Spend Matters welcomes another guest post from Abigail Green of Mintec.
The citrus sector is a major industry in the US, especially in Florida where it is estimated to be worth $9 billion and provide approximately 76,000 jobs. Back in March we saw how the spread of citrus greening disease in Florida was affecting the orange juice industry. Looking at some of the worldwide trends in the citrus crops, we would like to examine whether a decline in citrus production globally will benefit US producers.
US orange production fell 7% to 7.6m tons as a result of the spread of citrus greening disease throughout Florida. However, Californian production, the second largest producing state, was reported to be good, offsetting some of the losses from the Floridian crop. The supply of oranges for processing also fell, down 8% to 5.6m tons, leading to a drop of 10% in US orange juice production to 0.62m tons. This drop in supply will continue to affect prices for both fresh/processing oranges and orange juice until the initial estimates for the 2013/14 harvest are released towards the end of the year. This will be worsened by the reduction in output from Brazil, the world’s largest orange juice producer.
Brazilian orange and orange juice production is estimated to have fallen by 19% and 20% respectively, with fresh orange production pegged at 16.6m tons and orange juice at 1.0m tons in 2012/13. Production is expected to continue to fall in 2013/14 as many producers have uprooted their orange trees in favour of planting other more profitable crops. Over 36,000 hectares of oranges groves were reported to have been uprooted in Sao Paulo alone, the largest producing state, between 2012/13 and 2013/14. Consequently, Brazilian supply is expected to become increasingly restricted, causing higher demand for US supply both within the US and also from the international market, with US exports expected to have risen 12% year-on-year in 2012/13.
While US orange production has fallen, the production of other US citrus crops has risen, primarily due to an increase in yields. US grapefruit production is estimated to have risen 3% year-on-year to 1.08m tons, with lemons and limes up 3% year-on-year to 0.79m tons and tangerines and mandarins up 5% year-on-year to 0.66m tons.
Moreover, while the US is experiencing good citrus production apart from oranges, citrus production in other major producers has suffered due to adverse weather. In China, the largest producer of fresh grapefruit, production is estimated to have fallen 9% year-on-year to 2.9m tons in 2012/13 following a reduction in planted area and poor weather conditions. With China the fourth largest exporter of fresh grapefruit, international demand is expected to rise and further support US prices. Early indications for 2013/14 indicate that acreage of grapefruit trees in China will be reduced, so production is likely to remain at low levels.
EU lemon and lime production, the second largest producer, is expected to have fallen 8% year-on-year to 1.32m tons due to hot and dry weather conditions in the major producing Mediterranean countries. This will encourage a rise in demand for Mexican and Argentinean produce, the first and third largest producers, but demand for US produce will also rise as international availability tightens.
So, with production in other major citrus producers expected to drop this season, demand for US produce is likely to continue to rise, potentially resulting in a surge in exports while at the same time leading to an increase in the prices we pay.