Why California's Avocado Industry Is Disappearing | Gary Gragg | Katarina Szulc

California avocado industry is facing some serious challenges here. Not only the costs have been going up, there's also an element that they're competing with cartels from Mexico. Today we sit down with Gary Gregg, who knows the avocado industry really well. We also sit down with Katrina Shulk, who's been investigating what's happening with avocado farms in Mexico and how they are impacting the U.S. supply chain and California avocado farmers. We have the most stringent laws here in California for good reason. But when we import things from places that don't have those laws and our internal producers have to compete against that, there should be a way of like at least leveling the playing field a little bit. When these orchards are being taken over by the cartels, there is typically a lot of violence. When you're making your guacamole on Super Bowl, those avocados may have come from blood. I'm Siamak. Welcome to California Insider. Gary, it's great to have you on. Welcome. Thank you for having me here. And thank you for having the format you have with your show. You cover so many great topics that Californians need to know about. A lot of things that would be buried if you didn't cover them. So you're doing a wonderful job here, you and your team. Thank you, Gary. We want to talk to you about an important topic, which is avocados. And you're into the plant space. We're hearing that the avocado industry is facing some challenges. Can you tell us what you're seeing right now? Avocados basically have a lot of their history rooted right where we are. We're in Irvine, California right now. Most people know the Haas avocado. That's the most prevalent avocado in the whole entire world right now. What they don't know is it's the 100th birthday of that tree. That tree was planted for the first time 100 years ago in 1926, just 20 miles north of where we sit now. It was planted by Rudolf Haas. He was a postal delivery man. He was trying to get some plants to graft. He bought some seedlings from a guy to graft known varieties at the time on top of that tree and other trees. And then that tree wouldn't take the graft and he was about to cut it down. And by the time he was about to cut it down, the kids were playing in it and had a good time with it. And the kids actually ate the fruit from this tree and they loved it. And so they begged their dad not to cut this tree down. So then he took notice of the fruit and realized this is a pretty good fruit. Very different from the fruit at the time. Most fruit at the time was green, thin-skinned. His was thick, dark-skinned. And so it was hard to convert people over to it, but it tasted really good. And the thick skin was actually very protective of that fruit during shipping. And then he got this tree to propagate and it was about nine years later after he planted it in 1926, in 1934, he got the patent on this tree. And it now is the most popular avocado throughout the entire world. And that kind of started the sort of like the big industry that we see now. One thing that happened in California that affected the avocado trade here was NAFTA. When Bill Clinton passed NAFTA in the 1990s, it opened up the avocado trade into the market in California, which is the biggest market probably in the world for avocado consumption, in a place where we started growing these avocados. They're native to Mesoamerica, but basically brought up different ones up here. And every time you germinate a seed, you have a unique identity plant. And that's how the Haas variety got started and many others in California. So most of the varieties that we see today are from California. But ironically, once we had a big burgeoning avocado trade in California with lots of farms everywhere, we had laws in place to not import avocados from anywhere else outside the state to prevent pests getting into our crop. But that all changed with NAFTA. And then that opened up the crop to Mexico, Peru, and Chile. And so once that happened, all kinds of bad things happened, where now the local producers in California had to compete with this new, cheaper crop in Mexico, Peru, and Chile. And obviously the rules for minimum wage aren't the same in those locations. The environmental rules are much more lax. And so this caused a lot of pressure for the California producers. And also a lot of water costs were going up in California. So those are some of the challenges happening to the California producers. And real estate prices also going up and selling off the ranches. But the best avocados of all are California grown, because you get them straight off the trees, and they don't have to cold store them as long as they do when they ship them as far from Mexico, Peru, and Chile. What's the difference between the California ones and the other countries? Well, the farther you ship a fruit, or any agricultural commodity, the more it's going to degrade over time. And down there, they have to ship it so far, and they have to basically stretch the season out, that they end up cold storing these fruit for a very long time. And as they cold store it, it loses its sort of freshness, and it's a good punch. So when you're locally producing a fruit, you don't have to go through that as much. And so you can get the fruit pretty much at its optimal moment, so it tastes much better. So that's one thing. Do you see these avocado farmers in California