Orange juice prices have soared after crop failures in key regions, but following two years of price hikes, a fall is now on the cards, says Mintec’s Robert Miles
Poor harvests have sent the price of orange juice soaring over the past two years and left buyers both wholesale and consumer feeling decidedly squeezed.
But although world stocks of frozen concentrated orange juice remain unusually low as a result, things are looking up for the 2011/12 season, with improved harvests expected to ease some of the pressure seen in the global orange juice market of late.
Having risen almost 200% from £590/tonne in mid-2009 to more than £1,700/tonne this July, the wholesale price of orange juice concentrate (OJC) has already fallen to £1,641/tonne in the EU as a result of global commodities turmoil and better harvests.
Brazil, which grows about 30% of the world’s oranges and makes about 60% of the world’s orange juice, has increased its forecast for the 2011/12 season to 495 million boxes, significantly up on the 355 million boxes estimated as recently as May.
After producing the worst crop in seven years last year, production in Brazil’s main citrus belt in the states of São Paulo and Minas Gerais is expected to be up 43%, from 273 million boxes to 390 million. Processed output is also expected to increase to 504 million gallons of frozen concentrated orange juice next season 31% more than the 385 million gallons produced in 2010/11.
The amount of land used for orange production has stayed largely the same, so the rise in production is down primarily to excellent weather and improved crop management. For example, this season there were far fewer fungal outbreaks, which caused substantial damage to the Brazilian orange crop last year.
The bulk of Brazilian orange crushing will take place between July and November, but it will take months to process and ship, so any positive effect the improved Brazilian crop will have on prices is unlikely to be immediate.
In the US, which is responsible for 15% of the global orange harvest and 30% of global orange juice production, crop forecasts also promise a better orange season than last year.
Florida’s orange harvest for this year is forecast at 139 million boxes (40.8kg each) 4% above the 134 million produced last year.
However, with the Florida harvest not due to begin until October, US stockpiles of orange juice are still low, which means retail prices remain high. This has hit sales, which have fallen 7% year-on-year in the four-week period to 11 June.
Increased global demand for orange juice, particularly from emerging markets, has added further pressure and with Brazil and the US responsible for so much of the world’s orange juice production, there is little room for other producing regions, such as Mexico, China and India, to compensate for any shortfalls.
But with the harvests in these two key regions expected to be much stronger this year and with prices for world orange juice concentrate falling at last at least consumers won’t be paying for orange juice until the pips squeak next year.