Too Much Sun in the Sunshine State: Orange Juice Concentrate

Spend Matters welcomes a guest post from Abigail Green, at Mintec.

Whenever orange juice is mentioned, you may think of Florida. We are reminded about this on Florida license plates, and even a major league baseball stadium in Florida is named after a particularly famous brand. When it comes down to it, if you are American and drink OJ: it probably comes from Florida.

World trade in frozen concentrated orange juice (FCOJ) is dominated by Brazil, which accounts for as much as 80% of the world’s exports. The US (Florida) is the main producer of not from concentrate (NFC) juice. Brazil is the source for 80% of EU orange juice imports, while only approximately 10-15% of the orange juice in the US comes from Brazil.

Following the steep drop seen in orange concentrate prices over 2012 on the ICE futures market, prices since the start of 2013 are increasing. A drop in forecast US orange juice production for 2012/13 and an expected recovery in demand have both led to price increases. So far in March, average prices are 20% up from the beginning of the year, indicating that the orange juice market may be starting to return to the high prices seen in 2011.


Prices have risen in recent weeks following the latest US orange crop forecasts showing a 4% drop in production in 2012/13 to 7.87m tonnes. Orange juice production is forecast to be 663,000 tonnes, down 4% year-on-year, with the expected yield of juice from oranges also expected to be down by 1% year-on-year.

The continued spread of citrus greening disease is affecting orange groves in Florida, with the disease causing oranges to drop prematurely, increasing wastage and lowering yields. High temperatures and sparse rainfall have also resulted in drought conditions in the sunshine state, causing both growth and quality problems with the oranges. Concerns have been mounting over whether the dry weather will push Florida’s production below the current forecasts.

There are two key price influencing factors on the horizon for 2013. The first is the normal seasonal rise in juice consumption seen as spring and summer arrive. This was largely absent in 2012 as the effects of the global economic downturn coupled with the cold and wet summer in Northern Europe resulted in weak international demand, and kept prices low over the summer months. Some early reports suggest domestic consumption has already begun to rise, with retail sales for February up nearly 4% year-on-year. This could be an indication that the market is picking up and may further support prices.

Secondly, the hurricane season is due to start at the end of June and could cause considerable damage to orange groves. A bad hurricane season will push prices higher and whilst an individual hurricane is unlikely to have any long lasting effects on spot prices, a bad season can have significant implications on both this season and future season’s production if there is significant destruction to the orange groves.

With the current disease and weather problems, and the potential future demand and hurricane issues, it is likely that prices will continue to be volatile in 2013.

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