An Econometric Demand Model for Florida Green-skin Avocados

Abstract

This article develops an inverse demand model for Florida green-skin avocados (Persea americana). Information from the model is used to assess the likely impact on growers’ prices resulting from a reduction in the supply of Florida green-skin avocados due to a recent outbreak of a deadly fungus in the Florida commercial avocado production area. Consideration is also given to the increased supply of green-skin avocados imported to the United States from the Dominican Republic (DR), as well as the increased availability of ‘Hass’ avocado in the U.S. market. The estimated own price flexibility of –0.551 evaluated at the mean suggests that Florida avocado prices are not very responsive to changes in quantity supplied. A reduction in the quantity supplied is likely to bring about a less than proportionate rise in the price. Moreover, any noticeable rise in prices due to the impact of the disease is likely to be short lived and may be insufficient to cover additional grove management costs. In the longer run, prices are expected to revert closer to their long-run trend (or decrease) as a result of increased shipments from the DR, and further increases in the availability of ‘Hass’ avocados.