in California

• Storage /ripening in Denver, Texas & Pennsylvania

Index Marketing• Retail Customers = 65%

• Food service = 15%

• Wholesale = 25%

• Nationwide sales

• Concentrate on program business with major avocado users

Index Marketing• Major Customers

• Costco, Safeway, Kroger, Sam’s, Supervalu, Albertson’s, Stater Brothers, Harmon’s, Sprouts, Sunflower, Wakefern, Fiesta Marts,

QFC, Chipotle, Rubio’s, Baja Fresh, Fresh Point, Markon, Restaurant Depot

• Continually prospecting and improving the base

• Index sales staff incentive based upon superior returns

Key Success Factors• Volume will be up 30%

• In most periods there will be three countries in the market

• Monitor market• Shipment rates & inventories

• Communicate with Index field staff

• Understand shifting import seasons• Timing of Peru’s start

• Timing of Chilean finish and start

• Develop a plan and communicate the plan to your fieldman

Harvest Recommendations• Size pick 48’s and larger

• Harvest throughout the season

• Avoid putting your eggs all in one basket (market)

• Develop and communicate a plan (but be flexible based upon opportunity or lack of)

• Do not put off securing labor until the last minute

• Communicate with your Index fieldman

Price ExpectationsYear Total Calif. Calif. Ave. Calif.

Market Crop Share Return

(000 lbs.) (000lbs.)

2008 1,030 329 32% $1.00/lb.

2009 1,085 175 16% $1.14/lb.

2010 1,250 535 42% $0.75/lb.

2011 1,141 303 27% $1.52/lb.

2012 1,325 385 19% $1.00-1.10/lb.

Long Term Avocado Outlook• Demand for Hass will continue to grow

• Supply will increase, but demand should outpace supply

• Prices will remain attractive

• Index is positive about the future of the California avocado industry

Index Seminar Series• February – Pruning

• June - ?

• Suggestion for topics?

• Ideas to improve?

2012 Season Kick-Off

• Thank you!

• Questions?