Citrus Financial Forecast Looking Up

By Thomas H. Spreen|December 15, 2011

In October, the Florida Agricultural Statistics Service released their initial forecast for the 2011-2012 Florida citrus crop. The orange forecast predicted 147 million boxes will be produced, up from the 139 million boxes produced in 2010-2011. The grapefruit production forecast is 20.1 million boxes, up slightly from the 19.75 million boxes produced in 2010-2011. Forecasts for specialty varieties were up slightly compared to 2010-2011.

São Paulo state in Brazil is the largest producer region for orange juice. Its 2010-2011 crop of 273 million boxes was the smallest recorded in many years. Limited supply from Brazil was a primary factor supporting higher prices in Florida with average delivered-in prices at $1.67 per pound solid. Further analysis reveals that U.S. OJ imports were down in 2010-2011 despite a smaller Florida crop and U.S. OJ exports were down, especially those destined for Europe. This is evidence that the Brazilian processing companies may have been supplying their European customers with Florida product last season.

The São Paulo processing season is now in its latter stages. It is evident their 2011-2012 crop is substantially larger with an estimated crop of 390 million boxes. There are, however, two factors that will limit the effect of this larger crop on grower prices in Florida. First, USDA estimates of inventories in São Paulo at the end of the 2010-2011 season were very low. Therefore, there is a need to take a portion of the 2011-2012 crop and replenish those inventories. The Brazilian government has proposed a program called Concecitrus, which roughly translates into “for citrus.” Under this program, if a Brazilian processor agrees to pay a minimum price for fruit, they can obtain a low-interest loan to divert a part of their production into storage. The amount that can be stored is 200,000 metric tons (MT) of fresh concentrate orange juice (FCOJ) or about 15% of their expected production in 2011-2012. Apparently, all three major Brazilian processors have indicated they will take part in the Concecitrus program. Placement of 200,000 MT of FCOJ for storage into the 2012-2013 season will support prices for the 2011-2012 season.

It appears grower prices in Florida should remain at levels close to those seen in 2010-2011. These price levels are above the cost of production for nearly all Florida growers and may encourage increased citrus plantings, which are needed to replenish an aging tree inventory.