By Sam Meredith
Frozen concentrated orange juice futures, traded on the Intercontinental Exchange in New York, closed at $4.29 per pound on Monday — nearly double the price registered a year ago.
The benchmark contract has pared gains in recent weeks, falling from an intraday high of nearly $5 per pound on May 28.
What’s going on?
Analysts at research group Mintec say that Brazil, which plays a hugely influential role in shaping the orange juice industry, typically produces about 300 million boxes of oranges (each weighing approximately 40.8 kilograms) per cycle. However the combination of extreme weather, such as flooding and drought, and greening has dramatically reduced crop production.
In a report published on May 10, Fundecitrus forecast that Brazil was set to produce 232.4 million boxes of oranges in the 2024 to 2025 season. That represents a 24% decline when compared to the previous cycle.
“Restoring normal stock levels in Brazil will require several consecutive good harvests. With 40% of Brazilian plantations affected by greening disease and the risk of this number increasing, coupled with volatile climate conditions, the likelihood of achieving such harvests is low,” the IFU’s Cools said.
“As a result, high prices are expected to persist. Although there is a slight decrease in demand, it is insufficient to rebalance the market,” he added.
An untreatable disease that results in bitter, stunted fruit — known as greening — has joined adverse weather conditions as a long-term headwind for farmers in orange-growing areas across the world.
Greening has severely hampered orange production in the “Sunshine State” of Florida, where the IFU says production has collapsed to approximately 17 million boxes, down from 242 million boxes 20 years ago.
High incidence of citrus greening
Andres Padilla, a food and agribusiness research specialist at Rabobank, said that the high incidence of citrus greening will likely limit productivity over the coming months.
“Citrus greening remains a significant threat across all producing areas, and weather volatility will also limit potential growth in the upcoming 2024/2025 harvest,” Padilla said in an April research note.
Citrus farmers have stepped up their actions against greening in Brazil in recent months, Padilla said, noting that greening was more prevalent in smaller groves, where agriculturalists tend to have limited resources to remove infected trees at the rates required to keep the disease under control.
“Another effect of citrus greening is that farmers will be incentivized to harvest early, reducing the potential for higher fruit drop rates, which could have a negative effect on fruit quality, and potentially diminish juice yields,” Padilla added.
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This article originally appeared here and was republished with permission.
