Potential Impacts of Avocado Imports from Mexico on the Florida Avocado Industry

Transcription

1 Potental Impacts of Avocado Imports from Mexco on the Florda Avocado Industry Skavas Nalampang Agrcultural Economcs Extenson Tropcal Research and Educaton Center Unversty of Florda Emal: Wrusana Tantwongampa Agrcultural Economcs Extenson Tropcal Research and Educaton Center Unversty of Florda Emal: Edward A. Evans Agrcultural Economcs Extenson Tropcal Research and Educaton Center Unversty of Florda Emal: Selected Paper prepared for presentaton at the Amercan Agrcultural Economcs Assocaton Annual Meetng, Long Beach, Calforna, July 23-26, 2006 Copyrght 2006 by Skavas Nalampang, Wrusana Tantwongampa and Edward A. Evans. All rghts reserved. Readers may make verbatm copes of ths document for noncommercal purposes by any means, provded that ths copyrght notce appears on all such copes.

2 Potental Impacts of Avocado Imports from Mexco on the Florda Avocado Industry The Unted States s the thrd largest avocado producer behnd Mexco and Indonesa. U.S. avocado producton occurs n three regons: Calforna, Florda, and Hawa. Calforna s by far the largest producer, accountng for 90% of producton, on average, followed by Florda wth about 9% and Hawa wth less than 1%. Although producng only 9% of the USA total, the avocado ndustry s of great mportance to the many smalland medum-sze farmers n Florda. Moreover, snce the bulk (80%) of the avocados produced n Florda s sold outsde the state, the ndustry s consdered to be an mportant revenue generator for Florda. In 2005, Florda growers produced about 28 thousand short tons valued at US$14.45 mllon. Florda produces green skn varetes of avocados that are easly dstngushed from the more popular purplsh-black skn Hass varetes produced n Calforna. There s growng concern among Florda growers and ndustry representatves that a recent USDA polcy decson could have dre consequences for the Florda avocado ndustry. Specfcally, the decson to reverse a 93-year ban and allow U.S. mports of avocados grown n Mexco could flood the domestc market and cause a substantal lowerng of the prces receved by Florda avocado growers (Florda avocados already are sold at a dscount to the more popular Hass varetes). Whle earler studes have consdered the ssue of the lkely mpacts of ncreased market access for avocados shpped from Mexco, the man concern has largely been on the potental effects on the Calforna avocado ndustry (USDA, APHIS 2004; Carman and Rodrquez 2004). For example, a partal equlbrum and economc assessment by the 1

3 Anmal and Plant Health Inspecton Servce of the rule allowng Mexcan avocados to be mported year-round to all states of the Unted States n 2007 looked at the mplcatons for prces Calforna growers would receve. Among other thngs, the fndngs suggested that under the proposed rule change, mports of Mexcan avocados would ncrease by 267.2% (from mllon pounds to mllon pounds). In contrast, producton of Calforna avocados would decrease by 9.5%, and mports of avocados from Chle would decrease by 8.9%. Wholesale prces of avocados suppled by Calforna and Chle are expected to decrease by 15.4% (from US$1.49 per pound to US$1.26 per pound) and 6.5% (from US$1.24 per pound to US$1.16 per pound), respectvely. Lkewse, a study by Carman and Rodrguez (2004) estmated the U.S. avocado demand functon by usng avocado data from the marketng years to Ther results suggested a prce elastcty of demand for avocado from all sources (Calforna, Florda, and all mports) at average prces and quanttes, wth a 1.47 ncome elastcty of demand and a 0.21 advertsng elastcty of demand at mean values. Unlke past studes, ths artcle examnes demand equaton estmates for each category of avocados by ncorporatng avocado data from Calforna, Chle, Mexco, and Florda nto the Rotterdam nverse demand system to analyze the relatonshps among avocados from each category and assess potental mpacts on the prce of avocados, especally Florda green skn avocados, when Hass avocados from Mexco are allowed to enter all U.S. states n The specfc approach taken s to frst develop quanttatve estmates of the demand for Calforna Hass avocados, Chle Hass avocados, Mexco Hass avocados, and Florda green skn avocados n the Unted States usng the Rotterdam nverse demand 2

