- Citrus greening disease continues to affect oranges in Brazil and Florida.
- Frozen Concentrated Orange Juice stocks are extremely low today.
- FCOJ futures remain close to record levels.
This year’s global orange crop could be poor.
A major problem is citrus greening disease, which continues to spread widely across major orange producers such as Brazil and Florida.
Citrus greening disease is a bacterial infection spread by psyllid insects which cases defoliation of the orange trees, decay of roots and their eventual death. Affected trees produce small misshapen orange fruits with a thick peel that remains green at the bottom and a bitter taste.
There is no known cure for the disease and no naturally immune citrus cultivars. Current control methods include cutting down and clearing infected trees and applying insecticide and antibiotics.
In areas where citrus greening disease hasn’t been prevalent, orange harvests have also been affected by dry weather.
In this article we will look at orange crop prospects for major growers, and what this might mean for Frozen Concentrated Orange Juice (FCOJ) futures.
The 2022/23 orange harvest is continuing and will extend for another month or two due to the late bloom in the previous seasons. Current orange yields are also poor. Citrus greening has been a major problem in Brazil, with 24% of orange trees in Sao Paulo State and western Minas Gerais now affected, up from 7% a decade ago. We are also seeing low ratios of sugar to acid in Brazilian juice this year, which affects the profile of the final beverage, and therefore the taste for end-users.
2023/24’s harvest doesn’t look any better. It’s still early to forecast given that weather conditions will be important for the first blooming which happens in August, but we think 65 Brix equivalent FCOJ production will be 1.12m tonnes, 1% lower than the 22/23 crop. This could be problematic because Brazilian FCOJ ending stocks for 2022/23 look set to be the lowest on record at 13k tonnes. Supply for industrial consumers in H1’23 will therefore be extremely tight.
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Florida is the dominant state for orange juice in the USA. It was badly affected by 2022’s heavy hurricane season and the further spread of citrus greening disease. The US Department of Agriculture expects Florida to produce around 18m 90lb boxes of oranges in 2023, which is less than half of last year’s output and 93% lower than the peak output of 244m boxes in 1998. Floridan orange juice production has fallen far faster than American orange juice consumption, meaning imports will be required….from Brazil and other producers.
Mexico is one of the top 5 orange producers in the world. 2022/23 orange production was 20% lower than the previous season’s due to high temperatures and drought, primarily in Tamaulipas and Nuevo Laredo states. This led to delayed plant maturity thanks to a multiple bloom. Orange availability for the juice industry may decline further in 2023/24 thanks to low ratios of sugar to acid.
Spain is a dominant producer of oranges in Europe, accounting for around 60% of the crop. Production here fell by 20% in 22/23, but this has largely hit the not from concentrate market, not FCOJ.
The major problem for the FCOJ market is that orange production is falling faster than demand for juice is. This means that prices are likely to remain high in the short term, especially in Q1’23 as stocks in Brazil and the USA are low. We may only get relied once the next Brazilian crop begins physical deliveries next July/August.
FCOJ futures remain close to multi-decade resistance, in contrast to many other commodity markets which have fallen from their 2022 peaks.
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However, the futures curve is strongly backwardated.