Understanding the Challenges Facing Mission Produce

Mission Produce, a leading avocado distributor, has been impacted by the collapse in avocado prices. The company sources, grows, and distributes avocados across North America, Europe, the UK, and Asia, with avocados accounting for approximately 85% of its revenue. The decline in prices has resulted in a 20% drop in sales for the company, with the stock experiencing a 16% decline from its April highs.

The problem lies in Mexico, where the country has grown its largest crop in years. Mexico accounts for about 80% of total avocado imports to the US, with exports to the US jumping 35% year over year in the first four months of the year. The country dominates US avocado supply during the winter and early spring, while the larger California and Peruvian harvests generally do not ramp up until spring.

A Potential Price Recovery on the Horizon

Avocado prices are expected to recover due to weather factors in Mexico. Michoacán, which grows more than 70% of the country’s avocados, is running drought stress at roughly 125% of the intensity of the 2024 drought. A similar drought hit Michoacán in 2024, cutting both crop volume and fruit size, and avocado prices spiked the following year.

The US Department of Agriculture has also flagged the risk, warning in its March report that an El Niño in the second half of 2026 could bring drier conditions and heat spikes that shrink fruit sizes in Mexico.

Mission Produce’s Ability to Absorb Price Shocks

Mission Produce has shown its ability to absorb price shocks, with its fiscal Q1 gross margin expanding 190 basis points despite a 30% decline in prices. The company buys most of its fruit from third-party growers daily at market rates, so when avocado prices fall, its own input cost falls with them.

However, in April, Mission faced a mismatch between the Mexican fruit sizes available and what customers wanted. The company had to pay higher prices for high-demand sizes and offer discounts on less desirable fruit, negatively impacting its margins.

The Impact of the Calavo Acquisition

Mission Produce completed its $465 million acquisition of Calavo Growers in May, an avocado company that also sells tomatoes, papayas, and prepared foods like guacamole. The market welcomed the deal announcement in January, and the stock jumped 22%. The optimism did not last, as shares peaked in April and then fell as avocado pricing collapsed.

The acquisition eases one of the pressure points directly, as Calavo brings two Mexican packhouses and takes Mission from two facilities in the country to four. Calavo will also diversify Mission’s portfolio, bringing guacamole, salsas, and dips, plus greenhouse tomatoes and Hawaiian papayas.

Insider Signals Turning Bullish

Two signals that the editor watches closely when assessing a stock’s long-term potential are insider buying and institutional positioning. Both have become more constructive for Mission Produce lately.

Board member Bruce Taylor bought about 286,410 shares at $11.27 on June 17 and another 100,000 at $11.28 a few days later, increasing his stake to roughly 6.8 million shares. Director Jay Pack added 40,000 shares at $12.10 on June 30. Both bought within weeks of the fiscal Q2 report that knocked the stock to its lows.

Globalharvest Holdings Venture, Mission’s largest shareholder, bought roughly 2.4 million shares across July 6, 7, and 9, paying about $32 million at prices between $12.73 and $13.41.

Mission Produce’s Valuation

Mission Produce currently trades at about 11.9 times forward EV/EBITDA, about 12% below the stock’s own five-year average. The company delivered adjusted EBITDA of $11 million in Q2, with management expecting fiscal Q3 pricing to fall about 15% year over year.