4 system. Followng ths, an assessment s made regardng the extent to whch the normalzed prce of avocados wll change n response to a proportonal ncrease n the total quantty of all selected avocado varetes through the scale effect, and the extent to whch the prce of avocados must change for consumers to absorb more of the cost through the quantty effect. Background Recently there has been a surge n the demand for ethnc foods n the Unted States. Between 2002 and 2004, the ethnc food market n the Unted States ncreased from US$53 bllon to US$75 bllon, an average annual rate of growth of about 20%. The growng demand for ethnc food s fueled largely by changes n the ethnc makeup of the U.S. populaton. Currently more than 30% of the people lvng n the Unted States are regarded as ethnc. Hspancs are the largest and fastest growng segment, accountng for about 13% of the U.S. populaton n 2004 (Mller 2005). Avocados are one of the most popular ngredents used n Hspanc cusne. Other factors responsble for the ncrease n avocado consumpton n the Unted States (from a per capta level of 1.53 pounds n 1996 to 3.00 pounds n 2005) nclude year-round avalablty of fresh avocados due to mports, lower avocado prces, the promoton of the health benefts of avocado, and ncreased dsposable ncome. Wth consumers more health conscous, the demand for healther food tems has ncreased. Avocados have been promoted as a healthy frut provdng necessary vtamns and mnerals. Notceable wth regards to the rse n avocado consumpton s the ncreased share beng satsfed by mports. Snce the late 1980s, the Unted States has shfted from beng 3

5 a net exporter of avocados to becomng a net mporter. For example, n 2002, the Unted States overtook France as the world s number one mporter of avocados. Fgure 1 shows the trend n U.S. mports of avocados over the perod 1996 to The graph ndcates a steep rse n the volume of avocado mports n For the frst tme, mports outnumbered domestc producton. Between 1996 and 2005, mports ncreased from 28 thousand short tons to about 291 thousand short tons, an average annual growth rate of approxmately 30%. The largest (by volume) sngle-year ncrease occurred n 2005, wth mports ncreasng by 131 thousand short tons (from 160 to 291 thousand short tons). Ths was due to szeable ncreases n the volume of avocados mported from Mexco and Chle (dscussed below). The 2005 avocado mports were valued at US$ mllon. The man sources of U.S. mports of avocados are Mexco, Chle, Domncan Republc, and New Zealand (fgure 2). Most of these mports are the Hass varety from Mexco, Chle, and New Zealand. Domncan Republc exports are manly of the green skn type smlar to those produced n Florda. Mexco and Chle, wth shares of 50.87% and 43.50%, respectvely, domnate the U.S. avocado mport market, accountng for 94.37% of total mports n As llustrated n fgure 2, up untl 2004, Chle was the man suppler of avocados to the Unted States, followed by Mexco. However, the stuaton now has been reversed. In 2005, Mexco more than trpled the amount of avocados t shps to the Unted States (from 42 thousand short tons n 2004 to 148 thousand short tons n 2005). Ths represents an ncrease of 106 thousand short tons (247.37%) over the prevous year. In comparson, mports from Chle ncreased by 23 thousand short tons (22.70%) to reach 127 thousand short tons for the same perod. 4