facing challenges right now? Yes. Just like anything else, any other business in California, the business climate in California is challenging to say the least, especially when you're competing with a foreign product that doesn't have all of the hurdles and impediments that we do in California with, you know, all the different rules and regulations that people have to put up with here. But we still have a pretty viable crop in California. But it is very challenging to keep up with that, especially when you have cheap imports. What about the cartels? We've heard that cartels are getting involved in the avocado side of the business, and it's causing challenges. In this case, it's the Mexican cartels. People think of Mexican cartels as being closely associated to the drug trade, and that primarily is how they sort of started. But they actually control a lot of the economy within Mexico, and probably reaching in the United States too. So one thing that happened in 2016, or was it 18, California legalized cannabis. It was Prop 64. 64, right. And one of the unintended consequences of that was that now, instead of importing all of this cannabis from Mexico coming across the border, which the cartels were making a lot of money on, they're now deprived of that income because now it's being commercially produced within the state legally in large quantities. And so it seemed like that was the moment where things changed, and they started to really reach out into other arenas to supplement their loss of income. And one of those arenas is avocados. Most of these avocados in Mexico are grown in the state of Michoacán, which is sort of known as a heavily dominated cartel region down there. And it got so bad as to the U.S. government stopped all importations of avocados on the eve of the Super Bowl in 2022 because one of our inspectors got threatened down there by a drug cartel, or just a Mexican cartel. And that was sort of an inflection moment that changed everything. But even beyond that, apparently what's happening, and there's a lot of reporting on this, there's a documentary called The Avocado Wars by a series called Rotten. So that's an interesting thing to watch. That really explains it all. And apparently what's happening is a lot of these growers down there are basically being forced to pay protection money by the cartels in order for their cartels to leave them alone and just happily grow their crop. And if they resist that, then the cartels are doing some pretty nefarious things to try to convince them and influence them to pay the money. And abductions, and sometimes there's been reports of workers off of avocado ranches having their hands cut off. These are all things that have been reported. And some of these small towns apparently are creating their own militias. It's getting so bad they're having to do that to stay independent of the cartels. So that's kind of what's happening with the cartel influence on avocados. Is that impacting the producers here in California? Well, I think it would because if they're getting a lot of pressure in Mexico to produce a crop and the cartel is having to extract money from the producers in Mexico, then obviously the crop is going to cost more. So then there will be shortages. In which case in 2022 there were shortages. That was really good for the California growers because they could supplement that loss of crop. And so yes, any kind of inability to efficiently create the crop outside our borders will definitely help us here. We want to talk to you about the cartel's impact on California avocado. You're in Mexico and you've been studying what the cartels are doing in the avocado industry. It's very brave of you to do that, but can you tell us what's happening? The avocado industry is almost a $2 billion annual industry. It's very lucrative. And typically a lot of the avocado importers, manufacturers, so to speak, are actually based in California. And the majority of the avocados, around 80% of all avocados in the U.S. come from Michoacán, a western state in Mexico that has heavy cartel presence. CG&G, the Jalisco New Generation Cartel, which as we saw, the leader, El Mencho, was recently killed in February. Actually, he was from Michoacán, which is known as the green gold state. It's where the majority of avocado orchards are and farmers, typically most of these orchards are actually generational. A major problem, however, because of how lucrative the avocado trade is and also because it's legal, a lot of the orchards and farmers are extorted, operating under coercion of the cartels. So typically, kind of the way to put it in perspective for an American consumer is that around 20% of what you're paying for avocados in the U.S., particularly in California, is actually going towards the cartels. That's going towards the extortion fees, or as we call it over here, BISOL, which is essentially the avocado farmer's fee in order to actually independently continue to operate their avocado trade. Now, a few years ago, the U.S. stopped sending agricultural oversight bodies, individuals into Mexico, into Michoacán in particular, because these individuals were being threatened directly by the cartels. What they were supposed to do was go in and do due diligence. So ensure, of course, that pesticide use is up to standard, et cetera, right? Typical agricultural oversight. But aside from that, to ensure that the way that these orchards are being run are separate from