A worker in an orange orchard separates tangerines for sale on June 6, 2024 in Piedade dos Gerais, in Minas Gerais State, Brazil.
Pedro Vilela Getty Images News | Getty Images
The orange juice industry is reeling.
Prices of staple breakfast recently climbed to a fresh all-time high, rattled by the perfect storm of climate-fueled extreme weather, continuous resource constraints and citrus diseases known as greening.
The price rally accelerated sharply at the end of last month, after research center Fundecitrus warned that Brazil, the world’s largest producer and exporter of orange juice, is likely to register one of the worst orange harvests in more than three decades.
The crisis has even prompted some manufacturers and blenders of orange juice to explore whether alternative fruits, such as mandarins, apples and pears, can be used to dilute the drink.
“With no short-term solutions and the risk of the disease situation worsening, the situation remains critical,” Kees Cools, president of the International Fruit and Vegetable Juice Association (IFU), told CNBC via email.
Bottles of Simply Orange orange juice are displayed for sale at a grocery store on September 28, 2023 in Los Angeles, California.
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Frozen concentrated orange juice futures, traded on the Intercontinental Exchange in New York, closed at $4.29 per pound on Friday – almost double the price registered last year.
The benchmark contract has pared gains in recent weeks, falling from an intraday high of nearly $5 a pound on May 28.
What’s up?
Analysts at research group Mintec said Brazil, which has had a major impact on shaping the orange juice industry, typically produces about 300 million boxes of oranges (each weighing about 40.8 kilograms) per cycle. But a combination of extreme weather, such as floods and droughts, and deforestation has reduced crop production.
In a report published on May 10, Fundecitrus predicts that Brazil will produce 232.4 million boxes of oranges in the season 2024 to 2025. That represents a 24% decrease when compared to the previous cycle.
“Restoring normal stock levels in Brazil will require several good harvests in a row. With 40% of Brazilian plantations affected by greening disease and the risk of this number increasing, coupled with volatile climate conditions, the possibility of obtaining such a harvest is low,” IFU’s Cools said .
“As a result, high prices are expected to remain. Although there is little demand, it is not enough to balance the market,” he said.
Details of tangerines in baskets as workers at an orange orchard load a truck for sale on June 6, 2024 in Piedade dos Gerais, in Minas Gerais State, Brazil.
Pedro Vilela Getty Images News | Getty Images
An incurable disease that causes bitter and stunted fruit – known as greening – has combined with adverse weather conditions as a major windfall for farmers in orange-growing regions around the world.
Greening has greatly hampered orange production in the “Sunshine State” of Florida, where IFU said production has fallen to approximately 17 million square meters, down from 242 million square meters 20 years ago.
High incidence of orange greening
Andres Padilla, food and agribusiness research specialist at Rabobank, said the high incidence of green limes will limit productivity in the coming months.
“Orange greening remains a significant threat in all producing regions, and weather volatility will also limit potential growth in the upcoming 2024/2025 harvest,” Padilla said in an April research note.
Citrus farmers have taken action against greening in Brazil in recent months, Padilla said, noting that greening is more common in small orchards, where farmers tend to have limited resources to remove infected trees at the rate needed to keep the disease at bay. mentioned.
“Another effect of citrus greening is that farmers will be given an incentive to harvest earlier, reducing the potential for higher fruit drop rates, which can have a negative effect on fruit quality, and can reduce juice yield,” added Padilla.