6 Imports of Domncan Republc avocados n the Unted States doubled between 1996 and 2005 from 7.7 thousand short tons to 16 thousand short tons. The man drvng force behnd the sharp ncrease n avocado mports enterng the Unted States s the elmnaton of trade restrctons on avocado mports from Mexco. Whle Mexco s the world s largest producer of avocados, for a long tme t was shut out of the U.S. market and banned for phytosantary reasons. In 1993, the ban was partally lfted, allowng entry of Mexcan avocados nto the state of Alaska. Then, n November 1997, more restrctons were lfted, allowng Mexco to shp fresh avocados to 19 northeastern states and the Dstrct of Columba durng a four-month perod from November through February. In November 2001, the number of states allowed to mport Mexcan avocados was ncreased to 31, and the length of the shppng perod was extended from October to Aprl. Snce January 2005, Mexco has been allowed to shp year-round to 47 states (excludng Calforna, Florda, and Hawa). Full market access to all 50 states wll be permtted begnnng January Although there were no restrctons on avocados exported from Chle and Domncan Republc, the recent sgnng of blateral trade agreements between these countres and the Unted States should make t easer for these countres to shp avocados to U.S. markets. The upward trend n avocado mports s expected to contnue due to strong U.S. domestc demand and ncreased supples n the exportng countres. Mexco s expected to ncrease both ts producton and exports to U.S. markets due to ncreased acreages, good agrcultural practces that have successfully controlled pests, and the elmnaton of restrcted harvestng. Under the restrcted harvestng program, producers agreed to restrct the amount of avocados they harvested per acre so as not to saturate the export 5

7 market and cause prces to fall. In the case of Chle, both producton and exports are expected to contnue to ncrease n the comng years as a result of new bearng acreages and the need to ncrease export volume to compensate for fallng prces and lost market shares to Mexco. Fnally, ndustry experts have ndcated that producton of green skn avocados n Domncan Republc wll ncrease consderably n the comng years due to the expanson of ther avocado acreages by about 25 thousand acres. Many of those trees are stll mmature. The Florda Avocado Industry As mentoned earler, avocados are of great sgnfcance to the economy of Florda. Grown manly n Dade County, avocados are one of the top crops grown statewde and rank ffth among all crops natonwde (USDA, NASS 2004). Bearng acreage for avocados n Florda totaled 5.9 thousand acres n 2002/03, 6.1 thousand acres n 2003/04, and 6.4 thousand acres n 2004/05 (USDA, NASS 2005). The 2002 Census of Agrculture shows that there are 839 avocado farms n Florda, wth a total of thousand acres (table 1). Approxmately 89.15% of avocado farms n Florda are less than 15 acres, and about 10.85% are larger than 15 acres. Florda s avocado yelds totaled 5.25 tons per acre n 2002/03, 2.79 tons per acre n 2003/04, and 4.38 tons per acre n 2004/05. Total producton of avocados n Florda reached 28 thousand short tons n 2004/05, wth total producton value of US$14.45 mllon (USDA, NASS 2005). Fgure 3 shows the actual and nflaton-adjusted trends of the prces Florda avocado growers receved over the perod 1996/97 to 2004/05. Between 1996/97 and 1999/00, prces ncreased from US$528 to US$748 per short ton, or 41.67%. However, 6

8 wth the excepton of a slght recovery n 2001/02 and a spke n 2003/04 caused by a sharp drop n producton, prces have snce been decreasng (e.g., the 2004/05 prce of US$516 per short ton represents only 76.51% of the prevous 1999/00 to 2003/04 fveyear average). As shown n fgure 3, the downward trend n prces becomes more obvous when they are adjusted for nflaton. The concern s that ncreases n the domestc supply of avocados along wth sgnfcant ncreases n shpments from Mexco could serve to further aggravate the downward prce trend. Methodology Followng the nverse verson of the Rotterdam demand system developed by Barten and Bettendorf (1989), our nverse demand equaton for four dfferent categores of avocado ( = 1, 2, 3, and 4) s shown n equaton 1. In our case, = 1 refers to Hass avocados produced n Calforna, = 2 refers to Hass avocados produced n Chle, = 3 refers to Hass avocados produced n Mexco, and = 4 refers to green skn avocados produced n Florda. (1) w d ln( π ) = h d ln( Q) + h d ln( q ) + υ, for j j j, j = 1, 2, 3, and 4 where w = π q = ( p q m s the budget share of the th category of avocado, s the ) p prce of the th category of avocado, q s the quantty of the th category of avocado, π m s the normalzed prce of the th category of avocado where m s the total = p expendture of avocados for all categores, d ln( Q) = π ( dq) = w d ln( q ) s the Dvsa quantty ndex, υ s the dsturbance term, and scale effect ( h ) and quantty effect ( h ) are parameters. To ensure that the four necessary demand propertes (.e., addng-up, homogenety, Antonell symmetry, and negatvty propertes) are satsfed, the estmated j 7