any organized crime. Now, when we're talking about green gold and we're talking about Michoacán in Mexico, that's virtually impossible. Within Mexico, there's really no oversight of this, and we've seen cases where farmers actually band together in order to take matters into their own hands, sort of like vigilante groups, in order to fight off the cartels. What started happening was that these farmers then, once they were banding together or refusing to pay extortion, were having their orchards completely destroyed by the cartels or completely taken over. So I spoke with one farmer who, this was two or three years ago, had a generational avocado orchard in his family. It's important to keep in mind, too, in order to actually produce avocados, grow one avocado tree, you're waiting around two decades. So it's not a simple fruit to... Just plant and just get going. Yeah. No, not at all. Yeah. So when I spoke to him, he was actually in the process of being extorted. So armed men had showed up in an armored vehicle to his land and told him that if he didn't start paying them more, they were increasing the percentage of beso of extortion fee, that he would have to leave his land. He couldn't afford to do this. And it was really heartbreaking. He called me crying because I was in a couple of Facebook groups of farmers who were banding together to fight off the extortion. And he said that he was going to have to abandon his livelihood. What ended up happening was exactly that. Him and his family packed up whatever they could into one of their trucks, leaving everything behind as the cartel had actually requested. You're leaving behind your residency, any additional vehicles, any equipment used to basically run your farm. And they had to flee from the region that they were living in. And what happens is, before fentanyl, when heroin was the drug or the street drug, let's say, a lot of these avocado orchards would actually be completely destroyed by the cartels. And they would use it to plant poppies or cultivate any other plant that would be used for drugs. Now, though, with synthetic drugs on the rise and kind of at a peak, instead of doing this, they're profiting off of the land and the produce that already exists there, for most of this being avocados. And interestingly enough, last year, I actually started digging into doing stories because there are a few, and I can't name them for legal reasons now, but there are two that I know of, major avocado importers based in California that are knowingly buying avocados from orchards that are fully cartel run in Michoacan. And there's really no oversight right now to stop any of this. And this is money going directly into the hands of organized crime, particularly CJ&G, La Familia Michoacana, among other smaller, more fractured cartels. But for the most part, you have American companies selling a good to the American population with money that has knowingly been put into the hands of organized criminals. So what you're saying is that cartels are moving into the business by taking people's lands in essentially Mexico. It's been happening for a while. Yeah, this is not something new. Avocados have always been something incredibly lucrative for the cartels. But with the synthetic drugs now being kind of the number one street drug, fentanyl, this business is booming, honestly. And now the suppliers from the US are buying from the cartels. Are they lowering their price? What we are hearing is that it's very hard for the California local avocado producers to compete. Yeah, because they are doing this sort of, I mean, on the black market. Typically, the way cartels make this lucrative and manage to do this under the radar is they're selling the produce for a lowered price. So a great example of this is the way cartels steal and sell crude oil from Mexico to independent American refineries. They're obviously selling it at a fraction of the price than if these American refineries were buying them legitimately. This is the same thing with avocados. So because they have to put in the work to essentially ensure that these get into the United States without tipping anyone off that these are illegal, to be completely fair, inspectors and border patrol and whoever is meant to look over this, from my knowledge and my reporting, they aren't putting in the same amount of effort to ensure that these avocados are, quote unquote, ethical, as opposed to if they're searching for drugs or now crude oil. How do you know that these importers are buying from the cartels? Because I was able to track the very orchards and regions that these Haas avocados were being imported from, and they are knowingly in the region completely under cartel control. One thing that I think is really important that isn't viewed as an American problem is that when these orchards are being taken over by the cartels, there is typically a lot of violence. So that one individual I spoke to who fled with his family was honestly a best case scenario example. For many others, they become victims of extremely violent crimes where family members are being raped or being kidnapped. In some instances, some of them are even being killed in order to force their hand of either paying the extortion fee or give up their land. And unfortunately, in my reporting on this, I understand that this isn't technically a problem for Americans. But when Americans are the consumer, it's important to look back down the supply chain