The Van Trump Report

100% Orange Juice May Soon Be a Thing of the Past

As “citrus greening” disease continues to devastate the global orange industry, prices are becoming untenable for juice producers. Concentrated orange juice futures prices on the Intercontinental Exchange climbed to an all-time high closing price of over $4.90 per pound at the end of May, after more than doubling over the past year. While prices have since pulled back a bit, orange juice makers face an even bigger problem – not having any orange juice at all.

For a historical perspective, from the late 1970s, orange juice prices typically traded in a range between around $0.60-2.00 per pound. The market began to trend higher from 2010, with the low end of the range moving above $0.90 per pound. Prices began consistently trending higher in late 2022, soaring past $2 by early 2023 and continuing to rise ever since. Industry experts think prices could easily top $5.00 in the second half of the year.

Those historical orange juice price trends closely follow production levels that have been on a downward trajectory for the last two decades. Between the 1994-1995 season and 2003-2004, the average harvest was 351 million boxes. This dropped to 337 million in the following decade and reached 308 million in the 2014-2015 to 2023-2024 period

In the 1990s, the US and Brazil were competing to be the world’s biggest orange juice producers. Then toward the end of the decade, a tiny insect called the Asian citrus psyllid began to appear in Florida. The invasive pest transmits a pathogen that causes citrus greening disease, or Huanglongbing, which slowly kills the trees and turns the fruit bitter. In the two decades since, the disease has decimated the state’s orchards and helped Brazil maintain its title as the top global orange juice producer. Brazil accounts for over 70% of global orange juice supplies.

Virtually all of Florida’s citrus groves are now infested with citrus greening disease. In the early 2000s, Florida produced around 240 million boxes of oranges each year, but the latest forecast from the USDA for the 2023-24 season is currently just 17.9 million boxes.

Unfortunately, citrus greening has now made its way to Brazil’s orange groves, where producers have grappled with its impacts for several years now. On top of the disease burden, Brazil’s oranges this season also suffered extreme heat stress and drought during their key flowering period in the latter part of last year. That put the country on track for its smallest orange crop in some 36 years. Brazil is anticipating a nearly -25% drop in 2024-2025 production.

To keep prices down, orange juice suppliers typically rely on stockpiles from bumper crops to pad supplies during bad production years. But global orange production has taken big hits for three years in a row now from various weather events, on top of citrus greening that continues to wipe out orchards. Frozen juice concentrate only has a shelf life of about two years.

Tight supplies mean juice concentrate prices could remain at record levels longer term. It also could make 100% orange juice harder to find as producers try to manage costs. “This is a crisis,” Kees Cools, the president of the International Fruit and Vegetable Juice Association (IFU) told the Financial Times. “We’ve never seen anything like it, even during the big freezes and big hurricanes.”

Francois Sonneville, a senior beverages analyst at Rabobank, also says the global orange juice industry is in a full blown crisis. To survive, Sonneville believes beverage makers will have to either use lower quality juice, create mixed juices with other fruits such as apple, mango, or grapes, or charge consumers higher prices.

Sonneville also thinks the trend of lower orange supplies and higher prices is likely to continue. Citrus growers may not be inclined to replace dead and dying trees as it takes a long time to plant a new orchard and several years before the trees start producing fruit. Most think it is just a matter of time before new trees get infected with citrus greening so don’t feel like the time and expense is worth it. Many farmers are looking to alternative crops amid the ongoing disease problems, not to mention high labor costs and diminishing demand. (Sources: USDA, Reuters, The Guardian, Mongabay)

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