9 parameters h and h (for, j = 1, 2, 3, and 4) are subjected to the followng condtons (equatons 2 to 5): j (2) h = 1 and h = 0 (Addng-up) (3) hj = 0 (Homogenety) j j (4) h j = h j (Antonell symmetry) (5) x h x < 0 j j x θ I, θ R (Negatvty). Followng Barten (1969), each demand equaton s estmated smultaneously. The Rotterdam nverse demand system s estmated usng the maxmum-lkelhood method of estmaton wth constrants mposed. The homogenety and symmetry constrants were mposed by workng wth the concentrated log-lkelhood functon. Scale elastcty (s ) and compensated quantty elastcty (ε j ) can be derved from the estmated parameters h and h (for, j = 1, 2, 3, and 4), respectvely: j (6) s = h w, for = 1, 2, 3, and 4 (7) ε j = hj w, for, j = 1, 2, 3, and 4 where s s the scale elastcty of the th category of avocado, and ε j s the compensated quantty elastcty between the prce of the th category of avocado and the quantty of the jth category of avocado. Uncompensated quantty elastcty (γ j ) can be obtaned usng scale (s ) and compensated quantty (ε j ) elastctes so that (8) γ = ε + s w ), for, j = 1, 2, 3, and 4 j j ( j where γ j s the uncompensated quantty elastcty between the prce of the th category of avocado and the quantty of the jth category of avocado. 8

10 Data Avocado data are suppled by the USDA Agrcultural Marketng Servce (AMS) and Foregn Agrcultural Servce (FAS). Monthly quantty data consst of domestcally produced avocados (Calforna Hass avocados and Florda green skn avocados) between 1998 and 2004 and monthly quantty data of U.S. Hass avocado mports from two mportng countres (Chle and Mexco) durng the same perod. Due to data lmtaton, shpment data were used as a proxy for domestcally produced avocado data. Weekly market prces of both Hass and green skn varetes for fve markets between 1998 and 2004 were obtaned from the frut and vegetable market news portal mantaned by USDA Agrcultural Marketng Servce (AMS). Avocado markets ncluded Atlanta, Chcago, Mam, New York, and San Francsco. Monthly market prces were later calculated by averagng weekly market prces for all fve markets and were deflated by the consumer prce ndex ( = 100) obtaned from the U.S. Department of Labor. Emprcal Results Table 2 shows parameter estmates from the Rotterdam nverse demand system. Scale effect shows how much the normalzed prce of the th category of avocado wll change n response to a proportonal ncrease n the total quantty avocados n the market, whle quantty effect shows how much the prce of the th category of avocado must change to nduce the consumer to absorb more of the jth category of avocado. Our results ndcate that scale effects are sgnfcantly dfferent from zero at the 5% level and are all negatve, suggestng that the normalzed prce of each avocado category decreases as the aggregated quantty of avocados n the Unted States ncreases. Dagonal elements of the 9