and understand that when you're making your guacamole on Super Bowl, that those avocados may have come from blood. Are some people not farming anymore? How are people coping with the situation? The pressures in California are water. So you need a good source of water, and there's all kinds of different ways to get the water through groundwater from wells, surface water brought in from irrigation districts, and things like that. But more than that, you have these increasing suburbanization in California happening that's displacing the avocado crop further and further away from the population centers. And so they've actually come up with a way to maximize production on small area, and that is called high-density planting. And so this is a method where you plant lots of avocado trees like in a row, maybe like six, eight, ten feet apart, much closer than you would traditionally do it. Then you do intensive pruning on the trees, almost creating like a hedgerow effect. And then what that does is it concentrates all of the fruit in a smaller area of tree with the same root systems that the fruit gets bigger. But also because of our high labor costs here, it makes picking the avocados much easier because they're much lower to the ground. So that's one thing they're doing. It costs more to put an orchard in up front because you're planting more trees, but the return on investment is much higher. So a lot of the new avocado groves that are going in in California are utilizing that practice. That's something that's really kind of revolutionary. Is it possible to do this in a small land, like an acre or somebody's backyard? Absolutely, yes. In fact, that's kind of what I do. I've been growing avocados for quite a long time. A lot of experimental trees, different varieties I've been trying to promote and evaluate to see if they're good. So I sell a lot of my excess fruit to the local supermarket and they absolutely love it. And the wonderful thing about that is you can have like a small cottage industry with these avocados. You'll see people on Facebook selling their avocados. You'll see people on Craigslist selling their avocados. And then they build up a kind of a regular clientele that knows that time of year called this guy. He's got one tree in his backyard, produces 500 avocados, and he's always gone for sale and he lives right around the block. So I've been trying to promote the idea that people ought to do this in their own backyards for as much land as they have. And not just avocados, but other types of fruit. But the avocados are really nice because a lot of fruit like apricots, peaches, things like that, they will mature and then they'll drop within three weeks of maturation off the tree. That means you only have like a three-week window to pick these fruit. But avocados have at least two, three, four months on most, on all varieties at a minimum. And there's one variety that I've been testing on my property where I've had edible avocados from a single year crop span the entire year on the tree ready to be picked. And so that's why it's a really nice plant to have around because you can just pick it at your leisure. You don't have to like suddenly sell all this fruit in three weeks like you would for an apricot. What about the regions that you can grow avocados? Can you grow them everywhere in California or is there certain areas? Okay, so the way avocados work is there's a variance amongst varieties on how cold hardy they are. Usually it's the cold hardiness of the avocado within California will be its limiting factor on where it can grow. So the most cold hardy avocados are probably hardy to 20 degrees, 18 degrees, some a little bit hardier. And so most people don't get that cold but we can get that cold with a cyclical freeze. We had a freeze in 1990, the first year I was in operation right when I was convincing all these people that they should be growing all these subtropical plants. And the very first year it got, we had the coldest freeze we've ever had in California. It was 1990 in December. I'll never forget it. It was I think it was December 21st through the 23rd and I had to face a lot of unhappy customers after that freeze. But we haven't had anything nearly as bad like that since. So it's a matter of knowing what your risk tolerance is on a long-term freeze like that that might not ever come around again because of global warming. But during that freeze we did get down to like 18 degrees in the Bay Area so there was quite heavy damage and small little plants would have a problem with that. But once they get larger just the top of it sort of burns off and then that layer protects the rest of it then it just sprouts out in spring. So the most popular variety, the Hass avocado, the most chief the chief commercial variety in the whole entire world right now, that tree is hardy to about 25, 26, 27 degrees. And so most places in the Bay Area, in the immediate Bay Area and pretty much all of Southern California low elevation, stays above those temperatures. You can grow even that variety everywhere and even in the colder regions of the more inland locations away from the the warming influence of the ocean where it can get down to the low 20s or even 20 degrees, there's varieties that you can grow there as well that are marketable. And so my general rule is if you live below 2,000 foot elevation in California there should be an avocado that's hardy enough for you to grow there. You're seeing