The wholesale price of orange juice has hit a new record high, boosted by forecasts of a poorer harvest in drought-hit Brazil, while US production remains under pressure. The futures contract for frozen orange juice concentrate, the market’s benchmark, for July delivery, rose to $4.5325 a pound (about 450 grams). In one year the wholesale price increased by almost 77%. Since the start of the Covid pandemic, at the end of February 2020, it has increased fivefold.
For Judy Ganes, analyst at J Ganes Consulting, this new surge is due to the estimates published ten days ago by Fundecitrus, which predicts a 24% drop on an annual basis in the Brazilian harvest, to the lowest level in the last 36 years. Fundecitrus justified the decline with the drought that hit the main growing regions, in particular the state of Sao Paulo, which is the country’s largest producer and one of the main exporters to the United States. “There have been several months of below-normal rainfall,” underlined the expert.
Brazil has also suffered from the spread of yellow dragon disease. Also known as Huanglongbing disease (Hlb), it can interrupt the ripening of citrus fruits and cause the fruit to drop prematurely. So far, HLB has had a more limited impact than in Florida, where orange groves have been decimated in recent years. However, according to Judy Ganes, the market is “concerned about seeing what happened in Florida happen in Brazil,” even though growers “can move crops more easily” than in the United States.
The US Department of Agriculture (USDA) estimates that US production of juice oranges, mainly the Valencia variety, is slightly increasing (+3%) compared to the previous year, but has recently revised this forecast downwards. Furthermore, it will still be well below the harvest of two years ago (-36%). According to Judy Ganes, following this price escalation, “demand will continue to decline”. According to the USDA, orange juice consumption in the United States has already decreased by 58% between 2002 and 2022. (AGI)
GAV