11 quantty effects are all negatve and are sgnfcantly dfferent from zero at the 5% level, except for own quantty effect of Hass avocados produced n Mexco. Negatve dagonal elements of the quantty effects satsfy the negatvty condton of the demand system. Table 3 shows related scale and compensated quantty elastctes. Scale elastctes are all negatve and are sgnfcantly dfferent from zero at the 5% level. Calforna and Chle have the largest absolute values of scale elastctes (-0.938), mplyng that the normalzed prces of Hass avocados from Calforna and Chle are the most responsve to the change n total quantty of avocados sold n the Unted States. On the other hand, the absolute value of the estmated scale elastcty for Florda (-0.863) s the smallest, mplyng that the normalzed prce of Florda green skn avocados s the least responsve to the change n total quantty of avocados sold n the Unted States. It also ndcates that a 1% ncrease n total quantty of avocados n the market s lkely to cause the normalzed prce of Florda green skn avocado to decrease by 0.863%. Dagonal elements of the compensated quantty elastcty are all negatve. The compensated own-quantty elastcty of the Florda green skn avocado shows that a percent ncrease n the quantty of Florda green skn avocado s lkely to decrease the normalzed prce of Florda green skn avocados by 0.008%, holdng the quanttes of other categores of avocado constant. Negatve compensated cross-quantty elastcty denotes substtuton and postve compensated cross-quantty elastcty denotes complementary relatonshp between two categores of avocado. For example, the negatve compensated quantty elastcty between the quantty of Hass avocados produced n Chle and the prce of Florda green skn avocados (-0.058) suggests that Hass avocados from Chle and Florda green skn avocados are substtutes. A percent 10

12 ncrease n the quantty of avocados produced n Chle wll cause the prce of Florda green skn avocados to decrease by 0.058%, so as to nduce consumers to buy the same quantty of Florda green skn avocados. Table 4 shows estmated uncompensated quantty elastctes. The uncompensated quantty elastcty between the prce of the th category of avocado and the quantty of the jth category of avocado measures the percentage change of normalzed prce of the th category of avocado for a one percentage change n quantty for the jth category of avocado. When the absolute values of the uncompensated quantty elastctes are less than one (nelastc), a one percentage change n quantty for the jth category of avocado wll decrease normalzed prce of the th category of avocado by less than 1%. In contrast, when the absolute values of the uncompensated quantty elastctes are greater than one (elastc), a one percentage change n quantty for the jth category of avocado wll decrease the normalzed prce of the th category of avocado by more than 1%. In general, our results show that all uncompensated quantty elastctes are nelastc. Negatve own-quantty elastctes mply that avocado prces wll declne, gven an addtonal quantty of avocados. The normalzed prce of Calforna Hass avocados s the most responsve to a change n ts own quantty (.e., the normalzed prce of Calforna Hass avocados decreases by 0.538% for a 1% ncrease n the quantty of Hass avocados produced n Calforna), whle the normalzed prce of Florda green skn avocado s the least responsve to a change n ts own quantty (.e., the normalzed prce of Florda green skn avocado prce decreases by 0.053% for a 1% ncrease n the quantty of green skn avocados produced n Florda). 11

13 Calforna Hass Avocado Uncompensated quantty elastctes suggest that a 1% ncrease n the quantty of avocados produced n Calforna s lkely to cause the normalzed prce of Hass avocados from Calforna to decrease by 0.538%. It would also have the effect of causng the normalzed prces of avocados produced n Chle, Mexco, and Florda to decrease by 0.489%, 0.474%, and 0.444%, respectvely. Chle Hass Avocado Uncompensated quantty elastctes suggest that a 1% ncrease n the quantty of Hass avocados produced n Chle wll potentally decrease the normalzed prce of Hass avocados from Chle by 0.270%. Lkewse, under the same scenaro, normalzed prces of the Calforna Hass avocado, Mexco Hass avocado, and Florda green skn avocado are lkely to decrease by 0.246%, 0.264%, and 0.298%, respectvely. Mexco Hass Avocado Uncompensated quantty elastctes suggest that a 1% ncrease n the quantty of Hass avocados produced n Mexco s expected to decrease the normalzed prce of Hass avocados from Mexco by 0.111%. Ths wll also cause the normalzed prces of Calforna Hass avocado, Chle Hass avocado, and Florda green skn avocado to decrease by 0.108%, 0.119%, and 0.068%, respectvely. Florda Green Skn Avocado Uncompensated quantty elastctes suggest that a 1% ncrease n the quantty of green skn avocados produced n Florda s lkely to decrease the normalzed prce of Florda green skn avocados by 0.053%. Smlar effect s also expected for the normalzed prces of avocados produced n Calforna, Chle, and Mexco, such that a 1% ncrease n the 12