some challenges this space is feeling but this is a fruit that Californians love. It's kind of like symbolic to California. Do you have any thoughts for policymakers to make sure that this farming stays here? Yeah, I just absolutely love the romance of especially the historic citrus and avocado producing areas all started in Southern California. Moving out of Southern California, Southern San Joaquin Valley, moving up into Monterey, Salinas Valley. So I absolutely love that culture and we are sort of losing it a bit especially the avocados. And like I mentioned earlier that you know because we're in California and subject to so many rules and regulations, minimum wage laws, you know pesticide laws, all these things which are good laws but our Policymakers could potentially look at something like an avocado crop and if we have our own domestic production, how do we protect that against foreign producers who are not abiding by the same laws and conditions and regulations as we are? Well maybe what we should do is have a tariff that goes into all the imports to try to level the playing field a little bit on the cost because obviously labor costs are lower, they don't have all of the worker protection laws, pesticide laws, they don't have environmental laws like we have here. We have the most stringent laws of those types in the entire world here in California for good reason. You know we love our state, we want it to to do well but when we import things from places that don't have those laws and our internal producers have to compete against that, I think it's rather unfair. So there should be a way of like at least leveling the playing field a little bit whereby some of these imports get tariffed and I'm not sure what you do with the money from the tariff, maybe you help the give loans, use it for loans for the avocado growers to make more avocado groves here. The other thing that happens too, another reason why we have to really promote our domestic production of these these plants and not just avocados but everything, is because every time you have an import you're basically taking the local dollar and you're exporting that capital outside of our state and most times outside of our country. If we were to keep that dollar within our economy then that dollar turns over many many more times and really helps to, you know, the guy that grows avocados here, he is paying his workers who are then going and buying food, they're sending their kids to school, buying notebooks for their kids, the guy that sells the notebooks is making some money, the local restaurants are making money and if all of that income from this domestic product was shipped overseas then that's happening somewhere else. So there's a lot of really good reasons to try to keep as much of our domestic production as possible. The other way you could look at it too is avocado trees are absolutely gorgeous. They're dark, lush, gorgeous green and they look incredible just covering the hillsides of Southern California and it's really sort of a visual enhancement of our state. These are, you know, green belts that we can have within our society to slow down the urbanization that seems to be sprawling everywhere. So there's a lot of good reasons to keep it here. So Gary, thank you for bringing some to our studio today. There you go. This one here is called Surprise. Avocados have a flowering structure on them which tries to promote cross-pollinization. Nature doesn't really want anything to be inbred. Nature is always trying to encourage new genes coming together to create, you know, new possibilities of new entities. And so the way the avocado does this is there's a different flowering period. There's A-type flowering period and B-type flowering period and usually these avocados exhibit one type or the other. And so what this does is it basically makes it so that the flowers, the male flowers on one tree are not open at the same time the female flowers are open on that particular tree and they rely upon another tree of the opposite flowering type. So they're mixed together. That way they mix together different entities. And the Hass avocado is an A-flower type tree so it needs a B-type near it to help it pollinate. Well the B-types are good avocados but they're not that great. They're not as good as the Hass avocado. So they typically have these trees in the grove, usually one per acre of Hass trees, to pollinate that grove and they just waste those avocados on that particular tree. So this avocado is a B-type flowering avocado and it's a really high quality type. And so this one was developed so that the growers would have a high quality fruit to sell so they don't just waste the space on a tree in their grove. So when people buy avocados it's a good idea to buy both types, an A and a B-type. And also when you have two different trees you can oftentimes have different fruiting periods. But this one here that I gave you right now is a surprise. That's what it's called. And it's a B-type flowering that's really complementary to the Hass tree or any other A-types. Gary Gregg, it was great to have you on California Insider. Thank you for having me. Tell us what you think about the California avocado industry and us importing cartel-backed avocado from Mexico. You can always email us at siamakacaliforniainsider.com or comment. We read all of your emails and comments. I'm Siamak Khorrami. This is California Insider. We'll see you next time.