Spend Matters welcomes a guest post from Fawaz Luna of Mintec.
Orange juice, the official beverage of Florida, might be experiencing some added pressures this year as the marketplace is continually squeezed. Prices for frozen orange juice concentrate on the ICE NY exchange have risen by 9 percent since the start of April, reaching a two-year high.
On average around 2.2m tons of orange juice are produced each year, with over 600,000 tons being produced from the US alone and most of the rest coming from Brazil). In recent years, however, there have been increasing concerns regarding global orange and orange juice production thanks to citrus greening disease. Whether you’re a grower, buyer, or consumer, the prices you pay will be affected by this nasty disease in some form or another.
Citrus greening is a bacterial disease that is fatal to fruit bearing plants. The disease infects citrus trees at the leaves, travels to the phloem, the major vessel in the tree that transports nutrients from the roots, and then into the fruit, causing them to turn green and lose shape. Within four or five years, the disease will have killed the tree. There is currently no cure and so farmers may remove trees completely and replace them with new healthy ones just to avoid it spreading.
Citrus greening disease was first discovered in China in 1956. It spread across Southeast Asia, India, and southern Africa, and by 2000 had taken 100 million citrus trees with it. By 2005 it had also spread to Brazil and the US, the two major orange producing countries. In October 2007, the citrus greening disease had engulfed the majority of Florida. Fast forward to 2012, and the estimated costs of citrus tree losses in the US have totalled $4.5 billion, over 8,000 jobs have been lost, and fighting the disease had increased growers’ costs by 40 percent in seven years.
With the added disadvantage of new trees taking up to five years before they can bear fruit, the disease is having a marked effect on production and the global supply of oranges and orange-related products such as juice. Prices have inevitably been driven upwards.
Recently, production forecasts for oranges from Florida were revised down, with the latest production forecast at 4.4m tons, down 18 percent year-on-year. This has driving up prices of frozen orange juice concentrate. Although prices have eased in recent weeks, issues with production are likely to continue supporting higher prices.