14 quantty of green skn avocados produced n Florda wll cause the normalzed prces of Calforna Hass avocado, Chle Hass avocado, and Mexco Hass avocado to decrease by 0.046%, 0.060%, and 0.031%, respectvely. Polcy Implcaton for the Florda Avocado Industry From the uncompensated quantty elastctes reported above, conclusons can be drawn from the effect of ncreasng avocado supples from dfferent sources on the prce of Florda green skn avocado. Uncompensated quantty elastctes suggest that a 1% ncrease n the quantty of Hass avocados produced n Mexco s lkely to cause the normalzed prce of Florda green skn avocados to decrease by 0.068% (table 4). Ths s consdered to be a smaller effect when compared to the effect of a 1% ncrease n the quantty of avocados produced n other sources on the prce of Florda green skn avocados. For example, the uncompensated quantty elastctes also suggest that a 1% ncrease n the quantty of Hass avocados produced n Calforna and Chle wll potentally cause the normalzed prce of Florda green skn avocados to decrease by more than sx and four tmes (0.444% and 0.298%), respectvely, of the effect caused by a 1% ncrease n the quantty of Mexco Hass avocados. The result s supported by the fact that the green-skn avocados grown n Florda are dfferent from the purplsh-black skn avocados grown n Mexco. As a result, Florda green skn avocados do not compete drectly wth Mexco Hass avocados n the market, and t s therefore unusual for the ncreasng supples of avocados from Mexco to have a sgnfcant mpact on the prce of the Florda green skn avocados. Our man concern s what wll happen to the prce of Florda green skn avocado when avocados produced n Mexco gan full access to the U.S. market n Avocado 13

15 mports from the 2004/05 season already have exceeded domestc producton level for the frst tme, prmarly because of the year-round launchng of avocados from Mexco n The sgnfcant boost of mports from Mexco has resulted n an ample amount of U.S. avocado supples and decreased avocado prces, ncludng the prce of the Florda green skn avocado. Ths s consstent wth our fndng from the scale effect, whch suggests an nverse relatonshp between total supples of avocado n the Unted States and the prces of avocado. In the case of Florda avocado growers, a surge of avocado mports from Mexco together wth an ncrease of green skn avocado producton of 11 thousand short tons (64.71%) over the prevous season already have fueled a downward trend of the prces receved by Florda growers, from US$808 per short ton for the 2003/04 season to US$516 per short ton for the 2004/05 season (36.14%). Wth a strong growth of U.S. avocado consumpton and supples, partcularly n 2007, avocado prces are expected to contnue to declne. Concluson Ths artcle evaluates demand for four categores of avocados (.e., Calforna Hass avocados, Chle Hass avocados, Mexco Hass avocados, and Florda green skn avocados) by ncorporatng avocado data from Calforna, Chle, Mexco, and Florda nto a Rotterdam nverse demand system to analyze the relatonshps among avocados from each category and assess potental mpacts on the prce of avocados, especally Florda green skn avocados, when Hass avocados from Mexco are allowed to enter all states n

16 Based on avocado data from 1998 to 2004, results suggest that the allowance of Hass avocados from Mexco to all 50 states n the Unted States s not lkely to have a sgnfcant mpact on the prce of Florda green skn avocado. On the other hand, the ncrease of avocado mports over the years could mean a decrease n the prce of avocados n the domestc market, ncludng the prce of Florda green skn avocados. For the future outlook of avocado prces, t s expected that U.S. consumers wll contnue to consume large amounts of avocado. To help compensate for potentally lower avocado prces and to effectvely respond to ncreasng avocado demand, promotonal program ntatves for the Florda green skn avocados wll help boost the demand for Florda green skn avocados so that the Florda avocado ndustry can reman strong n a compettve avocado market. 15

17 References Barten, A. P Maxmum Lkelhood Estmaton of a Complete System of Demand Equatons. European Economc Revew 1:7-73. Barten, A. P., and L. J. Bettendorf Prce Formaton of Fsh: An Applcaton of an Inverse Demand System. European Economc Revew 33: Carman, H. F. and R. K. Craft An Economc Evaluaton of Calforna Avocado Industry Marketng Programs, Calforna Agrcultural Experment Staton, Gannn Foundaton Research Report No. 345 (July). Carman, H. and A. M. Rodrguez The Hass Avocado Promoton and Research Order: Offsettng Prce Impacts from Imports wth Advertsng and Promoton. Workng paper, Department of Agrcultural Economcs, Unversty of Calforna, Davs. Mller, M Ethnc Foods Market Profle. Washngton, D.C.: U.S. Department of Agrculture, Agrcultural Marketng Resource Center. Avalable at (accessed March 16, 2006). U.S. Department of Agrculture, Anmal and Plant Health Inspecton Servce (USDA, APHIS) Economc Analyss Proposed Rule: Allow Fresh Hass Avocados Grown n Approved Orchards n Approved Muncpaltes n Mchoacan, Mexco, to Be Imported nto All States Year-Round. Washngton, D.C. (May). U.S. Department of Agrculture, Natonal Agrcultural Statstcs Servce (USDA, NASS) Census of Agrculture: State and County Profles. Washngton, D.C. 16

18 Avalable at (accessed March 16, 2006) Non Ctrus Fruts and Nuts: 2004 Summary. Washngton, D.C. (July). Avalable at (accessed March 16, 2006). 17

19 Table 1. Dstrbuton of Avocado Farms n Florda by Acre, 2002 Acres Total Bearng Acres Nonbearng Acres Farms Acres Farms Acres Farms Acres 0.1 to 0.9 acres to 4.9 acres to acres 207 1, , to 24.9 acres to 49.9 acres to 99.9 acres 19 1, , acres or more 13 2, , Total 839 7, , Note: Table 1 was obtaned from the 2002 Census of Agrculture (USDA, NASS 2004). 18

20 Table 2. Parameter Estmates from the Rotterdam Inverse Demand System Orgn Scale Effects Quantty Effects R 2 Calforna Chle Mexco Florda Calforna * * 0.008* (0.008) (0.002) (0.001) (0.001) (0.001) Chle * 0.008* * * 0.003* (0.005) (0.001) (0.001) (0.001) (0.001) Mexco * 0.001* * (0.003) (0.001) (0.001) (0.001) (0.001) Florda * * * (0.003) (0.001) (0.001) (0.001) (0.001) Note: Asymptotc standard errors of parameter estmates are n parentheses and * denotes parameter estmates that are statstcally dfferent from zero at the 5% level. 19

21 Table 3. Estmated Scale and Compensated Quantty Elastctes Orgn Scale Elastctes Compensated Quantty Elastctes Calforna Chle Mexco Florda Calforna * * * Chle * 0.029* * * * Mexco * 0.012* * Florda * * * Note: * denotes elastctes calculated from paramete rs that are statstcally dfferent from zero at the 5% level. Table 4. Estmated Uncompensated Quantty Elastctes Orgn Calforna Chle Mexco Florda Calforna Chle Mexco Florda

22 350, ,000 Avocado Imports (Short Tons) 250, , , ,000 50, Source: U.S. Department of Agrculture Fgure 1. Total U.S. avocado mports (short tons), Avocado Imports (Short Tons) 160, , , ,000 80,000 60,000 40,000 Chle Mexco Domncan Republc New Zealand 20, Source: U.S. Department of Agrculture Fgure 2. Total U.S. avocado mports by country (short tons),

23 Florda Avocado Prce Receved by Growers (US$/Short Ton) 1, Actual Prce Inflaton-Adjusted Prce / / / / / / / / /05 Source: U.S. Department of Agrculture Fgure 3. Actual and nflaton-adjusted trends of the Florda avocado prces receved by growers (US$/short ton, = 100), 1996/ /05 22